Facility Location – Where Do I Need To Be?

For many organisations in Australia, the choice of warehouse or distribution centre location is a simple one, more often than not driven by two overriding factors: attach it to the production facility for convenience and place one in each state capital alongside the state branch office. Both of these make some sense:

• If we’re leasing land or buildings then the incremental cost of additional adjacent land and/or buildings may not add significantly to the cost the facility is alongside production and/or sales staff and thus provides ready access for inspections, sales demonstrations, samples etc.
• The size of our presence is expanded to make it seem that we are a major player in a given location or industry
• The sales staff can make rush deliveries if needed

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What the Developers Provide

What’s more, many developers are constructing facilities that tailor directly to this approach – there are a multitude of buildings in commercial and industrial parks that have any amount of office space attached to any sized warehouse. A call to any reputable property manager will reveal a plethora of facilities that will meet an organisation’s needs with very little tailoring, further saving costs in developing a bespoke facility. Selection in this case almost becomes one of push button solutions: just select the button for the size of the office, production facility and warehouse and out pops a recommended facility. Couple this with the cost you are prepared to pay, and there you have your answer. How difficult is that? And of course, there’s always a property developer/agent to willing to extoll the virtues of their listed facility. However, too often this last point becomes the overriding factor in the selection: the decision is handed to the General Manager or Finance Manager who then makes a ‘real estate’ based decision. This approach can have poor or even disastrous consequences. But you think this won’t happen to you?

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Do I Need a Warehouse in Each City?

Just think of the numerous companies in Australia that have a head office in one capital city and branch offices in three or four other capitals. Each of these may have a warehouse located out the back of the office, ostensibly to provide maximum customer service to the surrounding customer base. But has anyone actually seriously looked at the customer fulfilment targets required by the customers? If it’s, say, next day delivery (which is often standard in Australia), then one needs to question why a warehouse is required each capital city. More than likely a product that is ordered by midday can be picked, packed and despatched in the afternoon, moved to a local depot and transported overnight for delivery next day – without incurring any additional priority charges. Usually, this is the same timeframe for a locally based warehouse, which will invariably arrive the next morning – the same time as an interstate delivery.

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Where is the Best Location in a City?

Looking at more local deliveries (i.e. intra-city), many warehousing and production facilities have grown around historically based suburbs in the larger cities. These were traditionally sited alongside transport routes – rail – so that workers could get to and from work. Now, all deliveries are by road, and many workers get to and from work each day by road. Doesn’t it make sense now to locate the warehousing facility near major access points to better enable smooth, faster and lower cost deliveries. It often matters little if the head office is alongside the warehouse, so locating the head office near the centre of the city or closer to the workers might take priority while locating the distribution facility may be better sited near transport hubs and highways. Accordingly, the location of warehousing facilities should take into account all of the considerations necessary to maximise service to customers while lowering the cost to serve. (Traditionally, these were seen to be mutually exclusive: increasing customer service meant more and closer facilities at a higher cost to serve, but today through more sophisticated logistic management techniques we can do both).

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Some Issues to Consider

Without going into the many factors that might influence a location decision, just a few are discussed below:

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• Main Road Entry/Traverse: Many warehouses or facilities are located in positions where they may spend 15 minutes or more simply getting onto a main road while waiting for passenger cars (usually with a single driver) travelling on the same roads around the facility transporting office or other staff to work. All of this adds up to lost productivity and burning fuel. Do I have easy and close access to main roads and freeways?
• Peak Hour Traffic: In many cases, deliveries are scheduled to depart from a warehouse/transport depot at the start of the working day. This usually coincides with peak hour traffic with the resultant slow crawl through the traffic (and usually commences just prior to office staff arriving for work). Can I locate a facility so that I’m travelling against the peak hour traffic?
• Ease of Access: The narrowness of the adjoining street often causes problems either entering or departing the site, particularly backing B-doubles and semi-trailers. While some councils don’t seem to mind on street parking, it could be important to you if you are constantly being held up by the next door neighbour(s) while their trucks block the roadway or on a street narrowed by workers cars. These, ironically, may have been moved out of the off-street carpark to make room for trucks. Likewise, if they haven’t allowed sufficient off-street parking for employees or visitors, your access to your site may be hampered.
• Loading & Unloading: Many older facilities (or newer ones of poor design) are simply not equipped to handle loading and unloading of trucks and containers on site; so this occurs on the roadway or in a confined space. Worse still it may be a safety hazard as trucks are manoeuvred and unloaded among parked private cars.

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Solving these issues is relatively straightforward, but surprisingly rarely considered. Rather than a single visit to the new site, an extended inspection is warranted: stationing an employee at the proposed site for an extended period covering a number of days and most hours of a given day will soon tell whether the site has issues regarding traffic access and congestion. It should be noted that these issues above are only a few of potentially dozens of considerations - strategic and tactical - that management must consider before taking the costly decision to locate a warehousing or distribution centre.