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When you’re searching for a fulfillment company, location matters. Should you choose a 3PL warehousing and fulfillment company near you? Is it better to locate your outsourced warehousing service near the closest inbound port or near your highest concentration of customers? While some regions may offer cost savings over areas that have higher rent and labor rates, the best way to choose a location for your warehouse is to take a strategic look at ALL of your fulfillment needs.
We specialize in helping businesses find order fulfillment companies all throughout the United States, Canada and Europe. If you already know the best location yourself, simply choose the area below to learn more about the best fulfillment centers in local areas and get connected for price quotes:
If you don’t know what location is best for your business, keep reading and we’ll help you understand the most important factors when making this crucial decision.
The location of your supplier and/or manufacturer has a direct impact on the best location for your fulfillment center. Any movement from your supplier or manufacturer to your warehouse adds costs to your overall business model, unless of course your supplier will ship free freight to anywhere you select (this isn’t very common, unfortunately). Therefore, minimizing any inbound transportation costs (cost to ship your product from production facilities to your warehouse via freight forwarding services) is important because less inbound freight expense will need to be passed on to your customers in the form of higher product costs.
For example, if you sell your products throughout the US and production is in the US, there may be a benefit to selecting a warehousing partner near your production facility. This isn’t always true, however, because you also have to consider your outbound freight dynamics as well as some other factors. Alternatively, if you produce your product overseas in the Far East, such as Vietnam or China, then locating a warehouse on the West Coast US will minimize inbound freight costs, as it is the closest location for inbound freight from overseas. If you bring in product from Europe, east coast and eastern US 3PL warehouses are closest, and if you produce your product in the Middle East (such as India), then either east coast or central US (for example, Houston, Texas) might be best.
Outbound freight costs are the costs to get your products shipped from your warehouse to your end customers. Sometimes, end customers will ship product on their own account and/or will pay for the outbound freight and aren’t as particular about minimization of costs. However, most of the time, outbound freight costs can directly impact your sales. Especially in the case of e-commerce fulfillment of orders, potential customers may drop out of the online shopping cart if shipping charges are higher than they are willing to pay. In the case of Canada, Vancouver offers the closest port to the Far East, and the Middle East and Europe will find inbound freight cost savings by bringing in product into Montreal or the Greater Toronto area (GTA).
When e-commerce companies ship products all throughout the US, then choosing a central US pick and pack company will help streamline outbound costs and delivery times throughout the country. For Canada, the GTA is a great option because it is the most highly populated area of the country. However, if your company ships to a very concentrated regional area, locating a third party warehouse in that particular area could be best.
If you have data on where your end customers are located, then you can draw conclusions on the best location for your fulfillment center. For example, if your sales are highly oriented towards the Northeast, then you will benefit from an outbound shipping perspective to choose a warehouse in the Northeast. However, if your sales are scattered throughout the US, or if you expect to sell throughout the US but don’t know where the sales will take place specifically, then locating in the central US could be best.
Sometimes, choosing a warehouse with multiple locations is best for your business. When you have a high volume of sales that justify split locating your inventory, if speed to delivery (less than 2 day ground shipping), or if you have another specific requirement such as the need to comply with Amazon Prime shipping status, having more than one location might be a requirement.
But for most businesses, using a multiple location warehousing companies is overkill and requires carrying additional stock – the cost of which will likely not outweigh the cost savings in shipping. Furthermore, multiple location fulfillment centers tend to focus on high volume clients, and therefore have much higher monthly minimums – either a minimum monthly spend or a very high monthly order volume requirement. If you sell a low volume of orders, your customers have no time sensitivity for product deliveries by customers, and your product isn’t temperature or climate sensitive, then using a single, regional fulfillment company is best.
The few examples where a multiple location fulfillment center is best are as follows:
In some cases, there could be other factors that impact the ideal warehouse fulfillment center location. For example, if you need to have more oversight over operations and/or wish to maintain a more direct relationship with your fulfillment center, locating a company near your physical location could be beneficial. Another benefit to hosting your fulfillment locally is the ability to visit your inventory and the people who manage it. To keep tabs on what you have, what you need and build a relationship with the people representing you and your business.
Certain areas of the country have higher operating costs than others. Choosing a local fulfillment center in an area of the country with favorable warehousing costs may be more beneficial than locating near your business if your company resides in a higher cost area of the country.
For example, 3PL companies in California and fulfillment companies in New York have historically higher 3PL fulfillment pricing than more remote areas of the country. By choosing a 3PL near your business in these areas, you will be incurring higher costs than if you chose an outsourced provider in an area of the country that offers better rates, such as central areas or Midwestern areas.
