Location can cost you money

Roger OakdenGlobal LogisticsLeave a Comment

Where to locate your warehouse.

The decision about locating a new distribution centre or warehouse will not be made that often in the course of a company’s business – the review of location suitability will be about every five to seven years. Selecting a site a location that is close to a freeway can be a sensible decision; new warehouses and business parks adjacent to freeways are a common sight; yet are they in the best location? The criteria for selecting a distribution location are generally known, but an additional factor for consideration is traffic flow.

As inbound and outbound transport can be up to 60% of a company’s total distribution costs, it is instructive to visit the intended site at peak and non-peak traffic times to observe the delays that are occurring. This enables you to identify specific access problems caused by heavy traffic and their effect on total journey times.

Keith Kooloos of Savilles Australia considers that a 10 minute delay each day for a semi-trailer could cost up to $7,000 per vehicle. He has identified that the approximate hourly cost in Australia for a semi-trailer is $28 per hour; for a tray truck $40 per hour and a delivery van $12 per hour. This equates to an annual cost of $7,000 for a semi-trailer, $5,000 for a tray truck and $2,875 for a delivery van.

An average size distribution business with five semi-trailers, 10 tray trucks and 20 delivery vans may incur annual delay costs of $150,000. This surprising figure could be enough to change your mind concerning the location of a new distribution facility.


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About the Author

Roger Oakden

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With my background as a practitioner, consultant and educator, I am uniquely qualified to provide practical learning in supply chains and logistics. I have co-authored a book on these subjects, published by McGraw-Hill. As the program Manager at RMIT University in Melbourne, Australia, I developed and presented the largest supply chain post-graduate program in the Asia Pacific region, with centres in Melbourne, Singapore and Hong Kong. Read More...

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