Choosing a distribution centre location is a decision that can affect transport costs, delivery times, access to customers and the efficiency of the wider network for years to come.
There is rarely one obvious answer. A site that provides excellent access to customers may be further from suppliers. Another may sit beside a major motorway but struggle to provide access to the workforce required to operate it. Property costs can make an apparently attractive location less commercially viable too.
Location Intelligence can help bring these different factors together, allowing businesses to compare potential locations and understand the trade-offs involved.
So, what should you consider?
1. Where demand is coming from
The geography of demand is a useful starting point. Where are your customers, stores or delivery destinations, and how much demand is generated by different areas?
Historical sales and customer data can reveal geographic patterns that aren’t immediately obvious from overall figures. Some markets may account for a disproportionate amount of demand, while others could represent areas of future growth. Mapping this information can help businesses understand where a distribution centre needs to provide the strongest coverage and compare potential locations accordingly.
But current demand isn’t the only consideration. If the business is expanding into new markets or opening additional locations, the distribution network may need to support where demand is expected to develop as well as where it exists today.
2. How products reach the customer
The right distribution centre location also depends on the route products take after leaving it.
A retailer supplying a network of stores has different requirements from an ecommerce business delivering directly to customers. An omnichannel business may need to support stores, home delivery and click-and-collect from the same network.
Understanding the geography of those different destinations helps businesses assess potential sites in terms of the journeys that will actually need to be made. Rather than simply looking for a central point on a map, the aim is to understand how well a location connects with the places the distribution centre needs to serve.
3. Transport and infrastructure
Access to the transport network can have a significant influence on the suitability of a distribution centre. For many operations, proximity to major roads will be particularly important. Others may also need to consider ports, airports, rail freight terminals or other infrastructure depending on where products originate and how they move through the supply chain.
Travel distance is only part of the picture. Journey times, road connectivity and the practical accessibility of a site can make two apparently similar locations perform very differently. A site positioned close to a motorway junction, for example, may offer a more practical distribution base than somewhere geographically central but poorly connected to the routes the business uses most frequently.
4. How the location fits the wider network
A distribution centre shouldn’t be considered in isolation. Its position needs to make sense in relation to the rest of the network, including existing distribution centres, stores, customers, suppliers and other important locations. This becomes particularly important for businesses operating several distribution centres. Catchments may overlap, some facilities may be operating close to capacity and changes elsewhere in the network can alter the role a new site needs to perform.
Scenario analysis can help here. What happens to coverage if a distribution centre is placed in one location rather than another? Which customers or stores would it serve? How would that affect neighbouring facilities?
Looking at the network as a whole provides a stronger basis for comparison than evaluating each property individually.
5. Access to the workforce
A distribution centre also needs people to operate it. That means understanding the potential workforce around a proposed site and how easily employees can reach it. Population and demographic data can provide insight into the surrounding labour market, while travel times, road connections and public transport can help assess accessibility.
Shift patterns can make this particularly important. A location that is relatively easy to reach during normal working hours may be much less accessible early in the morning or late at night when public transport is limited. For large distribution centres employing significant numbers of people, workforce accessibility can therefore become an important part of the location decision rather than something considered after the site has been chosen.
Bring the criteria together
The strongest distribution centre location isn’t necessarily the one closest to the most customers, the motorway or the cheapest available property. It is the location that provides the right balance for the particular network and operation.
And those priorities won’t always carry equal weight. For one business, customer coverage may dominate the decision. For another, access to ports or the motorway network may be critical. A third may find that workforce availability rules out an otherwise attractive site.
Periscope® brings customer, demographic, transport, infrastructure and other location data together, helping businesses compare potential locations and understand how each one fits within the wider network. Rather than relying on a single measure of distance or accessibility, decision-makers can build a more complete picture of the factors that matter and the trade-offs involved.
