Why Amazon Is Packing Smaller Warehouses Into Urban Areas

As consumers' expectations about 'their right' to one day delivery solidify - and as urbanization continues its relentless growth, Amazon is finding that the benefits of scale in its larger warehouses are superseded by the benefits of getting distribution centers closer to where people actually live. JL

Jennifer Smith reports in the Wall Street Journal:

Amazon's first major New York City distribution center is 20% smaller than Amazon's usual fulfillment centers, stuffed with twice as many robots as human workers and able to handle 50% more inventory than traditional warehouses.The smaller sites are the latest example of how online sales are reshaping logistics networks. As retailers move inventory closer to big population centers, they’re squeezing big distribution operations into smaller buildings that use automation and build up rather than out to get more out of every square foot. The space is used as efficiently as a New York studio apartment
Amazon.com Inc.’s first major New York City distribution center is nearly the size of 15 football fields and can spit out more than one million items a day during its busiest period.
But the 855,000-square-foot facility on a swampy stretch of the northwest side of Staten Island is a tightly packed site compared with most of the sprawling warehouses the e-commerce giant has spread around the country. It is 20% smaller than Amazon’s usual fulfillment centers, stuffed with twice as many robots as human workers and able to handle 50% more inventory than traditional warehouses.

The space is used as efficiently as a New York studio apartment, and for Amazon and other companies looking to duplicate the company’s determined push to deliver goods to consumers as fast as possible, that makes its anchor for the lucrative market a likely model for the future of urban e-commerce fulfillment.
“It’s super-compact,” Amazon spokeswoman Ashley Robinson said on a tour last month. “That’s why we’re now able to build in the city proper. We have a fulfillment center in Baltimore, we have one in Dallas, we have one just outside of Seattle, and they’re all kind of built on this same format.”
The smaller sites are the latest example of how online sales are reshaping logistics networks.
As retailers move inventory closer to big population centers, they’re squeezing big distribution operations into smaller buildings that use automation and build up rather than out to get more out of every square foot.
Leasing activity for big-box industrial spaces over 1 million square feet fell 26.1% last year, according to commercial real-estate services firm Jones Lang LaSalle Inc., while leases in the 100,000 to 500,000-square-foot range slipped by only 3.6% from the year before.
“They’ve already filled out their big hubs, the 1 million square footers,” said Gillam Campbell, an industrial research manager at JLL. “Now they’re filling in their spokes. That enables them to get that very fast delivery time in densely populated cities and urban areas.”
In November, Walmart Inc. opened a 200,000-square-foot warehouse in the Bronx to handle e-commerce fulfillment for its Jet.com business.
A former warehouse outlet for ABC Carpet & Home, the facility has two floors and one mezzanine level and provides same-day and next-day shipping for groceries and some general merchandise. A Jet.com spokeswoman said the facility “is equipped with automation to enable employees to leverage technologies that help with certain tasks, providing fast, high quality services to our customers. There is also a level of manual automation in place.”
Developers are planning more multistory warehouses under 1 million square feet in the Bronx and Brooklyn.
Amazon’s facility in Staten Island has four mezzanines where autonomous robots help human workers assemble online orders. Inventory is stored on shelves that the robots, which resemble Roomba vacuum cleaners, pick up and deliver to people at workstations on the perimeter.
That limits the number of steps human workers take, and allows the company to store more goods in the robot-only sections of the warehouse because they don’t have to build out long lines of racking and walkways for humans to fetch the products. This building handles items under 18 inches in diameter—such things as toys, electronics, trash bags and baby supplies.
The tight coordination needed to make the system work was evident on the tour.
To bring in the products, one worker removed bottles of lotion, nutritional supplements and other merchandise from yellow plastic bins, stowing them on the robot-driven shelves for later retrieval by pickers. In the robot area, the machines moved forward, backward and sideways, navigating around each other as they moved between stations.
On the outbound side, pickers pulled items, scanning them and dropping them into totes that move on conveyers to the lower floors.
Much of the inventory is presorted at other locations, freeing up space that would traditionally be used for inbound docking and receiving to house additional merchandise. The company is building more of those facilities now.
“Robotics and the phase-out or minimalization of inbound docks, will bring the footprint down to about 855,000 square feet. Then you just build vertically,” Ms. Robinson said. “If we had a building that needed a million square feet, operating in Staten Island would be really difficult, even if we could find the land, and it would be a lot more expensive.