In today's competitive markets, finding the right location for a distribution warehouse can be a key factor in the profitability of any corporate supply chain. But the choice of the right location can involve far more than simply cost per square foot.
Deciding on the best location will often require looking into an array of factors. These will include the infrastructure of the building and the area, the cost of labor, where the most important customer locations are or areas open to expansion and whether the community is one that would welcome a warehouse in their area.By taking the time to assess each of these key factors, a business can then decide on not only the location of the next distribution warehouse, but the order of development for the next several warehouses to aid in business growth.
Building and Area Infrastructure
There are a number of factors to consider when looking at a physical location for a regional distribution warehouse. While price may drive initial location choices, within that structure several considerations need to be included. These may be:
- Layout and flow of building
- The capacity of the building
- Staging facilities including handling equipment
- Accessibility including off ramps from freeways, trailer storage and street turning lanes
These issues will immediately affect the profitability of any distribution warehouse. The recent creation of warehouse districts that include these kinds of infrastructure can make a physical location that might not be readily apparent much more profitable then such obvious choices as a port location. Southern California's Ontario County is a great example of a location that has developed these capabilities outside of the Los Angeles/Long Beach port area and made warehouse distribution centers a big part of their commercial landscape.
Location Remains a Prime Concern
Just as they say in real estate, the key is location, location, location. But although location can be a driver for price, it can also be important because you of course need to locate the warehouse where your customers are. If your goods arrive primarily by ship but your retail locations for delivery are primarily inland, a look at highway arteries and rail lines can be key to deciding where to locate the warehouses.
With at least 20% of costs tied up in transportation between the rising cost of gas for trucking and the increase of wages for drivers, the decision to ship by truck must always be considered against the more economical but slower transport by rail. Goods that are less perishable, and shipments that are not heavily time sensitive might be better and more economically served by rail service as the price of truck shipping continues to grow. This makes the location of a warehouse where both options are viable the primary candidate.
The Impact of Labor Costs on Warehouses
While location is a prime factor and infrastructure can drive the decision regarding warehouse location, labor remains one of the biggest expenditures that can be controlled for warehouse cost management. Knowing the labor market of a specific location must be factored in when considering warehouse distribution location. Healthy local labor demands and employment opportunities can drive up labor costs in an area to make the physical location untenable. An area that has a history of large numbers of transient labor will result in training costs.
Seasonal demands on goods will also be affected by labor availability in the location. If your fluctuations in labor needs coincides with that of the surrounding area, you may find yourself either paying too much to attract labor or having to bring it in from other locations. Checking out the seasonal flow of labor availability in a region can be an important part of your overall labor cost analysis.
Target Clients and Areas of Growth
While it is ideal to locate a distribution warehouse in an area close to your key clients, when expanding your distribution chain it is also important to look at future growth. If you have a small warehouse in an area where you have seen a fair amount of customer growth, you might consider bookending that warehouse with another in a nearby area or even closing that warehouse in favor of a larger more centrally located warehouse.
The ability to grow with demand will also be an important factor when looking at client support for a regional warehouse. As the business grows, expansion into your current location will cut costs and allow a flexibility that will make your business competitive. Remaining in a cost effective location will also cut overhead by allowing you to negotiate long term rates that will control overhead costs if space allocation needs should grow in the area due to increased business demand.
As we move into an era of ecological considerations warehouse space has begun to move away from waterfront locations and into their own “neighborhoods”. This has also cut down on the friction between residential neighborhoods and nearby commercial and shipping locations. Finding a warehouse that is located in a commercial location intended for this business will not only ensure that the infrastructure needed is provided, but that community relations have been established before the warehousing district was developed. With the growth of centrally located warehouse distribution centers many cities who have lost their industrial base due to its movement overseas may welcome new labor centers such as warehouses. These are important factors to consider when looking at a warehouse location, particularly if you are considering leasing or renting in an already existing location.
As you can see, there are many factors to consider when looking into a new warehouse location for distribution purposes. Long term use versus short term use, the reputation of a warehouse management company and security should also be part of the discussion with any leased space. Meeting with the executives of the company, checking references and following these basics named above will help towards finding the warehouse location that best suits you and your clients needs.