Outside of your business strategy, choosing the right location for a warehouse is a critical decision for any business. A well-planned warehouse location strategy could significantly impact the overall efficiency, costs, and most importantly, customer satisfaction with your services. Additionally, the right location can help a company adapt to changing market conditions, regulatory requirements, and emerging trends, providing a competitive advantage in an increasingly globalized economy.
Specifically, the decisions that executives make on industrial sites have a long-lasting impact on the cost, speed, and consistency of their companies’ supply chains. The same goes for the port, transload, and warehouse locations that buttress the logistics activities at the industrial site. But evaluating locations for transportation advantages and disadvantages can be a daunting task. So, it shouldn’t be a surprise that the perfect location for a warehouse is not an easy task. There are several crucial steps that businesses must take to ensure they make the best possible decision.
Here at PLG Consulting, we specialize in helping shippers and service providers select the right storage, handling, or logistics facility for a diverse range of commodities and goods, including chemicals, oil and gas, bulk commodities, and manufactured goods. In this article, we are going to go over some of the most important factors that you need to consider when selecting a warehouse or logistics facility location.
Understanding Your Business Needs
It’s easy to be broad and go over the basics like leasing or rent cost (which we will go over), however, it’s important to drill down and focus on the unique needs of your business. There are various types of goods that are more complex to store compared to others such as perishables, hazardous materials, and those that require temperature control. All of these needs must be considered when selecting a warehouse or logistics facility location. Below we will go over the various types of goods we cover.
Identifying Specific Requirements For Various Types Of Goods
Chemicals
When handling chemicals, there are stricter rules when it comes to safety and environmental regulations. Some things you need to take into consideration are a well-ventilated warehouse, temperature control, and containment systems to prevent leaks, spills, and other harmful fumes. In addition, when it comes to chemical storage you need to make sure you segregate the chemicals away from incompatible materials and implement good fire protection measures.
Oil & Gas
Like chemicals, oil and gas has its own set of requirements when it comes to a warehouse or logistics facility location and measures you need to take. Handling oil and gas requires specialized infrastructure, such as tanks, pipelines, and other containment systems. Location selection for these warehouses should consider factors like proximity to production sites, refineries, transportation networks, and end-users.
Bulk Commodities
With a warehouse handling bulk commodities, there are some things you need to keep in mind. The thing that should be at the top of your list is specialized storage systems. These systems include things like silos, hoppers, bins, and other containers to maintain the quality and integrity of the goods. For bulk commodities, transportation is the name of the game. This means that you want to select a location with easy access to transportation, terminals, and transload services. Transportation options include rail, truck, or even marine transport.
Manufactured Goods
When dealing with manufactured goods, the biggest things you should be concerned about when looking for a warehouse or logistics facility are inventory management, efficient material handling, and order fulfillment. The most important aspect is making sure that the location is optimized for the flow of goods and a wide range of products, sizes, and weights. Being close to manufacturing plants, suppliers, and customers is crucial for reducing lead times and keeping transportation costs low. Lastly, you want to have access to a talented workforce and dependable transportation so the warehouse runs efficiently.
Understanding the specific needs and requirements of the goods you handle is a crucial starting point in the warehouse or logistics facility location selection process. Next, consider the transportation options available in the area.
Assessing Transportation Options
Assessing transportation options is another important aspect of the warehouse or logistics facility location selection process. If you can’t move your resources and products efficiently, it doesn’t matter how good the location of your warehouse is. Below we will go over the various methods of transportation and their benefits.
Rail
When it comes to rail transportation, it could be cost-effective, have a lot of capacity, and offer a greener, more sustainable solution compared to other methods. This is great for companies that are dealing with bulk commodities or heavy cargo.
Intermodal
Intermodal transportation is a combination of two or more modes of transport, like truck and rail. This type of transportation could be economical and reduce lead times. It makes sense for companies that are looking to move their goods across distances quickly and efficiently.
Marine
If you’re a business that is engaged in international trade or sourcing bulk commodities from overseas, marine transportation should be a major consideration. Having proximity to ports and harbors could provide direct access to global markets and facilitate the movement of large volumes of goods.
Terminals
Terminals serve as crucial transfer points for goods moving between different transportation modes. Locating your warehouse near a terminal (such as an airport, seaport, or rail yard) can streamline the transfer process, reduce handling costs, and improve overall supply chain efficiency.
Truck
One of the most versatile and most used options for moving goods is trucks. Trucks are a good option for moving goods both regionally and nationally. Trucks are specifically good for warehouses or logistics facilities that have access to major highways that trucking routes could benefit from.
Pipeline
Last but not least is pipeline transportation. This is a specialized option that is used for the movement of liquids and gases, such as oil, natural gas, and certain chemicals. Warehouses dealing with these commodities should consider proximity to pipeline infrastructure when selecting their optimal location for business.
Site Selection Checklist
Now that we have reviewed considerations for the type of goods you produce and transportation options available, we’re now going to go over a site selection checklist you should use when selecting a warehouse or logistics facility location.
