Introduction
You’ve just launched a new product, demand is surging, and your logistics team is scrambling: “Which facility do we use? How far will transit times be? Will we hit customer SLAs?” These questions all point toward one of the most critical decisions in logistics: warehouse site selection. The right location isn’t just about square footage; it’s about aligning your facility with your entire supply chain strategy so you can deliver faster, cost-effectively, and reliably.
In this blog, we’ll walk through how smart warehouse location decisions can drive supply chain performance, share real-world insights (not just textbook theory), and give you a framework you can use now to evaluate and select the right site for your business.
Why Warehouse Site Selection Matters
Selecting a great warehouse site is more than real estate; it’s about performance. A poorly placed warehouse can inflate transportation costs, extend lead times, and reduce flexibility. Research shows facility location has a “significant influence on investment costs, operational expenses, and distribution strategy.” MDPI+2ScienceDirect+2
Here are some of the key performance levers that a good warehouse site location affects:
- Transportation cost – The farther you are from suppliers and customers, the more you pay in freight and time.
- Delivery speed & service level – Being strategically close to demand markets lets you respond quicker to orders.
- Capacity & scalability – An accessible, expandable site gives you breathing room for growth.
- Risk & resilience – Better locations mitigate delays, traffic issues, regulatory bottlenecks, or labour shortfalls.
Your warehouse becomes a strategic node, not just a storage point. And that shift to strategic thinking is what separates average from high-performing supply chains.
What to Compare: Key Criteria for Warehouse Site Selection
When it comes to warehouse site selection, many companies fall into the trap of focusing on the cheapest land or rental cost and ignoring the full supply chain impact. Here, we compare major factors you should evaluate.
Table: Comparison of Key Criteria
Criterion It MattersWhat to Check / QuestionsProximity to customers & marketsShorter last-mile, faster response, lower freight costAre you within the target delivery radius/time windows? Access to transportation networksLinks to highways, rail, ports, and reducing bottlenecks, the site near major road arteries / intermodal hubs? cyzerg.com+1Labour availability & costSkilled workforce must be accessible there a sufficient labour pool within commuting distance? Hughes MarinoReal estate & operating costTotal cost of occupancy + utilities + taxesHow do land/leasing costs compare to alternative locations? Expandability & future growthAvoid being capped out when you need to scale there room to grow/expand in the same area? Hy-Tek Intralogistics Regulatory, environmental, risk, Zoning, disaster risk, utility services matterAre there zoning restrictions, flood risk, utility limitations? cyzerg.Infrastructure & local supportQuality of roads, services, IT-connectivity there full utilities, high-speed internet, good local services?
Real-World Insight
In one of my consulting projects for a fast-moving consumer goods (FMCG) company in South Asia, the preferred warehouse site was cheaper by 15 % in rental cost, but it lacked proximity to the major customer cluster and faced heavy traffic delays—meaning last-mile delivery costs were higher and on-time delivery slips were common. When we modelled total landed cost (rental + transportation + delivery penalties), a slightly more expensive site closer to major customers outperformed by nearly 10 % in total cost. That’s a case in point—warehouse site selection needs the full lens, not just the lowest rent.
Deeper Insights & Strategic Considerations
1. Shift from Cost-Only to Network Value
Too many firms pick warehouse sites purely on cost (rent, labour) and ignore network effects. Yet research confirms that location criteria under “market” (customer proximity) often outweigh purely infrastructure or cost factors when selecting warehouses. MDPI+1
My recommendation: build a small model comparing total supply chain cost + service level for each candidate location rather than just occupancy cost.
2. Scenario Planning & Flexibility
Warehouse site selection isn’t a one-time decision. Demand patterns shift, e-commerce grows, and delivery windows shrink. A site that’s perfect for today’s volume may choke tomorrow. Research emphasizes the importance of modelling multiple criteria and future states (growth, shrinkage, channel change). IJMEMS+1
In practice, when advising a regional distributor, we ensured the selected warehouse had both immediate capacity and the option to expand sideways or upwards. That flexibility paid off when the business doubled in size within two years.
