How to Choose the Right Warehouse Location for Your Supply Chain

Key Takeaways

• Placing your warehouse near major customer hubs reduces shipping times and costs, improving customer satisfaction.
• Using sales data and demand forecasting helps stock products where they’re needed most, minimizing overstocking and stockouts.
• Too many warehouses increase carrying costs, while too few cause delivery delays and higher transportation expenses.
• Third-party logistics providers like Ryder have the expertise, technology, and strategic locations to simplify warehouse management and improve performance.

The location of your warehouse can provide your business with a significant strategic advantage. After all, the right fulfillment center location gets your product customers faster while reducing transportation costs and improving your overall supply chain performance.

In today’s age of Amazon shopping, customers expect quick deliveries, so businesses that are able to find warehouse space in the ideal location can get products out faster. The result is happier customers who trust your business to meet their shopping needs.

However, strategic placement isn't just about proximity to your customers: It's also about finding a balance that makes you more efficient while reducing overall costs.

You also need to figure out how many warehouses your business needs. Having too many fulfillment centers can lead to higher inventory carrying costs and potential stock imbalances, increasing overhead costs.

However, having too few fulfillment centers leads to longer delivery times, higher transportation costs, and potential customer dissatisfaction.

Striking the right balance requires a data-driven approach to warehouse selection and strategic inventory placement. Here's a look at how you can choose the right warehouse location for your supply chain.

The Impact of Warehouse Location on Supply Chain Performance

Warehouse location can directly influence your supply chain. The closer your warehouse is to your customers, the faster you can deliver products to them.

Reduced transit times mean quicker order fulfillment, lower shipping costs, and improved customer satisfaction. For e-commerce businesses, meeting the "two-day shipping" expectation requires strategically placed distribution centers as close as possible to where your customers live. This may or may not be close to major population hubs.

However, companies with fulfillment centers within 50 miles of a metropolitan area can usually get orders into the hands of customers in that city within 48 hours. This fast delivery time will not only keep your customers happy but also restrain shipping costs.

Men's denim manufacturer Mugsy is an excellent example of using a fulfillment center to grow a small business. This company is based in Chicago but now uses a Ryder fulfillment center in Columbus, Ohio.

As a result, customers in the surrounding area typically receive their orders within one day, while most of the East Coast get their orders within two days. These faster delivery times have helped the company expand to offering over 40 different jean styles and enjoy a 99.5% satisfaction rating with their e-commerce customers.

E-commerce competition is intense, and customers expect rapid order fulfillment. Strategically placed warehouses allow you to meet any delivery promises you make, reducing the risk of abandoned carts and negative reviews due to slow shipping.

Major retailers like Amazon have set the standard for fast delivery by positioning fulfillment centers close to most U.S. customers. These locations mean the company can offer same-day or next-day delivery in many areas.

While your company doesn't have to compete with Amazon, getting your products to your customers as quickly as possible is best for everyone.

Warehouse location can also impact your bottom line. There's a lot to figure out, though, because these locations influence multiple cost factors like:

• Operational costs: Labor rates, utilities, and property taxes vary by region.
• Transportation costs: Shipping costs increase with distance; locating near transportation hubs (e.g., ports, highways, railways) reduces these costs.
• Inventory carrying costs: Efficient stock placement minimizes overstocking and inventory imbalances.

There's a lot to think about when selecting a location for your warehouse, as it can transform your supply chain, ensuring improved results for your company with every customer order.

Strategic Inventory Placement

Of course, you don't have to leave all your inventory in a single warehouse. Spreading your products across multiple warehouse locations balances costs and makes it possible to improve performance in various parts of the country.

Determining where to rent or buy warehouse space sounds challenging, but fortunately, we live in a time when massive amounts of data are widely available. In short, you can use sales data and historical trends to understand where and when demand for your products is highest. This information allows you to place high-demand items in warehouses close to those markets, reducing shipping times and costs.

For instance, an apparel retailer might place winter jackets in northern warehouses and summer gear in southern locations to align with seasonal demand. That doesn't mean the company can't send summer gear to northern states, but it's prioritizing getting cold-weather products to people who live in cold-weather environments.

