Twin Cities most costly for warehousing

By Staff -- Logistics Management, 6/1/1998

A recent warehousing site-selection study ranked the Minneapolis/St. Paul area as the most expensive U.S. distribution-center location. Conducted by the Boyd Co., a location consultant in Princeton, N.J., the study compared operating costs for 19 major U.S. transportation and distribution hubs.

The Boyd study found that Minneapolis/St. Paul had average annual warehouse operating costs of $15.1 million. "St. Paul has high property taxes and labor costs compared to the rest of the country," says John Boyd, president of the Boyd Co. The annual operating costs used in the analysis were based on a representative 350,000 square-foot facility employing 225 workers and shipping within North America. The study also looked at operating expenses such as labor, electric power, heating, taxes, amortization, and transportation costs. Startup and relocation costs were not considered.

Sioux Falls recorded the nationwide low with an $11.8-million average annual warehouse-operating cost. "There's a trend toward locating distribution centers in smaller cities," Boyd notes. "Smaller cities offer a lower operating-cost structure, a more positive labor relationship, and less-expensive land."

The Boyd study also noted that many companies serving national markets were shifting from a multi-facility distribution network to just one or two strategically placed facilities. That's partly because the North American Free Trade Agreement, which liberalized trade between the United States, Canada, and Mexico, is forcing companies to rethink their distribution strategies, Boyd says. "Canadian and U.S. companies are ... looking at locating in a mid-continent corridor from Winnipeg through Kansas into Texas."

The Most Expensive Areas for Warehousing...

(average annual operating costs, in millions)

Minneapolis/St. Paul $15.1

Detroit $14.4

Chicago $14.2

...And the Least Expensive

Sioux Falls, S.D. $11.8

Fargo, N.D. $12.5

Kansas City, Mo./Kan. $12.7

Source: The Boyd Co.