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  • Choosing Warehouse Location

    Warehouses in my country are usually located outside cities because of the lower overhead and the availability of space. Cities here in my country nowadays are too stuffed leaving limited space for new businesses and buildings to be built. A warehouse owner needs to choose his/her location well though because there are also a lot of rural areas here which experience flooding and this could cause a big loss on the business owner if his/her business experiences this kind of calamity.

    What do you think should be considered when choosing the right location for a warehouse?

  • #2
    Re: Choosing Warehouse Location

    It looks easy but this is a tricky one - choosing the location for the warehouse. There are so many factors to consider although first in the list would be the distance, i.e. if you are the warehouse manager. But for the upper level officers, their first consideration is the value of the property or the cost of rent. Some other considerations to mention are the condition of the place like what you said about flooding. How about the peace and order, are there no bandits around? There are rural areas in our country where the rebels require companies to pay their tax (to the rebel group) so it is like paying double tax. So I guess you should have a formula so you can come up with a good computation in choosing the best location for your warehouse.

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    • #3
      Re: Choosing Warehouse Location

      This greatest problem in this situation may be the event of finding a suitable site for the location. When establishing a warehouse, the considerations may be accessibility to customers the security of legitimate visitors to the complex, if weather the location is vulnerable to disasters, if the location is easily accessible to the emergency services, and if its within zoning laws approval. With all these considerations it's sometimes very difficult to find suitable locations to establish warehouses.

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      • #4
        Re: Choosing Warehouse Location

        Well you know what they say: Business is all about location, location and location. Of course, when it comes to the warehouse it might not matter quite as much, in terms of overall sales at least, but it certainly is important. You want to be in a good place, preferably in the center of things, with easy access to get your goods out. Now that I think about, I am sure this can really make or break certain companies, so it is even more important. Interesting stuff, and thanks for sharing.

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        • #5
          Re: Choosing Warehouse Location

          Quiet a lot to consider there basing on all your replies. I also think that choosing the right location could be a bit hard and tricky because I do think that there will alwaysbe something negative about a location one oughts to consider. I guess it also boils down to choosing the lesser evil and having a plan to manage all the odds in your chosen location.

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          • #6
            Re: Choosing Warehouse Location

            I think some of the things that need to be considered are: 1) type of items stored in the warehouse, 2) volume of items stored in the warehouse and 3) accessibility of roads (they should be paved enough to facilitate the ease of delivery).

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            • #7
              Re: Choosing Warehouse Location

              I'm not experienced with this but I am guessing you would need to consider climate and weather as well as accessibility and also security. If the location is too cheap then it would probably be best to check as to why that is because there might be disadvantages that you might not be aware of. As far as accessibility the roads have to be good so you could assure that not only your goods will be transported in and out as easily and safely as possible but also the safety of the ones transporting the goods as well as the people going in and out of the warehouse everyday.

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              • #8
                Re: Choosing Warehouse Location

                @Norm, that is a good consideration to check on why the property is too cheap because there might be something behind that reason. I can relate to that kind of location when we bought our house which was pegged at 3 million pesos which I haggled and got for 1.6 million pesos (that's less than $40k). But before buying, we asked around if the place gets flooded and we got a negative reply. That is true though that our house is safe from flooding but when there is heavy rains, the surrounding roads are all flooded making our street isolated. Well, that is a problem in accessibility. And if a warehouse is in the same location, that would be a problem every time there is heavy rains.

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                • #9
                  Re: Choosing Warehouse Location

                  The situation is same everywhere and the authorities do not allow companies to have warehouses within the city limits. So, you have to look into the suburbs for a space to have your warehouse set up. The primary thing to be considered is easy conveyance, more than one access points from the city, road width of at least 50 ft, area with low crime rate and it has o be in a place as close as possible from the highway. But, these days most of the companies prefer to have heir storage in a warehouse complex developed either by the government or any private developer in a location marked out specially for this purpose. These complexes are well planned and the security arrangement are also very good. You also get many other facilities.

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                  • #10
                    Re: Choosing Warehouse Location

                    I noticed that security and easy road access are some of the most mentioned considerations when it comes to choosing a good warehouse location. I too think that a warehouse should be located in a safe place both from calamities and from possible robbers or criminals. I think the latter could be easier to manage though with the right security measures. Calamities are sometimes very unpredictable especially in our generation when unexpected weather disturbances occur more often.

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                    • #11
                      Re: Choosing Warehouse Location

                      Choosing the right location always seems to be the hardest part when it comes to hosting your own business, locations are always going to be one of the most important facts that will help you grow your business and therefore, it is always going to be the trickiest thing ever, so basically, when it comes to choosing between locations and available spots, I personally think that you always have to go for the best one when talking about space and availability to park cars on the surrounding areas, you also have to locate it in a crime free area if you do not really want to lose your goods, so yes, locating your warehouse on the outside of the city may be a good idea, but you should analyze the area and see if it really is the best place for it, that's my opinion though.

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                      • #12
                        Re: Choosing Warehouse Location

                        As far as I know, from hazardous materials, flammable product and food items, many companies make products that have strict storage and firefighting requirements.The location you’ve chosen properly should be suited to handle your unique needs, And also you should consider how will they handle the different requirements for products that require a chemical/foam system versus a water based system, Always be sure to also take any environmental concerns into consideration, are there any streams, ponds, etc. in close proximity? Asking these questions now will help you avoid a messy disaster later.

