7 keys to facility location: Number 7 - Logistics

By John T. Mentzer -- Supply Chain Management Review, 5/1/2008

Once we have analyzed the land, labor, and capital factors, accounted for the locations of suppliers and customers, and factored in our production processes, we still have to consider the logistics factors. Where are the railroads? The interstate highways? Ports of entry? Airports? What is the cost to store our products? Answers to all of these questions affect the final decision about the location of the new DC or production facility. Logistics factors are often the “fine tuning” for a facility location, taking into account the required physical movements of goods and the proximity of highways and rail spurs, for instance.

Developers in AllianceTexas, a 17,000-acre master-planned, mixed-use community located in north Fort Worth, made sure they factored logistics into their decision to include a major distribution hub in the plan. They looked at the fact that the BNSF and Union Pacific railroads had facilities nearby. They knew that the Port of Houston was distant, but viable as a logistics channel. Interstate highways came through the area. And since Dallas-Fort Worth airport was more than 20 miles away, the developers built their own airport. They also built production and storage facilities that clients could readily occupy, thus reducing their storage costs. AllianceTexas is also close to a huge potential market for many companies: the Dallas-Fort Worth metro region. By taking into consideration logistics factors as well as the other six influencers, the AllianceTexas developers built a facility location hub that now makes sense for more than 170 companies, with over 28 million square feet of facilities and over 27,000 employees.

Key questions for managers to ask:

1. Where are the railroads? Are there rail spurs to the facility?
2. What is the quality of the highways near the facility? How close are the interstate highways?
3. What are our ports of entry?
4. Where are the airports, and what is their air cargo capacity?
5. What is the cost to store our products in facilities?

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