4 warehouse location strategies

Since the onset of the pandemic, it is clear that there has been considerable growth in the e-commerce sector. As a result, both online retailers and logistics operators have been working to improve and implement all the necessary changes in both warehouse management and last mile distribution. However, large retailers and distribution centers have gone a step further in the location of warehouses.

It is known that 82 logistics parks have been opened in Spain in the last 2 years, which is a remarkable number considering the impact of the e-commerce boom. However, what strategies are companies taking into account to locate their activities in certain logistics centers? If you want to know them, take a look!

Product features

This is one of the most important factors in warehouse location, as the product to be sold or distributed is at the heart of the business model, whether B2B or B2C. However, several components of the goods such as durability, intrinsic stability and manageability must also be taken into account.

Durability is a fundamental aspect when it comes to fresh goods where they are to be consumed soon after purchase such as foodstuffs. While intrinsic stability is a relevant factor for chemical products where mishandling can cause health problems, so they are safer, being stored only at their production plant and points of use. Handling is also an important point for bulk liquids and aggregates because it is not convenient to store them in many places and transfer them until they are already packaged. 

Production capacity

Another aspect to be taken into account in the location of warehouses is the storage capacity, which is in proportion to the amount of manufacturing and/or imports by suppliers. But it is not only a question of focusing on volume, but also of paying attention to other factors such as the degrees of transformation.

The degrees of transformation classify goods on the amount of processing required to become the manufactured product they distribute (which may not necessarily be destined to the final consumer depending on the business model). A product with a low degree of conversion is usually one that needs only to be packaged and/or processed such as fresh goods. While an item with a medium or high degree of modification are those that go through many or many developments and changes to make them suitable for sale such as industrial materials, so it might need several warehouses for the raw materials involved in manufacturing.

Finally, it is known that a distribution network is mainly composed of the following three characteristics of the warehouses: the number, location and types of warehouses. Keeping these aspects in balance in order to be as profitable as possible is not at all simple because of the tedious planning involved, apart from the fact that there are two important factors to take into account: the composition and the distribution in the marketing network.

Type of business

It makes sense to think that the location of warehouses should be as close as possible to the consumption points in order to shorten distances and save time and money. However, this statement does not apply in all cases, depending entirely on the objectives of the warehouse.

For example, in the case of factories, proximity to points of sale is not such a key factor because that is the job of distribution warehouses, but it is better to be close to available and affordable labor. Warehouses with parcel services, on the other hand, are more efficiently located in urban hubs or in logistics parks close to highways to reduce delivery time.

Price of land, building, equipment and facilities

Undoubtedly this is one of the most influential when choosing locations for the construction, purchase or rental of warehouses because its investment is very high, both its fixed and derived costs. In addition, special attention must be paid to the economic costs and commercial expenses that influence the respective location of the warehouses.

Economic costs refer to those that directly influence the purchase of land, building permits and the price of labor to build the warehouses, among other aspects. While commercial costs are those that are maintained over time during its activity, such as the cost of vehicles and TMS used, the distances between suppliers and distribution points, and competitive warehouses.

Conclusion 

Looking at the current scenario regarding the boom of sectors such as e-commerce and the opening of many logistics parks in recent years, we can see that there is a "fever" for the acquisition of new spaces and for the location of warehouses. However, the whole strategy and all the aspects to consider in the location of warehouses makes your choice to buy or rent a warehouse is not a simple task and is a well studied decision in most cases.

At Hedyla we understand the importance of having a good distribution network that is properly executed and we offer tools to help improve your logistics operations.