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Under a Creative Commons license Open access AbstractThe aim of this study is to analyze the location decisions of the manufacturing industry companies in the ICI Top 500 and Second Top 500 Industrial Enterprises (ICI-1000) for the year 2018. The location choice model developed accordingly is based on the assumption that companies choose the location of their production facilities with “the goal of profit maximization, and that this decision is influenced by both internal (company-specific) and external (sectoral and regional) factors”. The empirical analysis is conducted utilizing the nested logit estimation method and a large data set containing information on 909 manufacturing industry companies among ICI-1000, sub-sectors and location alternatives. The results support the views of Neoclassical and Institutional location approaches. The location decisions of the companies are affected by the characteristics specific to the company, sector and location. The ICI-1000 companies in the study tend to locate in areas with high market power and market growth, qualified and abundant labor, high sectoral growth and diversity and good geographical and physical conditions. The impact of these factors on company location preferences varies depending on the technological intensity of the industry in which they operate (high/low). Companies operating in high-tech (high, medium-high, medium-low) sectors choose places with a diversified and deepened labor pool, sectoral diversity and knowledge diffusion. On the other hand, the effect of specialization that emerged with localization economies is crucial in the location decisions of companies in low-tech sectors. KeywordsFirm behavior Firm location Manufacturing Nested logit model JEL classificationD22 R30 L60 C35 Cited by (0)© 2022 The Authors. Published by Elsevier B.V. on behalf of Central Bank of The Republic of Turkey. Choosing the right warehouse location can make all the difference in how effective, efficient, and profitable a company is. Leasing or purchasing a warehouse is a major decision, and choosing the right location can significantly enhance a company's ability to compete and effectively serve customers. When it comes to selecting a location, it’s important to take the time and consider all of the following criteria, take some notes, and then compare your notes against all the available options. Only after all the data has been compiled and analyzed should the final decision be made. Let’s review the 7 selection criteria for the best possible warehouse location. Rent Rates & TaxesCost will remain a key criterion when selecting the right location of a warehouse, but it must not be the only one. Hidden costs could offset any savings on cheap rental rates and therefore must be considered. The rental rate of a warehouse in the US is normally based on square feet (SF) per year or month depending on the landlord. Average prices in the US can range from as low as $2.56 SF/Year and as high as $16.50 SF/Year. See the table below for the top 6 low & high-cost markets. Data Source: Industrial Market Outlook 2017 In addition to rates, attention must also be given to local governmental regulations, tax structure, and tax incentives. You could also benefit from special local government programs intended to promote your industry segment, so it pays to consider this as well. Workforce Availability, Labor Skills & CostsWorkforce availability, skills, and labor costs are directly associated with local demographics. Not every geographical location offers a workforce with the right skills at the right price. Pay attention to the local demographics of the state/city being considered. When evaluating workforce availability, consider supply and demand: Low workforce availability and high demand will drive salaries up (meaning operating cost will be higher). The opposite is also true. High levels of workforce availability and low demand will drive salaries down. Besides workforce availability and costs, skills are also critical. A workforce skill gap will result in a low quality of customer service and a reduction in both competitiveness and productivity. The following chart demonstrates the impact of a qualified/trained workforce in the logistics industry. Improvements Noticed as a Result of Undertaking Training or Qualifications
So, when choosing a warehouse location, research the demographics and focus on educational attainment, population characteristics & income levels. A quick Google search for “[city or state] demographics” should pull up the needed information. City and state government websites are also likely to provide this information. Roads, Highways & Traffic FlowAccessibility to roads and highways as well a local traffic density must also be considered, especially if trucking is the main mode of transportation. Transportation costs are affected by some or all of these variables and can impact the competitiveness of the company or the attractiveness of the warehousing facility to customers. Consider the following points:
Factors such as congested highways and surface roads as well as poor signaling systems will increase fuel consumption, accident rates, and time wasted. Proximity to Airport, Railway Stations & PortsIn this case, the main mode(s) of transportation used to receive or ship goods to and from the warehouse must be prioritized. For example, if most of the cargo is imported/exported via air, then you will want to be as close as possible to the airport. If this is not possible, you should at least explore facilities with easy access to highways and roads that offer a direct connection to the airport. You want to be as close as possible to the point of the most predominant transportation mode in order to control drayage costs and have the highest possible velocity level – the maximum number of containers per month. The following info-graphic contains data from the Department of Transportation displaying shipments weights by transportation mode for 2013 and the expected volume for 2040. Data Source: Bureau of Transportation Statistics Markets & Local Environment FactorsProximity to suppliers, producers, and the market(s) being served as well as local environmental factors must be also considered. Any new warehouse should be as close as possible to major suppliers, producers, and/or customers. This will help reduce lead times, decrease transportation costs, and enhance responsiveness. The factor to consider here is who is/are the major supply chain partner(s) and how you can make the supply chain more efficient by strategically selecting the warehouse location. Also, local environmental factors such as weather conditions and risk of exposure to natural disasters should also be considered. Would the warehouse be exposed to hurricanes, tornadoes, or earthquakes? Is it in a flood zone? For any of these risks, the warehouse must meet specific building requirements. Other local environmental factors that should also be considered include proximity to neighbors (warehouses can be noisy – avoid disputes), traffic congestion, and peak traffic hours. Consider how these variables could affect regular operations. Building Availability & Utility CostsIf the business grows or shrinks, you will need to adjust accordingly. If this is the case, you will want to minimize your need to re-evaluate all these factors if moving to a new warehouse is your only option. By moving within the same area, you will be able to retain your workforce, utilities, etc., and minimize the frustrations of carriers/truckers and customers trying to find the new location. One last aspect: utilities. You will want to double-check the availability and cost of utilities. Some warehouses are more demanding/dependent on one utility than another. For example, refrigerated warehouses are more dependent on electricity and water. But there is one utility that almost everyone ignores: the internet and communication services. Remember to check not only the availability of internet services but also the speed and link type (Cable, T1, Fiber, etc.) available as well as all associated costs. Also, remember that on occasion, the installation of internet services can take up to 3 months – or more. SummaryPlease, take the time to properly plan and understand the most strategic warehouse location for you and your customers. The impact of this decision is much more significant than just opening a warehouse somewhere. The location of your warehouse will have long-lasting effects on the financial, operational, and competitiveness aspects of the company. If you want more warehouse content, you can follow us on LinkedIn, YouTube, Twitter, or Facebook. You can also message us through our contact page if you have other inquiries. Which of the following are basic steps in the location decision process?Procedure for Making Location Decisions. Step 1 Identify Dominant Location Factors. In this step managers identify the location factors that are dominant for the business. ... . Step 2 Develop Location Alternatives. ... . Step 3 Evaluate Location Alternatives.. Which of the following is a location analysis technique typically employed by a service organization quizlet?Location analysis techniques typically employed by service organizations include: the factor rating method.
Which of the following is more of a site factor than a community factor?Which one of the following is more of a site factor than a community factor? E) Quality of life.
Which of the following assumptions is not associated with strategies for goods producing location decision?Which of the following assumptions is NOT associated with strategies for goods-producing location decisions? Answer: C) High customer-contact issues are critical.
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Which of these factors would be considered when making a location decision at the site level?
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