Distribution Choices Driven by Consumer Demands for Same-day, Next-day Delivery

For operations serving customers through e-commerce and omni-channel distribution, picking the right locations for warehousing comes down to a whole host of factors. Not least among them, of course, is cost.

As the U.S. Roadmap for Material Handling & Logistics explored in its “Low-Cost, Low-Impact Material Handling and Logistics” section (starting on page 41), “Firms (and nations) that execute logistics operations at lower cost will always enjoy a competitive advantage.”

Helping companies reduce their real estate costs and pick the best location for their distribution facilities is 30-year industry veteran Jack Rosenberg’s area of expertise. As the National Director of Logistics and Transportation Solutions at commercial real estate services organization Colliers, Rosenberg has a unique perspective on how to evaluate the impact of today’s supply chain trends on location decisions.

“The biggest trend in supply chain right now is that everybody wants same-day or next-day service, which affects decisions about where to locate distribution facilities,” he notes. “However, the choices that companies are making about being closer to urban areas vary from company to company.”

The five biggest markets for logistics and distribution are Atlanta, Dallas, Southern California, Chicago and the New York/New Jersey area. But where companies decide to locate within those metro areas varies a great deal.

“When you look at urban industrial facilities, there’s a connection between the age of a building, its proximity to a major city’s downtown and its obsolescence,” Rosenberg says. “For example, where I’m located in Chicago, the buildings closest to downtown were probably built in 1920, with 12-foot ceiling heights and that accommodate a maximum truck length of 50 feet, including the cab. Today that’s just a completely obsolete facility.”

Although there are companies engaging in urban in-fill activities—buying a site, tearing down the existing building and constructing a new, modern facility in its place—those are generally exceptions to the rule because of the associated costs.

“Most industrial distribution centers remain located on the outer perimeter of a metropolitan area,” he says. “That’s why more and more retailers are opting to use their stores as distribution centers; it gives them a means to compete with Amazon on same-day or next-day delivery services.

Click here to learn more about the U.S. Roadmap.