Speed to market is key in logistics today, and distribution centers (DCs) are increasingly central to helping shippers achieve success. When selecting a site for the DC or warehouse, however, there are many factors that must be taken into account to ensure the right site without running into unexpected requirements that can hamper future operational costs.

The process usually begins by asking where, how and why.

According to Jeff Ashcroft at Supply Chain Network, the key factors to consider when selecting a site for your distribution center are as follows:

Lot size
“Determining the correct lot size for your operation is directly relational to the types and size of inventory you need to store at this location,” Ashcroft writes. Once you’ve determined your inventory deployment and made an inventory-based calculation of building size, the facility’s height and the type of storage medium(s) you plan to utilize, you should be able to determine the proper lot size.

Adjacent lands
If timid about real estate and major investments, you may want to build to your three- to five-year needs. Then ensure that adjacent lands are available, and tie them up with a right of first refusal (ROFR) to ensure you have readily available space to expand.

Site grading
“Simply put, the most level, flat lot is your best choice if available,” according to Ashcroft, “and it will cost you significantly less than an uneven lot that has either very high areas [that] need to be graded down, or very low areas [that] need to be graded up.

Environmental assessment
As a purchaser of major industrial property, you must be careful to review environmental reports on lot candidates. If these don’t already exist, ensure that appropriate reports and studies are carried out before the finalizing the purchase. The property owner is liable to clean up the environmental issues with owned lands. Do not make the mistake of hastily purchasing a contaminated property without requisite reports and studies. Plus there is that little matter of your employees’ health.

Taxes
The difference in tax rates between municipalities can be huge, and not knowing prior to the site purchase can have a spectacular (and surprising) impact on your annual operating costs. Also, ask about tax holidays and discounts, as many areas are looking to attract industrial development to build their tax base and bring jobs for their people, Ashcroft suggests.

Proximity to services
Be sure that there is electricity, water and sewers sufficient for your needs at or near your lot. If not, you could have a large over budget expenditure and another potential delay. And make sure that the electricity for high-voltage DC users is high enough to run all the equipment you plan to run on the site.

Above all, site selection must be based on what will add value to the supply chain. True supply chain management focuses on adding value to customers and sharing that gain with all the component links in the supply chain. So in placing necessary attention on location, don’t neglect focusing on the distribution facility’s purpose and strategic role.

Logistics Management recently noted:

It doesn’t matter what industry, product, or geography a shipper is involved in; getting products to customers quickly and efficiently is a necessity for success. And the key to making that happen boils down to siting, developing, and running a DC in a location that guarantees flexibility and agility.

Accessibility
Having several modes of transportation available gives shippers different options for moving freight when circumstances change — which improves on meeting customers’ delivery requirements.

If the selected site is all the way across town from the highway, it may not really be the bargain it seemed when carriers want to charge you extra to get to your location to drop off and pick up trailers.

If the DC is going to handle imports primarily, close proximity to the port of entry becomes critical in reducing time to market. To that end, companies are developing import centers near seaports.

For many companies, a rural location with good transportation access meets their needs. The rule of thumb for regional DCs is that they should be within a 100-mile radius of a market’s logistical center,” said Logistics Management.

“Beyond that, the cost picture can change significantly.”

Sources:

Supply Chain Network

Logistics Management