How to Choose a Warehouse Location: 5 Important Selection Criteria

When operations grow beyond the capabilities of a current warehouse or DC, managers have a tough decision: How best to accommodate the growth?

Some operations will decide to redesign their existing facilities to take better advantage of their what space they have through the use of automation technologies and smarter inventory storage. Some will decide to build out their existing facility and enlarge it to meet their increased demands. And others yet will decide to build an entirely new warehouse or DC to accommodate the growth.

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But in deciding to build an entirely new facility, managers face another question: Where in the country should this secondary (or tertiary, etc.) facility be built? What selection criteria should be taken into consideration to ensure that you are choosing the right place for your operational needs?

The answer to that question will vary substantially depending on the specifics of your operation and your industry, and a warehouse design consultant may be able to help you in settling your options. That being said, there are a number of factors that should be taken into consideration when you are deciding on the location of your new warehouse or DC.

1. Where do you currently operate, and where must this new facility service?

This is really a question of how large an area your operation services. Hyper-local operations, for example, would likely need to keep any secondary warehouse or DC similarly local. Statewide operations may expand to another corner of the state for easier distribution. Regional operations want the second facility in a different state within the region. And national operations may consider where, nationally, they currently operate to identify gaps that could make distribution easier.

But it is critically important to consider your future plans as well as your current operations. If you are a statewide distributor currently but intend to become a regional distributor within a reasonable amount of time, it may make sense for you to begin building out this network of facilities now, especially considering how long the projects can take.

2. Where would you have the best access to transportation hubs?

Manufacturing product or picking orders is only half of the battle. The other half is getting that product into the hands of your paying customers, and that, of course, entails transportation. How you currently transport goods, and how you plan to do so in the future, may have a major impact on where you decide to construct your new facility.

Common considerations to keep in mind when selecting a location based on transportation include:

• Does it have easy access to interstate highways?
• Does it have access to rail lines?
• Where are the closest airports?
• Where are the closest ports?

Some of the most attractive transportation hubs in the US for distributors include:

• Chicago: With easy access to railroads, an international airport, and waterways
• Houston: With access to ports, highways, and an international airport
• Memphis: With access to waterways, interstate highways, and an international airport (which made it an obvious choice for FedEx’s SuperHub)
• Los Angeles: With the busiest container-handling port in the country, an international airport and 5 additional commercial airports, and a series of freeways
• Atlanta: Served by 3 major interstate highways, and with access to an international airport, and major rail lines

3. Where will you have access to reliable and cost-effective labor?

Though automation technologies like AS/RS, Goods-to-Person (G2P), sortation, and the like can help you fill many gaps, access to a steady and reliable supply of labor is critical even for the most automated of facilities. The machines will in the least need to be serviced and maintained, after all.

For that reason, labor supply is a critical factor to consider when selecting any site for a new warehouse or DC.

In addition to selecting a state or locality with ready access to labor, you may also want to account for labor costs. Locales with a lower cost of living expenses typically provide workers who are willing to work for less than areas with higher cost of living expenses (for example, the South vs. the Northeastern United States).

4. Where can you get the cheapest land?

It’s a simple fact that the price of land can vary pretty significantly from region to region, state to state, and even city to city. You will need to take this into account when selecting land to build your new facility.

Locations with higher population density and demand for land typically enjoy higher property values compared to areas with low demand, so you may be able to reduce your land costs by selecting a location outside the norm. It is important to keep in mind, though, that high demand also often correlates to easy access to transportation hubs, so by selecting a less in-demand location you may be giving up some other logistical benefits.

Beyond the price of land itself, you must also take into account property taxes, which over time can substantially weigh on an operation’s bottom line. Some states and localities are willing to work with operations (i.e., bring down their tax rates) who promise to employ a certain number of people at the new facilities, so you will want to seek out these business-friendly locations.

5. Is the area prone to natural disasters or extreme weather?

Though it is impossible to fully account for every storm or extreme weather event, knowing whether a particular area of the country is prone to a particular kind of extreme weather can help you a.) know whether or not the weather may ever impact your ability to do business and b.) inform your building design if you choose to work in such an area.

No region of the US is fully secure from all extreme weather. Hurricanes are common in the south and Gulf Coast; tornadoes are common in the Midwest; blizzards are common in the Northeast; and wildfires are common in the West. Flooding can happen anywhere there is coastline or a river.

Knowing where your operation is vulnerable will allow you to plan for possible disruptions and put plans in place to deal with them ahead of time to keep your business from losing money.

The Bottom Line

Selecting a location for your new warehouse or DC requires that you consider a variety of factors. Everything from your specific industry to your operational plans to transportation to the price of land and your access to labor will weigh on your final selection.

A warehouse design consultant may be able to help you in selecting the best land for your specific needs and, once that land has been acquired, in putting it to the best possible use for your operation.