Proximity To Suppliers And Customers
Delivery time is important no matter the type of goods. Making sure that your warehouse or logistics facility is close to suppliers could help eliminate any possible hiccups in the supply chain, while proximity to customers could ensure that orders are delivered quickly and efficiently.
The closer you are, the easier it is to enhance relationships with both suppliers and customers, improving future business opportunities.
Access To Transportation Networks
As we talked about, transportation is particularly important in terms of warehouse and logistics facility locations. You want to make sure that your warehouse or facility has good access to transportation networks, like highways and railroads, so you can move goods quickly and efficiently. The closer you are the more cost-effective it is to transport goods with faster delivery.
Workforce Availability and Labor Costs
When it comes to site selection, workforce availability, and labor costs play a significant role. A location with a skilled and readily available workforce snares that operations run well. When you have a location that has a skilled workforce pool, it reduces the time spent on resources, recruitment, and training. Additionally, when you have a competitive labor force, it usually means that labor costs are lower.
Real Estate Costs and Availability
Good warehouse or logistics facility space is difficult to assess the ‘right fit’ in terms of specifications with varying prices from location to location. You want to make sure that you are selecting the optimal facility and securing the best deal possible for the space you need. Also, consider your long-term business goals when looking at a warehouse or logistics facility space. Will it support more volume and growth? Is there room for expansion? Here are some tips to ensure you are getting the optimal warehouse or logistics space for your business, while also staying within your budget:
- Research and compare locations including proximity to suppliers and customers
- Consider leasing vs buying: Locking into a longer-term lease may be a good initial strategy to keep costs down
- Collaborate with other businesses: Sharing space and splitting fees with other businesses may be a good tactic to lower costs
Regulatory Environment and Permitting Requirements
The regulatory environment and permitting requirements are essential factors to consider during the site selection process for warehouses and distribution centers. These aspects can significantly impact the feasibility, cost, and timeline of establishing and operating a facility.
- Compliance with regulations: Warehouses and distribution centers must adhere to various local, regional, and federal regulations, which may include environmental, safety, labor, zoning, and building codes. Ensuring compliance with these regulations helps avoid potential legal complications, fines, and delays in operations.
- Permitting requirements: Depending on the location and type of operation, permits may be required for the construction, operation, and expansion of a warehouse or distribution center. Understanding the permitting process, including the necessary documentation, fees, and timelines, is crucial for seamless project execution.
- Environmental regulations: Warehouses and distribution centers may be subject to environmental regulations, such as air quality, waste disposal, and hazardous materials handling. It is essential to understand and comply with these regulations to avoid penalties and maintain a good reputation.
- Local zoning laws: Zoning laws dictate the types of activities and land uses allowed in specific areas. Verify that the chosen location permits warehouse and distribution center operations to avoid potential legal disputes and relocation costs.
- Facility design and construction requirements: Building codes and regulations may influence the design and construction of your warehouse or distribution center. Familiarize yourself with these requirements to ensure your facility meets all necessary standards.
- Potential changes in regulations: Keep in mind that regulations can change over time. Staying informed about potential regulatory changes can help you adapt your operations and avoid unexpected costs or complications.
Infrastructure and Utility Services
Infrastructure and utility services are crucial considerations when selecting a site for a warehouse or distribution center, as they directly impact the functionality of your facility.
You need a reliable power supply, efficient water and sewage systems, high-speed internet and reliable phone connections, access to public services in case of an emergency, and good road quality and maintenance for smooth truck movements.
How PLG Can Help: Comprehensive Solutions For Warehouse and Distribution Success
At PLG Consulting, our skilled team possesses years of specialized expertise and hands-on experience, allowing us to tackle your most intricate logistics and supply chain challenges. Trusted by senior executives from top shippers, transportation companies, and private equity firms worldwide, we are dedicated to delivering excellence. Here’s how we can assist you:
- Site Selection: Our experts help organizations find and evaluate ideal locations for warehouses and distribution centers, considering various industrial, logistics, and development factors to ensure the best possible decision.
- Network Optimization: We specialize in optimizing supply chain networks through distribution node modeling and optimization, ensuring the seamless and cost-effective movement of goods while providing a competitive advantage in a demanding market landscape.
- Operations: We offer expert assessments and tailored recommendations for enhancing efficiency in warehouse and distribution processes while ensuring compliance with safety, health, environmental, and security standards.
- Technology: As highlighted in our article, “Supply Chain Technology Trends 2023 and Beyond,” technology plays a crucial role in cost savings and efficiency improvements. We can help assess your technology needs and integrate the latest solutions into your warehouse or distribution network.
- Procurement: Our team assists in procuring distribution services, negotiating cost-effective agreements with performance clauses, and ensuring you receive the best value and service quality from your supply chain partners.
- Business Strategy for Warehouse Service Providers: We help warehouse service providers develop strategies for market penetration and asset utilization improvement while providing valuable market intelligence to support growth and expansion in an increasingly competitive industry.
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