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                        • #13
                          Re: Choosing Warehouse Location

                          Originally posted by Corzhens View Post
                          @Norm, that is a good consideration to check on why the property is too cheap because there might be something behind that reason. I can relate to that kind of location when we bought our house which was pegged at 3 million pesos which I haggled and got for 1.6 million pesos (that's less than $40k). But before buying, we asked around if the place gets flooded and we got a negative reply. That is true though that our house is safe from flooding but when there is heavy rains, the surrounding roads are all flooded making our street isolated. Well, that is a problem in accessibility. And if a warehouse is in the same location, that would be a problem every time there is heavy rains.
                          Yeah I am guessing that similar rules apply for buying a house or renting a warehouse since the business is somewhat treated like your family so you'd want as much as you can get for as little money as possible but you do also want to make that decision as safely as possible. You really have to be careful as sometimes the difference of only a short length can mean a lot of savings but it's important to find out why that is.

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                          • #14
                            Re: Choosing Warehouse Location

                            Choosing a location for a ware house can be very time consuming with a lot of factors that will need to be reviewed. I would say it is important to first look at the infrastructure around the building itself. You want to make sure that there is plenty access for tractor trailers to maneuver and no low bridges. There is a Costco warehouse in my area with a low train bridge that drivers are constantly getting stuck under. Once you establish that the location has the infrastructure needed you want to make sure you needs for space being met by the building itself. After that you would want to look at price, warehouses are generally located on the outskirt of town which is good due to the rent or property taxes (if you own) being lower. I would also check the local crime maps to see if the area has an issue with break ins. Warehouses may offer the idea of an easy target for criminals. If there are a lot of break ins you might want to see if it would be best to move somewhere else or would it be cheaper to get a good alarm and maybe a security guard for the hours the ware house is not in use. These are just a couple of the things I would look at while picking the location for a ware house. Let me know if you have any questions as I would be happy to help! Thanks!

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                            • #15
                              Re: Choosing Warehouse Location

                              I wrote this Blog post a while ago..........

                              We are constantly told by Real Estate companies that the three most important elements of any real estate purchase are location, location, location. But does this really hold true for industrial real estate and in particular distribution centres (DCs) and warehouses? I would like to argue… not quite!

                              If we look objectively at a company’s needs for DCs, we should start with the premise that we don’t need any.

                              In an ideal World, where demand is consistent and supply reliable, then by adopting a Just In Time (JIT) approach, products can flow directly from supply to customer. Sadly that ideal World does not exist, due to fluctuations in customer demand, inconsistent supply and all manner of glitches that can occur in a Supply Chain.

                              For these reasons, we need to hold product at DCs within our Supply Chains to act as a buffer so that we can ride out these variations in supply and demand and meet our customer service requirements.

                              I am often approached by businesses seeking assistance in designing or selecting the location for a new DC. Frequently this is due to existing facilities reaching capacity. It should be said at this point, that there are a whole range of measures and changes that can be adopted within the Supply Chain to reduce the DC capacity requirement, or indeed to better utilise the existing DC capacity, before embarking on adding more facilities to the network.

                              But assuming that a new facility is required; is the location really that important and what drives location decisions? Given the rise in popularity of distribution parks, hubs and even logistics cities (such as in Dubai) then perhaps the location decisions have already been made?

                              It is worthwhile to take a step back and examine, objectively, some of the key cost relationships in a network of Distribution Centres.

                              Network Cost Relationships
                              As the number of Inventory Points in a network increases, so the costs are impacted as follows:
                              The cost of storage rises, due to the increase in facility numbers and fixed costs.
                              The inventory holding cost (cost of capital) increases as more inventory is required. (Due to increased safety stock requirements with more locations)
                              The primary transport, or linehaul cost increases, as more tonne/kms are being travelled.
                              The customer delivery cost (secondary transport) reduces, as with more facilities, the distance to the customer reduces.
                              DC systems costs increase, as more licences, interfaces and hardware may be required.

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                              So the objective within any distribution network is to find the optimum number of facilities that will reduce the total cost curve, whilst still maintaining appropriate levels of customer service.

                              So what about the location of these facilities? What drives the optimum location? Well it is certainly not location, location, location as in the residential or retail property market. Again, taking an objective view of DC locations, we need to understand what drives, or should drive businesses to select certain locations over others. In fact the cost driver that frequently has the least impact on the total cost of selecting a given location, is land and building cost. This is due to the fact that inbound and outbound transport, as well as labour costs are a far higher proportion of the total costs of a distribution network.

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                              So the location decision process might go something like this. We have established a need for 6 DCs in the network. We have established that one of these of a certain size, is required to be located in city X.

                              Given the choice of a number of locations in city X that all meet the required location characteristics, the specific choice of one location over another is often not that important. This is because land and building cost will often have a much lower impact on the overall cost than those costs driven by the supply and demand profile.

                              As an example, I was recently involved in the DC location decision for a large company that operates a fleet of some 400 delivery vehicles from one site alone. They needed to move to a new purpose built larger facility. The choice of a range of potential facility locations had a massive impact on delivery transport costs. Imagine moving to a location that was 30 minutes further away from the centre of gravity of demand? A fleet of 400 trucks would now be driving an extra hour per day. That could actually increase fleet costs by at least $3.6 m pa.

                              So when selecting the location of Logistics facilities, are the three most important elements location, location and location? No. Well not in terms of a specific location.
                              But given a range of locations that all meet the needs of the business, such as access to customers and resupply, access to highways, ports and the like, then the costs of land and building of one location compared to another can start to be important.

                              Perhaps the three key elements should not read location, location, location, but lowest overall cost, best overall service and access to the right infrastructure?
                              Rob O'Byrne
                              Site Owner & Sponsor

                              | Supply Chain Consultants | Supply Chain Conference | Supply Chain Education |

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