Criteria for warehouse location

It's important to determine rational logistics channels and the location of the commercial network (retailers, wholesalers, warehouses). The optimal location of the warehouse helps reduce cost and to create a well-organized logistics system.

Warehouse location

Using the Pythagorean theorem, the distance (not known) to newly established commercial centers of the area served can be determined using the following formula:

$d_{i}={\sqrt {(x-x_{i})^{2}+(y-y_{i})^{2}}}$

where:

• x, y - the coordinates of the desired point of warehouse location
• xi. yi - coordinates of the area that will be served by this new facility

This equation is sometimes expanded by the number of inhabitants (mi) and the area. You can determine the minimum of the function:

$Q=\sum _{i=1}^{N}m_{i}{\sqrt {(x-x_{i})^{2}+(y-y_{i})^{2}}}$

Appointment of decision variables x and y is followed by differentiation with respect to their functions Q and equating the derivatives to zero. Then, after appropriate transformations, formulas to determine the coordinates of the warehouse can be obtained. Alternatively, instead of a linear minimum distance we could use minimum square distance (i.e. to find the minimum of the square of the distance, so that the function Q does not contain a square root). Using the minimum square distance we can calculate the optimal location of the warehouse, taking into account the position of suppliers and customers.

We denote the coordinates on the xi and suppliers yi and s customers by uj and vj deliveries from individual suppliers to wholesalers by pi, and wholesalers to individual recipients by qj. Function for Q, expressing the squares of the distance, which is the minimum that we seek has the form:

$Q=\sum _{i=1}^{r}p_{i}[(x-x_{i})^{2}+(y-y_{i})^{2}]+\sum _{j=1}^{s}q_{j}[(x-u_{j})^{2}+(y-v_{j})^{2}]$

After differentiating this function with respect to x and y and aligning the derivative to zero yields the following formulas designating the warehouse coordinates:

$x={\frac {\sum {p_{i}x_{i}}+\sum {q_{j}u_{j}}}{\sum p_{i}+\sum q_{j}}},y={\frac {\sum {p_{i}y_{i}}+\sum {q_{j}v_{j}}}{\sum p_{i}+\sum q_{j}}}$

Examples of Criteria for warehouse location

• Proximity to customers: Warehouses should be located close to customers, so as to reduce transportation time and costs, and to ensure fast delivery. For instance, Amazon has strategically located their warehouses close to their customer base to minimize the delivery time.
• Proximity to suppliers: Warehouses should be located close to suppliers, so that materials and products can be easily procured and stored. For example, Walmart stores are typically located close to suppliers, so that they can easily receive, store, and deliver goods.
• Proximity to ports: Warehouses should be located close to ports or other means of transportation, so that it is easy to receive and deliver goods. For instance, the ports of Los Angeles and Long Beach, California are two of the busiest ports in the world, and many warehouses are located near these ports.
• Availability of skilled labor: Warehouses should be located in areas with a plentiful supply of skilled labor, so that it is easy to hire and retain workers. For example, the city of Chicago has a large warehouse district, and many of the warehouses there are staffed by highly skilled workers.
• Low operating cost: Warehouses should be located in areas with low operating costs, including taxes and wages. For instance, many warehouses are located in rural areas, which typically have lower wages and taxes than urban areas.

Advantages of Criteria for warehouse location

A well-chosen warehouse location has many advantages, such as:

• Cost Savings: A warehouse located close to major transportation hubs such as airports and ports can reduce costs associated with shipping and logistics.
• Increased Efficiency: A strategically located warehouse can help reduce delivery times and improve customer service.
• Improved Inventory Management: A conveniently located warehouse can ensure that goods are stored and managed more efficiently.
• Flexibility and Adaptability: A warehouse located in an area with access to different modes of transportation can help you adapt to changing customer demands or new business opportunities.
• Improved Visibility: A warehouse located in a visible and accessible area can help to attract new customers and build brand recognition.

Limitations of Criteria for warehouse location

• Cost: The cost of warehouse location is a major factor to consider. This includes rent, labor, utilities, taxes, and insurance. Additionally, transportation costs should be taken into account when determining the best location.
• Infrastructure: The warehouse should be located in an area that has good infrastructure. This includes a reliable road network, access to public transport, and other necessary services.
• Competition: The warehouse should be located in an area with minimal competition. This includes other warehouses in the same industry, as well as any other businesses that could potentially compete with the warehouse.
• Culture: The warehouse should be located in an area that is culturally suited to the business. This includes understanding the local language, customs, and business practices.
• Demographics: The warehouse should be located in an area with the right demographic. This includes the number of people living in the area and the type of people that frequent the area.
• Accessibility: The warehouse should be located in an area that is easy to access. This includes being easily accessible to customers, suppliers, and employees.
• Technology: The warehouse should be located in an area that has access to the latest technology. This includes access to the internet, automated systems, and other technologies that will help streamline the logistics process.

Other approaches related to Criteria for warehouse location

In order to determine the best location for a warehouse, there are several criteria to consider. These include:

• Proximity to suppliers and customers: The warehouse should be located close to suppliers to reduce transportation costs, and close to customers for faster delivery.
• Availability of transport infrastructure: The warehouse should be located in an area that has a reliable and cost-effective transport infrastructure for efficient delivery of goods.
• Labor availability: The warehouse should be located in an area that has a reliable and cost-effective labor force for efficient management of operations.
• Quality of local infrastructure: The warehouse should be located in an area that has a good quality infrastructure, such as roads and utilities, for efficient operations.
• Tax incentives: The warehouse should be located in an area that offers tax incentives to reduce the overall cost of operations.

Overall, these criteria should be considered when determining the best location for a warehouse in order to create a well-organized logistics system.

Criteria for warehouse location — recommended articles

Role of transportation — Distribution network — Central procurement — Optimization of transport — Public warehouse — Channel width — Factor of production — Outsourcing and offshoring — Logistics service providers

References

• Feldman, E. F. A. T. L., Lehrer, F. A., & Ray, T. L. (1966). Warehouse location under continuous economies of scale. Management Science, 12(9), 670-684.
• Perl, J., & Daskin, M. S. (1985). A warehouse location-routing problem. Transportation Research Part B: Methodological, 19(5), 381-396.