may yet be the best location for your DC. But so too might be any of the locales that rank in the Top 10—or 25 or 50—cities on your favorite list of “best” logistics sites. So how does a company move from a “robust algorithm” to nding its own hotspot on North America’s DC heat map? By de nition, companies must look to transportation in their quest to nd the right region in the logistics landscape— and the right dot inside the regional circle—for their DC. And as part of that study, site-selection teams are well advised to apply what Roth refers to as “the rule of 1.5.” “Whatever happens in transportation impacts industrial real estate a year and a half later,” he explains. For example, Roth cites the dramatic changes in transportation that occurred when new regulations and policies were implemented in the railroad and trucking industries in 2017. The widespread adoption of precision scheduled railroading (PSR), an economics-driven initiative to reduce the number of geographical points that railroads serve, drove trucking companies to alter and increase their own traf c volumes and patterns. All well and good but just some three years later a federal mandate requiring truckers to replace manual logbooks with electronic logging devices (ELDs) was put in place. The mandate had the effect of reducing the ranks of truck drivers by about 10%. AHEAD OF THE CURVE Companies that were ahead of the curve on these changes and how they would affect individual sites were likely to make better decisions on where to place their DCs than those that did not anticipate what was coming around the corner. Risk assessment requires similar foresight. “Because of the pandemic, corporations are assessing risk differently,” Roth says. “International supply chains were not as resilient as was thought.
Transportation options at your potential DC site are an important consideration. Determine how close you need to be to major ports, interstates, or rail access.
whether your company needs—and can afford—numerous DCs serving multiple markets or a solo location to serve as a national portal. “If you were to draw a straight line from Memphis to Louisville, along that extended line you would see Columbus, Ohio,” says Wulfraat, who adds that all three cities qualify as major logistics hotspots. “Louisville quali es because it’s the UPS worldwide hub,” he says. “Memphis quali es because it’s the FedEx hub, and Columbus because it’s one of the strongest LTL/FTL trucking points in the country. “So if you had a single DC to service the entire country, if you want the optimum case to access the entire market out of one place, that corridor is where you would position yourself,” Wulfraat says. GRANULAR ANALYSIS Whether the geographical circles under consideration are limited to regions providing direct access to the Port of Los Angeles—the nation’s number one container port—or the numerous seaports of Florida, or perhaps a more centralized or inland location, the nal choice of the precise spot for your DC requires more granular analysis.
“For the past 20-plus years, everything has been based on ef ciency,” he adds. “What we learned over the past two years is that if you lose a sale, that wipes out the ef ciency, so it’s dif cult to rely on the historical supply chain.” As a result, forward-thinking companies are now establishing not only a single supply chain path but alternatives as well. “We can’t change our China integration overnight,” Roth says, “but we want to have at least one other alternative—China plus one, maybe plus two. Where product allows, companies need to start to migrate away from China.” An alternative supply chain solution may, for example, include Taiwan, Malaysia, or Mexico. Whatever alternative path is chosen will impact the list of potential DC sites. “Network strategy is all about the big picture,” says Wulfraat. “Figure out how many circles to put on the map and how big each circle should be. Should you have three, four, ve, or six buildings? Once you gure out where you need to be geographically, then look at the circles and nally the dot within the circle.” Choosing a DC site to optimize your distribution network also depends on
January 2023 • Inbound Logistics 211
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