Amazon could soon start using cubic footage to measure warehouse space

Most of those improvements are being driven by automation, with robots and machines handling a greater amount of warehouse work, Dhanorkar said. Amazon, which spent $775 million on robotics company Kiva Systems in 2012, reportedly has over 100,000 robots in its fulfillment centers around the world. Mark May, an analyst at Citigroup, wrote in a note on Friday that Amazon plans to make 20,000 fewer holiday hires this year because of automation.

Following Olsavsky’s comments on the call, Nomura analyst Simeon Siegel wrote that Amazon is continuing to find ways to make better use of space.

“Interestingly, management noted that they may begin to think about cubic footage, which may suggest a further utilization of height within their centers, finding further incredibly economical footage in existing locations,” Siegel wrote.

It’s an industry-wide problem. The surge in online shopping has led more retailers to seek out storage space. Demand for industrial real estate — mostly e-commerce warehouse and distribution centers — has outstripped supply for 34 consecutive quarters, according to a recent report from CBRE Group.

Tarek Abdallah, a professor at Northwestern University’s Kellogg School of Management, said multi-story warehouses are particularly useful for Amazon and other companies that want to be closer to cities so they can speed up deliveries to customers.

“The real estate price is very high in highly dense urban areas,” said Abdallah, who researches operations management. “This strategic move is crucial for Amazon because they want to solve the last mile problem.”

With that trend, cubic feet becomes a more logical way to measure warehouse capacity, said Douglas Hales, a supply chain management professor at the University of Rhode Island. The first U.S. multi-story warehouse was only announced in 2016.

“Cubic feet is definitely being adopted by a large number of companies that use multi-level distribution centers,” Hales said.

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