Optimal warehouse location

The properties of the goods you want to store or transport are an important criterion when making a decision. Shelf life is particularly important: if your products do not have a long shelf life, you should ensure short delivery routes in order to keep delivery times as short as possible. The quantity of goods to be stored is also an important point, as this determines the size of the warehouse, among other things.

Handling should also be taken into account. For example, if the goods are difficult to store due to their weight or consistency, special precautions must be taken to limit the choice of locations. This is because transferring or refilling liquids would only increase costs. Special storage should also be ensured for products of high value.

You should also take the stability of your product into account when making your choice. Products with low stability, such as goods from the chemical industry, have special storage requirements, which is why special warehouses are needed here. Another important criterion for determining the required storage space is the space required by the products. In order to be able to react optimally to regular, seasonal or even unforeseeable fluctuations in demand, the storage rooms should not only use the space effectively, but also be generously proportioned and spacious. The planned company growth and the defined service level should also be taken into account when selecting a warehouse location.

When developing the right strategy, you should explicitly consider the costs involved so that you can compare them with your budget. When dealing with the cost perspective, a clear distinction must be made between two areas:

Supply chain costs
This category refers to all costs that could be incurred during transportation or storage. For example, longer transportation routes increase delivery costs, especially if specific requirements, such as a continuous cold chain, are necessary for delivery. In addition, personnel costs increase with an increasing number of warehouse locations, both indirect and direct costs. Other costs that are incurred are

• Transportation costs: Inbound & outbound transportation costs, as well as costs for any transshipments, production disposal and more
• Costs for incoming and outgoing goods processes
• Capital commitment
• Overhead costs
• Handling costs
• Insurance of the goods
• Potential damage to the goods

Investment requirements
This topic area is primarily concerned with the contributions to be paid for the warehouse itself. These include

• Rent of the building
• Technology (e.g. equipment to be used)
• warehouse structures
• depreciation
• Restructuring
• Insurance to be taken out
• Maintenance and cleaning
• Energy costs
• Safety precautions

This criterion focuses on the infrastructure of the surrounding area. The warehouse location should be easy to reach. This means that it should have a good infrastructure of road and port connections. This is the only way to ensure the safe transportation of goods. Direct access to relevant transport connections is crucial for transportation and delivery times and aims to ensure a fast, trouble-free flow of goods.

Compliance with legal regulations is highly relevant when constructing a warehouse. These can relate to the construction of the building as well as its energy supply. Great importance should also be attached to noise and water protection. These regulations can vary depending on the country.

Staff should also be taken into account when choosing a storage location. It is important that the location is easily accessible for employees and complies with all safety precautions.

A central point that should not be lost sight of when choosing a location is the customers. After all, their satisfaction with the service has a significant influence on their loyalty to your company. In order to consistently maintain this, two prerequisites must be taken into account:

• Location: Proximity to customers shortens delivery routes and times, allowing you to act more quickly when orders arrive. Rapid delivery times and responses to orders increase customer satisfaction.
• Demand: In addition, the demand curve on the market should be interpreted in detail so that the number and volume of orders can be recorded. This involves looking not only at historical and existing customer demand, but also at forecast demand, which includes factors such as seasonality. Based on this, you can determine the quantity of goods to be delivered or stored and the necessary delivery speed. The vehicles and personnel to be deployed can also be recorded. This process enables your company to meet all orders quickly. By estimating the demand on the market and the resulting determination of the quantity of goods, you can also ensure the long-term availability of your goods.

In order to retain customers in your company, it is important to optimally meet their requirements in terms of delivery reliability, availability, delivery times and value-added service. It is therefore important to ensure that the choice of warehouse location can meet customer requirements as desired. A precise analysis of the flow of goods is relevant to this goal.

Before you finally decide on a warehouse location, you should first analyze the competition. This should include the warehouse locations of your competitors, their efficiency and the services they offer. Based on this analysis, you can strategically plan the warehouse location and your offering to set yourself apart from the competition. It is then advisable to keep a regular eye on your competitors’ services so that you can react flexibly to changes.

• Lower storage costs due to the operation of only one warehouse
• Lower personnel costs
• Simpler stock overview
• High availability of goods
• Efficient warehouse management
• Potential to reduce the volume of stock
• Potentially high degree of automation
• Low minimum stock level

• Possibly longer delivery routes, as there may be longer distances to the customer as there is only one warehouse
• This results in higher delivery costs
• Longer delivery times
• Less flexibility in delivery
• Higher risk of failure due to storage at one location
• Default risk affects all customers

• Transportation costs tend to be lower as there is less distance to the customer
• Shorter delivery times
• High response times to orders
• Failures do not affect all customers and can be avoided
• High delivery flexibility

• • Possibly more complex supply chain, as several warehouse locations are operated
  • Higher inventory volume, as items may be stored at several locations
  • Higher investment costs (costs for IT, warehouse equipment, etc.) due to the operation of multiple warehouses
  • Higher investment costs due to the operation of multiple warehouses
  • Higher costs, e.g. for inventory and warehouse management
  • High minimum stock level

• High risk of misallocation: requested goods may be located at a site that is further away from the customer.