Fuel prices causing companies to “Move West”

I lived in Los Angeles during the early 2000’s and had the opportunity to tour various inland logistics centers based in the Fontana/Ontario area of Southern California. Some of these operations were absolutely outstanding. For instance, the company I was working for at the time was running nearly one million square feet of warehousing and distribution for a major Life Sciences firm. My company was literally handling the entire operation including inventory, returns, distribution, etc. and was even in the preliminary stages of RFID development for the warehouse. At that time, I was also responsible for two large tech firms that were interested in relocating their warehouse operations to that region. During that time fuel was still reasonably affordable, so the main driving forces in the decision to move operations to that area were less expensive rent, less labor costs, and a somewhat close proximity to the ports in Los Angeles and Long Beach.

As companies continued to look for lower operating costs, companies began to push Eastward into the Redlands and Moreno Valley areas. Recently, with diesel fuel prices skyrocketing, many companies are now second guessing the decision to move that far East. According to an article on PE.com, many firms are once again looking West for places to establish their DC operations. Especially those firms that rely on the importation of finished goods from overseas. Local drayage rates into the inland empire average roughly $325 per container, while the Redlands area costs approximately $390. If you are importing 5,000 containers per year, that is a difference of $325,000 annually.

I assume that California is not unique in terms of companies looking to relocate closer to the ports. The majority of my career has been in the Western United States, so I can’t say if fuel is causing similar changes in the Southern and Eastern regions of the US. If you have particular insight, please drop us a comment below and let us know.