Important factors in choosing a DC location

August 15, 2006 by SwizStick  
Filed under 3PL, Contract Logistics, Supply Chain Management

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BlogOnLog has an excellent post on the various factors involved when choosing a location for a distribution center. The post explains two of the most important – and in my opinion, sometimes overlooked – factors are “people” and “community”.

While various markets may meet a company’s transportation needs, it may be harder to find a reliable and productive labor force. As such, labor force is the foremost community characteristic to identify in site selection. Firms should also analyze turnover rates because retraining employees increases operating costs.

Most communities will provide a survey outlining the area’s wage and benefit rates, which are impacted by geography and the presence of organized labor. Often, incentive packages are offered to businesses that meet or exceed community wage averages.

Getting a community’s support is vital. When a community is behind a project, everything from permit approvals to the plan’s review processes moves faster. Selecting a pro-business community is a definite plus.

I agree wholeheartedly. I would add that “people” – i.e. labor – is probably the most important factor of all. While a pro-business community trying to attract companies to locate in their area would be a very attractive factor, the local labor market might not be up to par.

For example, perhaps state workers compensation benefits are very favorable, which is influencing your decision to locate a DC there. However upon further inspection the local community you are looking at has a much higher percentage of workers compensation claims than average. And while local turnover may be low, there is abnormally high percentage of workers being terminated because of drug abuse issues. These figures could point to an underlying community problem that could negatively impact your operation.

Where possible, try to get a realistic picture of the people and labor issues within the community from already established businesses and community leaders. And remember to gauge appropriately the information you receive; a local community leader desperate for business may paint a picture that’s just a bit too rosy to accept. Likewise an established business in the area that sees you as competition may not give you the most accurate view on the local labor market. This all may sound like good business sense, but too many people out there don’t look at all the elements of the equation before executing a critical decision.

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