However, please keep in mind that even historically higher cost states and areas have potentially some options that are cost competitive. A great example of this is the southern California market. While Long Beach warehousing services and Los Angeles 3PLs are typically much higher in cost due to their proximity to the port and high warehouse rental rates, locating a warehouse in areas outside of Los Angeles, such as the Inland Empire, will provide more favorable pricing and lower cost structures. These areas are oftentimes very competitive to even more remote areas of the country – and when you factor inbound costs into the equation, may well prove to be the best solution for your business.
Two final notes related to the most cost-effective areas for fulfillment operations. First, there is no area that is the “cheapest”. In our historical studies, we have not found a particular area that offers the lowest rates hands down. Second, even remote areas that have lower warehouse lease costs and lower wage bases may not prove to be the lowest cost solution when you factor “every” cost into the equation. Choosing a warehouse based upon the lowest costs alone can be a very bad decision – especially if performance suffers.
For companies with taxes in mind when deciding on an outsourced fulfilment center location, there are a few things to consider. The most impactful taxes that factor into the equation are sales taxes, business taxes, inventory taxes.
Yes – there are states that offer excellent tax benefits, such as no sales taxes and/or lower e-commerce sales taxes. However, many of these “tax advantageous” areas are in remote areas of the country (think Delaware, New Hampshire, Montana, and Oregon) and do not have many fulfillment options. Furthermore, many low costs tax states do not offer the same advantages in terms of speed of shipping and lower outbound delivery costs to customers. Therefore, when accessing the viability of choosing a 3PL in a low or no sales tax (or business tax) area, be certain that the location also checks all the other boxes in terms of operational and financial viability.
When making the “all-important” decision of warehousing location, it is extremely important to consider the overall workforce availability in the area. While it might be a great thought to operate in a remote area of the world to reduce costs, the area may be significantly impacted by workforce fluctuations. Remote areas will not have the diverse and vast labor pool of larger markets, and economic shifts could put your business at risk if labor participation reduces.
On the other hand, larger markets won’t experience the same level of risks. Warehouse staff will be readily available when needed, and 3PLs will be able to add staff for peak seasons without any issues.
Environmental disasters, such as hurricanes and tornadoes, as well as geographic climates, such as cold areas or extremely warm areas, could have an impact on the choice of warehouse location. If it’s important to you to avoid natural disasters, choosing a location that doesn’t have as many throughout the year is important. For companies with heat sensitive products might be best suited to avoid southern locations that experience higher normal temperatures and companies with products that cannot freeze might want to avoid northern warehouses. That being said, many warehouses offer climate controlled conditions to help mitigate some of the risk.
There are several different types of warehousing options, which can lead to a healthy amount of confusion. Therefore, part of the considerations in deciding whether to choose a warehouse solution near your business is to determine which type of local warehouse is best suited for your business. Below are the main types of warehouses you’ll find in your local area.
If you need a warehouse space that you can lease and occupy, industrial warehouse leasing is the best option in your local area. With a local industrial warehouse lease, you will be able to access and work in the facility. The downside, of course, is that you will be subject to the fixed monthly lease cost, as opposed to a 3PL warehouse that only charges you for the space used during the month. But industrial warehouse leases are mandatory if you need to work in the facility, since third party logistics companies do not allow you to get into the facility and work in their warehouses due to insurance and liability reasons.
Of all the warehouses in your area, shipping and receiving warehouses are most likely the least common. As opposed to a full-scale warehousing service near me, these companies specialize in helping with short-term receiving and cross docking scenarios. Oftentimes, they will receive goods on behalf of companies, store it for a short period of time (oftentimes after re-working some or all the product), and then ship back out the goods. These shipping and receiving warehouses will frequently help support Amazon FBA operations (usually referred to as FBA Prep services). Unfortunately, as mentioned above, most 3PL warehouses do not offer this service so it may be extremely difficult to find since the services provided do not make a great deal of profit for the warehouse operators.
Full-scale fulfilment services and 3PLs offer the entire spectrum of logistics services for clients – from inbound receipt of goods and long-term warehouse storage, to pick and pack fulfillment services (B2B and B2C) and outbound shipping services. These local warehouse solution providers handle every aspect of the logistics for you so your business can focus on other operations and business tasks.
E-commerce warehouses around you are more specialized in terms of their core service offerings – they only focus on e-commerce fulfillment: storing and fulfilling online B2C orders. Because they specialize in this one niche, they are highly competent in linking to your online website and other online sales marketplaces, as well as fulfilling orders for small parcel customers and provide extensive and robust reporting solutions available online 24-7.