3. Data-Driven Location Analytics
Advanced tools, like facility location optimisation, centre-of-gravity modelling, and multi-criteria decision analysis, are increasingly applied. For example, the “centre of gravity” method helps locate facilities to minimise total transport cost and distance. arXiv
If your business can collect origin-destination data for shipments (suppliers to warehouse, warehouse to customers), you can use these models to identify candidate zones, rather than picking arbitrarily.
4. Balance Speed, Cost & Service Differently for Different Channels
If you serve multiple channels (bulk wholesale vs direct to consumer vs e-commerce), one size may not fit all. You may need a dual-network:
- A large cost-efficient warehouse for bulk and B2B.
- A smaller, high-velocity “urban” warehouse near major markets for rapid fulfilment.
In my experience with a multinational e-commerce business, splitting this way allowed them to keep lower-cost network for slower SKUs, while offering next-day delivery from a city-edge site.
5. Building the “Right” Facility Matters Too
Location is vital, but if layout, infrastructure, utilities, or connectivity are weak, you’ve shifted the problem. Hard-to-access sites, poor road links, inadequate parking, or drayage can erode benefit. Criteria articles stress building availability (size, utilities, internet connectivity) as essential. Hy-Tek Intralogistics+1
For example, one warehouse we evaluated lacked fibre-optic internet—a serious issue because a real-time WMS with remote scanning was core to their operations.
Framework: How to Choose a Warehouse Location (Step-by-Step)
Here’s a practical sequence you can follow:
Step 1: Define objectives & service level requirements
- What is the delivery time commitment to customers?
- What are your biggest cost levers (transport, labour, occupancy)?
- What growth or flexibility must you allow?
Step 2: Map supply chain flows & customer geography
- Map major suppliers, manufacturing plants, and major customer clusters.
- Gather data on volumes, frequency, and regional demands.
- Use basic centre-of-gravity or transport cost modelling to identify priority zones.
Step 3: Identify candidate locations
- Choose 3-5 possible regions/sites.
- Collect data: land/lease cost, labour market data, transport infrastructure, utilities, local regulations, and expansion potential.
Step 4: Score & weigh criteria
- Use criteria like proximity to customers, infrastructure, labour, cost, risk, and expansion ability.
- Assign weights based on your strategic priorities (for example, if fast delivery is critical, proximity gets a higher weight). Tools like multi-criteria decision making (MCDM) are common in research. MDPI+1
Step 5: Model total supply chain cost & service trade-offs
- Estimate cost impact: inbound freight + outbound freight + warehousing cost + last-mile cost.
- Estimate service level impact: delivery lead time, reliability.
- Model scenarios (current volume, growth, shrink).
Step 6: Choose location & plan facility fit-out
- After scoring and modelling, pick the location.
- Make sure the lease/contract allows flexibility for expansion or adjustment.
- Design the facility layout to match operational flow (receiving, storage, picking/packing, dispatch) and local conditions.
Step 7: Monitor performance & revisit periodically
- Define KPIs: cost per unit, delivery lead-time, inventory days, utilisation, labour productivity.
- Review at least annually: is the location still optimal given business changes, demand shifts, cost changes?
Conclusion
Warehouse site selection isn’t a checkbox; it’s one of the foundational strategic decisions in your supply chain network. When you get it right, you unlock lower cost, faster delivery, flexibility, and scale. When you get it wrong… you’ll feel it in rising freight spend, slower fulfilment, and frustrated customers.
By applying a structured approach, aligning objectives, mapping flows, weighting criteria, modelling costs and service, and designing for future change, you can dramatically improve your outcomes. As one research note put it: “Once the decision is implemented, it cannot be changed, and any wrong decision can result in significant losses.” MDPI+1
Call to Action:
Ready to put your warehouse location decision under the microscope? Download our Warehouse Site Selection Checklist (link to internal resource) and benchmark your current or proposed sites against the criteria above. Share in the comments your biggest challenge in site selection, and if you need help modelling or comparing sites, drop us a line!
