Location, Location, Location
Updated: Aug 24, 2022
There are many factors that go into evaluating a location, and while the list outlined below is by no means exhaustive, it is representative of a few core factors Peak Velocity utilizes in identifying the best location for a company’s dropship fulfillment operation.
Reach is defined as how quickly a customer can expect their order to be received. When evaluating the reach of a particular location, Peak Velocity analyzes two specific scenarios:
The first is determining the shipment time to a customer at the cheapest shipping method available, which is typically Ground service provided by all the major carriers such as UPS and Fedex. From a facility in Southern Florida, it may only take two days to get an order to Atlanta, but up to six days to get it to Seattle. That timeline could significantly impact a Seattle customer’s buying decision, costing you business. As a result, midwestern states like Missouri and Indiana, are becoming extremely popular for warehousing needs. Being centrally located in the U.S., allows for shipping to more than 80% of the country in two days by Ground.
We also evaluate the historical ecommerce sales heat map for a company. If you have a niche product mix, it's very common for a majority of sales to come from specific regions of the country, yet be largely immaterial in other areas. For example, if you sell surfboards, perhaps a majority of your sales have historically been shipped to southern California, so New Hampshire will probably not be the ideal location for your Dropship fulfillment facility. You want to be as close as possible while still optimizing operating costs, which are expensive in southern California. This ensures quick delivery times, reduces the risk of a delay while the order is in transit, and helps build brand loyalty as customers realize you are local.
As we continue to evaluate location, Injection is our next concern. Most of our clients manufacture products overseas, then bring them into facilities within the U.S. for storage and order processing. The act of moving product from the manufacturing facility to the Dropship facility is referred to as Injection. Traditionally, the most cost-effective method of injection has been by sea. Ports line the west and east coasts of the U.S. and, to a lesser extent, the southern coast as well. When considering Injection, the goal is to minimize drayage from the port to the facility, getting product stocked and ready for sale as quickly as possible. This is where midwestern facilities, despite their reach, are at a distinct disadvantage with Injection. Their distance from any port increases time, expense, and risk.
Evaluating the size of the labor pool within the market you are considering is imperative. Understanding the proximity of other facilities and, therefore, what competition for that labor pool you may encounter, is also vital. Too much competition or too shallow of a pool and you risk not being able to secure sufficient staffing. Even if you are able to staff your facility, it might be at a cost that is too high to be operationally sustainable.
Again, this is not an exhaustive list. We haven’t even touched on proximity to carrier allocation centers or major highway interchanges. Nor did we cover access to or cost of required equipment and supplies, or real estate market volatility. But these three points are the best place to start. From there, Peak Velocity Consulting is well-equipped to help you narrow things down even further and make the decision that’s right for your company. We are experts in properly evaluating location criteria to make sure you are as successful as possible in “Shipping Your Business Forward.”