The internet talks a lot about using multiple-location fulfillment centers, which pose challenges for most companies. Only a few work out as planned. They have various challenges, including splitting inventory which increases inventory and carrying costs.
A single warehouse with a central location will best suit most companies because it evenly distributes transit times and costs. This will suffice for most companies unless there is hyper-sensitivity to delivery times. And you won’t have to split and carry more inventory (or move inventory if one location is low in stock, thereby increasing costs).
Also, if you find there are high concentrations of orders in a specific region and need to speed up times, you can always contact shipping carriers to do zone-skipping strategies.
Expansive and reliable rail networks promote timely and efficient freights and shipments. Many centers prefer an accessible route to the railroad network to ease congestion and improve delivery time to these locations. The simple yet effective impact of the rail network on their proximity to fulfillment centers reduces their operations and functionality.
Fulfillment centers close to the rail network ease the transport and freight of goods. You’ll be able to cut your transport time and cost significantly with an accessible rail network. The vast network and categorization in the fulfillment center allow shipments to move seamlessly between different phases.
Interstate roadways ensure that transport agencies honor their expected transit and arrival time. A good road network gives truck drivers an easy time moving across and within states delivering items without any hatches. Government entities continue promoting the deliveries by improving the standard and quality of the road network, whether under national or county management.
Setting up a fulfillment warehouse within a reliable road network allows easy accessibility, giving it the best chance to excel. Check out these top states with the best roadway and highways:
2-day ground coverage is one of the standard shipping options with brands with a high reputation, like Amazon. The logistics to attain the 2-day ground coverage require a sturdy transport and warehousing system allowing seamless movements and transit.
Setting up a central center with a good road and rail network system also enhances your plans on the 2-day ground coverage. Centers in DFW, Houston, Chicago, St. Louis, and Kansas City provide an excellent foundation for ground shipping. The infrastructure within and connecting these cities to other areas allows shipping companies to hit the 2-day mark timely.
The metropolitan characteristics of these cities provide affordable and reliable costs to their customers in the East. If you’d like to ship items between coasts, consider the demarcated shipping zones in the West to fulfill the 2-day coverage.
Most fulfillment centers are in metropolitan areas with high populations and reliable infrastructure. Such locations include LA/Long Beach, Houston/DFW, Chicago, NJ/NY, and Miami. There’s a high population in these areas where people can get timely deliveries within the shipping zone.
These metro areas are also well-connected through road, rail, and air. The inbound freight system allows the centers to receive and distribute high volumes and types of items without discrimination. You don’t have to worry about accessibility as the road and rail network within the metro areas ensures smooth and timely transit times for truck drivers. The tech in these centers promotes easy handling of trucks and items within the warehouse. There are also large areas where you can install equipment for stacking and arrange your packing.
You can connect the building zones to the road and rail network to avoid verification and transfer delays. There’s also a higher demand for imports and inbound items in these metro areas. Setting up a fulfillment center in these is more beneficial to shorten the duration between receipt and delivery. It eliminates lengthy travels to get to the inbound items from other states.
Additionally, they help solve high shipping costs, encouraging online customers to purchase store items. You’ll have a broader online market in metro areas and their environs because of the nature and characteristics of the population.
One of the main challenges in widening the online market for eCommerce centers is managing shipment time and delivery costs. Customers pull out from purchases because of the time or potential costs incurred to get the items. Fulfillment centers near me could help you shorten this period and increase monthly sales.
Consider getting a centralized location to stock up on your items. Ensure you factor in the customer’s preference, shipping zones, and the popularity of different items when setting up your warehouse location. It’ll help you save on delivery costs, thus improving your service delivery. And there’s nothing that customers love more than an affordable yet efficient delivery service.
Choosing a centralized or multiple warehouse location requires an in-depth understanding of the eCommerce business and the location. Study how the current shipping companies work out their deliveries and start building your system. These factors help you understand what to consider when choosing a fulfillment location.
WarehousingAndFulfillment.com provides a comprehensive list of pre-screened fulfillment companies that can help you achieve all your fulfillment needs in any given region. Whether you need inventory at one central location or many, we can help you find it. Get YOUR hand-picked matches and get multiple, free price quotes from any of the areas below!
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Mississauga, Ontario, Canada
Retention rate of customers: 96.7%
Annual order volume: 103,500
Order rate: 99.7%
Shipping rate: 98.0%
Inventory accuracy rate: 95.0%
Toronto, Ontario, Canada
Retention rate of customers: 95%
Annual order volume: 2,000,000
Order rate: 99%
Shipping rate: 99%
Inventory accuracy rate: 99%
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