LOCATION ANALYSIS – Distribution Center or Manufacturing Site.

1. Customer Demand & Service Requirements

The starting point

Key questions:

• Where are customers geographically concentrated?

• What delivery promises must be met (same-day, next-day, 2-day)?

• What percentage of demand must be within X miles or hours?

Key metrics:

• Average distance to customer

• % of customers within 1-day transit

• Order-to-delivery lead time

Why it matters:

Shorter distances = faster service + lower transportation costs

2. Transportation Costs & Network Optimization

The largest cost driver for most DCs

Consider:

• Inbound freight lanes (suppliers → DC)

• Outbound lanes (DC → customers)

• Parcel vs. LTL vs. TL mix

• Fuel costs, tolls, congestion

Analytical tools:

• Network optimization models

• Gravity models

• Transportation simulation

Key trade-off:

Fewer DCs = lower fixed cost
More DCs = lower variable transportation cost

3. Labor Availability & Cost

Often underestimated — and frequently decisive

Evaluate:

• Local labor supply (warehouse, forklift, supervisors)

• Wage rates & benefits

• Turnover and absenteeism

• Union presence

• Competing employers (Amazon, Walmart, 3PL hubs)

Key metrics:

• Fully loaded labor cost/hour

• Time-to-hire

• Annual turnover %

Reality check:

A “cheap” location with no labor is an expensive mistake.

4. Real Estate & Facility Costs

Fixed cost with long-term implications

Key considerations:

• Land and building costs

• Lease vs. build

• Ceiling height, column spacing, dock doors

• Expansion capability

• Zoning restrictions

Metrics:

• Cost per square foot

• Cost per pallet position

• Expansion cost per incremental sq. ft.

5. Transportation Infrastructure & Accessibility

Speed and reliability matter as much as distance

Evaluate proximity to:

• Interstates & highways

• Rail terminals

• Ports & airports

• Parcel carrier hubs (UPS, FedEx)

Risk factors:

• Congestion

• Weather disruption

• Infrastructure bottlenecks

6. Inventory Strategy & Network Design

Location must support inventory goals

Key questions:

• Will inventory be centralized or distributed?

• How does this impact safety stock?

• Is postponement or cross-docking planned?

Trade-offs:

• More DCs → higher inventory holding cost

• Fewer DCs → higher transportation and risk exposure

7. Risk, Resilience & Business Continuity

Increasingly critical

Consider:

• Natural disaster risk (floods, hurricanes, earthquakes)

• Climate impacts

• Single-point-of-failure exposure

• Geopolitical or regulatory risk

Best practices:

• Regional diversification

• Backup DCs

• Multi-node network scenarios

8. Taxes, Incentives & Regulatory Environment

Can materially shift the economics

Evaluate:

• State and local taxes

• Incentives (abatements, grants, training credits)

• Environmental regulations

• Permitting timelines

Tip:

Incentives help — but should never outweigh fundamentals like labor and access.

9. Technology & Automation Readiness

Future-proofing the location

Assess:

• Power availability for automation

• Broadband & IT infrastructure

• Suitability for AS/RS, robotics, AMRs

• Ceiling height and floor load capacity

10. Scalability & Long-Term Growth

Think 10–20 years, not just year one

Key questions:

• Can volume double without relocating?

• Is land available for expansion?

• Will the labor market tighten?

11. Sustainability & ESG Considerations (Growing Importance)

• Transportation emissions

• Access to renewable energy

• Local community impact

• Workforce sustainability

How Leading Companies Do This

Best-in-class organizations:

• Run scenario-based network models

• Balance cost vs. service vs. risk

• Validate models with on-the-ground site visits

• Revisit network design every 2–3 years