Distribution Center Site Selection

For most companies locating at the right location, in the right region and finding the right plot of land or building, is crucial to operational success. New investments in land, buildings, material handling equipment and talent are done for the longer term. As the global business environment in which a company needs to make a location decision is becoming more uncertain every day it is of huge importance to make a robust and future proof decision on the location for a new distribution center.

The importance of a thorough location decision process

Companies can have a variety of reasons for starting the location selection process for a new distribution center: cost reduction, expansion of capacity to facilitate business growth, the entry of new markets, tapping into new labor pools, rationalization after a merger or acquisition, coping with geopolitical developments. The realization of a new warehouse comes with significant investments (or leases). The investments are done for a long period of time and therefore the impact of the new location should also contribute positively for a prolonged period of time. In other words: in case of a wrong location decision the negative implications will also have a negative impact for a prolonged time period (e.g. higher costs, issues in finding the right labor, customs issues, delivery issues).

Specifics of location selection for a distribution center

In general, we see that location selection is done based on three types of factors

  • Costs - All relevant factors that can be translated into money such as land, real estate, labor, logistics costs, taxes, etc.
  • Quality of the business environment - Factors that cannot be translated directly into currencies but that still have a direct effect on the performance of the new operation. Think of availability and flexibility of labor, accessibility (by various transport modalities), supplier availability, customs regulations
  • Risk - All external business disruption risk factors that a company itself cannot influence but that still may have a substantial impact on the future operations such as inflation risk, currency exchange rate risk, transparency risk, natural disaster risk, etc.

Traditionally, in the location selection for a new warehouse geographical positioning, accessibility and the availability of land or existing buildings are critical. But the availability of labor is becoming a key factor as well. In almost all logistics hotspots in Europe, but also in other parts of the world, labor shortages emerge, with rising labor costs as well. Therefore, it has become very important to assess the labor market in detail, not only looking at today’s situation but also making forecasts of the labor potential towards the future.

Investment incentives and tax reduction measures are attractive in certain countries/States/regions in Europe, Asia, the US and Mexico/LatAm. Especially for warehouses with a large number of workers the total financial packages can be (very) interesting for the investing company.

Distribution Center Site Selection & BCI advice

BCI advises companies throughout the world in the selection of the optimal location for their new distribution center. BCI, based on more than 33 years of experience, has developed a proven approach for international location and site selection. This approach is based on an integrated assessment of costs, quality of the business environment factors and risk factors.
Our approach is fact-based, utilizing own databases, international reliable sources as well as a unique network of contacts around the globe (recruiters, investment agencies, real estate agents, etc.).
BCI delivers a clear final report with unbiased recommendations as well as a detailed data report showing the complete process of site selection and all data used for comparing the locations in each phase of the project.

Learn more about Distribution Center Site Selection?

Ask your question to one of our experts

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