Factors to Consider when Choosing Warehouse Locations

5 December 2019

A well-organized system of warehouses serves as the physical backbone of any supply chain network. At times, the entire success of a company depends on how efficient its warehouses are, which is why choosing the location of these warehouses should be a carefully planned decision. Certainly, rent is a major concern and a top priority, but there are other factors to consider as well.

Why is choosing the correct location and type of warehouse so important? Because the right decision can ensure the proper functioning of the storage building and the entire supply chain, while the wrong choice can doom the latter to fail before activity can even begin. But let’s take a closer look at some of the factors that can help you differentiate between several options.

Proximity to Both Manufacturing and the Consumer Base

These are two aspects that can help streamline your deliveries and ultimately increase your revenues. On the one hand, choosing a location that is within reasonable proximity to some (if not most) of your manufacturers can significantly reduce both the time it takes for products to arrive to your warehouse and the shipping costs.

Even more important, however, is the proximity to your company’s designated consumer base, which should be prioritized as a way to ensure faster deliveries. Before making a choice, try to pinpoint both your consumer base and the region(s) that you are most likely to serve. Your customers will know the difference, not only because your deliveries will be faster, but also because they will cost less.

The Availability of Local Warehouse Workforce

We tend to see warehouses primarily through their storage functions, which makes us prioritize the space itself over other factors. Yet even more important than the available space is the local workforce demographics, which will basically determine whether you will be able to find enough workers to staff your warehouse, as well as how much this will cost you.

Consider, for instance, that if the local demand for warehouse employees is high while the workforce availability is low, this usually leads to a spike in salaries. This ultimately impacts the overall company costs and can seriously affect your ability to deliver products at a competitive price.

Local Infrastructure and Proximity to Ports, Airports, and Railways

Although it is important that a warehouse has enough room to store inventory, it is equally important whether it is accessible for the quick transportation of goods. On the one hand, this means that it should be within reasonable proximity to local ports, airports, and/or railways station. Naturally, you should prioritize the point of transportation that this particular warehouse is most likely to use.

On the other hand, no matter how you ship most products, it is highly probable that goods will travel some distance by truck in order to reach your warehouse. It is therefore essential that the warehouse location has access to good roads and highways and that the latter do not usually suffer from congestion.

Rent, Taxes, Utilities, and Other Fees

Despite the fact that other factors must be considered as well, rent rates remain a major concern when picking warehouse locations. In the United States, for example, the rates per square foot per year can range from as little as $2.6, in Memphis, TN, to as much as $10, in Long Island, NY, or $11.1, in San Francisco, CA. Local taxes, fees, and incentives are equally important to consider.

In addition, utilities are not equally priced throughout the different states. This should be considered against the fact that some warehouses prioritize some utilities over others. For instance, a warehouse that must keep products under a certain temperature might need more electricity and/or water, so managers should prioritize these utilities when choosing a location.

Room to Grow

It is possible, but unlikely that your business will remain unchanged over the course of decades. Your demand for storage might increase or decrease and the warehouse location you choose can significantly reduce your costs when changes become necessary.

Consider, for example, the fact that extensions are more affordable than buying or renting additional warehouses. As such, you should ask yourself whether the options you have in mind can be extended for additional storage in the future or whether you will likely have to move. Factor the answer in with the rest of the issues described above and make your decision only after carefully considering their implications.