Advanced inventory management systems (IMS) also help identify which products a company should stock at which locations. These systems use demand forecasting and sales data to automate product allocation, reducing stockouts and overstocking.

For example, if one SKU sells faster in the Midwest than on the West Coast, the IMS will adjust stock levels accordingly to improve availability. There might not even be an underlying reason, like the weather, for these sales differences, but the tech will find the pattern, so you don't have to guess.

You don't have to be reactive when determining where to keep your products. Accurate forecasting helps you maintain the proper stock levels in the right locations without overcommitting resources. You can use predictive analytics to account for market trends, customer behavior, and supply chain disruptions to maintain balanced inventory levels at all times.

For instance, high-performance footwear manufacturer Athletic Propulsion Labs uses thorough forecasting to map out sales expectations and promotions well into the following year. From there, the company can figure out its peak sales periods and make sure it has enough shoes ready to go to meet demand.

Predictive analytics can really benefit companies like Athletic Propulsion Labs as they grow because it gets their shoes where they need to go when their customers need them the most.

The Benefits and Risks of Different Fulfillment Strategies

Taking the time to strategically identify and create the right warehousing strategy will go a long way in growing your business, but certain avoidable risks are involved for those who lack a clear understanding of the complete picture.

By analyzing the numbers and implementing a strategy that fits your business, you can shorten delivery times. Faster product deliveries enhance customer satisfaction, increasing the likelihood of repeat business.

The right warehouse strategy can also save you some money. Your goods won't have to travel as far, saving on transportation costs, and you won't have to carry as much inventory once you optimize your supply chain.

Having multiple fulfillment centers increases stability. You can place your products all over the country, making it easier to expand operations without bottlenecks. The result is greater market reach and the potential to increase profits.

As long as you keep an eye on overstocking and avoid tying up too much money into carrying costs, you should notice considerable improvements.

Also, keep in mind that freight expenses are increasing all over the country. If you aren't careful about where you stock certain items, you could end up having to ship items between multiple warehouses, eating away at the money you save.

Poorly coordinated fulfillment strategies can also lead to stockouts in some warehouses and overstocking in others, once again increasing your expenses.

For the best results, you'll have to be careful as you develop your warehouse strategy and invest in tech that keeps your products in optimal locations around the country.

Why a 3PL Partner Makes Sense

Partnering with a third-party logistics (3PL) service gives you a solution to these risks. It can simplify warehouse selection and management while enhancing overall supply chain performance.

3PLs like Ryder bring years of experience in supply chain management, helping you analyze data, optimize inventory placement, and manage logistics operations more efficiently.

We also provide access to cutting-edge technology, such as warehouse management systems (WMS) and real-time tracking tools. Our WMS helps automate order picking and packing, reducing labor costs and increasing accuracy.

Ryder also operates one of the largest warehouse networks in North America, with:

• 101 million square feet of managed warehouse space.
• Over 300 facilities across the U.S. and Canada.
• Multiclient & dedicated e-commerce fulfillment centers to handle direct-to-consumer orders.

We also have strategically placed e-commerce fulfillment center locations including locations in New Jersey, California, Seattle, Savannah, Columbus, Salt Lake City, Atlanta, and Dallas, giving you access to all the benefits of running multiple warehouses without having to rent or buy the facilities yourself.

Find the Ideal Warehouse Solution with Help from Ryder

Choosing the right warehouse location will impact your entire supply chain, so you'll want to put some effort into the decision.

A well-placed fulfillment center improves delivery speed, reduces shipping costs, and improves customer satisfaction, all of which can benefit your company. However, balancing the number of fulfillment centers is important, as having too many can increase costs, while too few will slow your deliveries.

Businesses can create a streamlined and cost-effective supply chain strategy by analyzing demand, leveraging advanced management systems, and working with a trusted 3PL partner.

Evaluate your warehouse footprint and take the next step toward optimizing your fulfillment network, or reach out to Ryder to learn more.