Site selection requires a good deal of consideration, and often the factors within the equation can be at odds with another. For the food and beverage industry, choosing a location for a distribution center starts with aiming to be as close as possible to highly populated markets. Other requirements include proximity to a good transportation infrastructure, moderate operational costs, an available and dependable labor force and moderate taxes—and all of these requirements must conform to a particular distribution budget.
Although the task might appear daunting, our experts assure us it can be accomplished successfully. We asked a couple of site selection consultants for some of the “hot” locations currently favorable to these kinds of projects, and these are the geographies they highlighted.
LOS ANGELES BASIN
A number of factors make California a difficult place to do business, so companies might have to weigh the advantages against the disadvantages. LA’s hot-ticket geography offers a huge source of food supplies, as well as huge market concentrations, but the area’s strict regulatory climate, restrictive labor laws, higher operating costs and higher electricity costs offer substantial obstacles to businesses.
“The LA Basin market is such that if you are going to serve it, you have to be right there,” says David Brandon, senior vice president for industrial site selection for Dallas-based Site Selection Group. “If you can serve it from the high desert, you will be better off in terms of overall operating costs than if you were to serve it from locations in the valley.”
Consequently, companies are looking beyond the LA Basin to escape the regulatory requirements by agencies like OSHA and the South Coast Air Management District. “Once you get into the high desert, you are no longer within the air management district and the requirements for solid and liquid waste disposal and material management issues are not as aggressive,” explains Brandon.
He points to a recent Dr. Pepper/Snapple DC in Victorville and a Pepsico facility in Tracy both in the high desert. One caveat Brandon offers is California’s suspect financial condition. “The money will have to come from somewhere and this is an issue that will come to bear on future decisions relating to DC location.”
“Companies would love to be able to cross into Arizona or Nevada,” says Mark Sweeney, senior principal at McCallum Sweeney Consulting in Greenville, SC. “But California still seems to be a place that companies will accept, even with its difficulties, just to be able to take advantage of California’s other advantages such as its excellent transportation infrastructure, including its two major ports in LA and Long Beach.”
Sweeney explains the “Chicagoland” area encompasses Chicago and the surrounding 100 miles or so, including Illinois and parts of Wisconsin and Iowa.
The “hot” area is Joliet, about 30 miles southeast of Chicago, which again demonstrates how these areas are chosen based on their proximity to the higher-cost epicenters companies want to be near.
Chicago’s attraction is it can serve all of Michigan and the Midwest, notes Brandon. “So it is a major area of distribution and logistics center investments. One of the challenges we face is getting our customers to within a 100- or 200-mile radius of the epicenter of their distribution network they have identified when they approach us. You don’t have to be in Chicago to serve that market.”
Locating within that radius enables companies to operate in an environment that not only enhances their distribution network, but also diminishes their overall operating costs, explains Brandon. He points to Bay Valley Foods which recently located in Rochelle, IL, about 80 miles west of Chicago. Living Essentials and Monarch Beverage Co. both recently built DCs in northern Indiana, just across the Chicago line. Weston Foods just built a major DC and bakery in northern Indiana. “The reason these companies chose northern Indiana is because taxes, labor availability, and costs are higher across the border into Illinois,” Brandon reports.