New study details the cost of operating a distribution center
December 28, 2010 - MMH Editorial
The Boyd Company, an independent site selection consulting service headquartered in Princeton, N.J., has just released its 2011 Comparative Distribution Warehousing Industry Operating Costs study that compares the cost of operating distribution centers in a series of 50 U.S. and Canadian cities, which all house major or emerging concentrations of warehousing activity.
The analysis provides an independent point of reference for the corporate planner’s assessment of operating costs in each of the surveyed sites. In addition to shipping cost considerations, the report covers other major geographically-variable factors like nonexempt labor costs for warehouse, materials handling, packing, light assembly and administrative support workers; industrially-zoned land costs; new warehouse construction costs; electric power costs; natural gas costs; real estate property taxes; as well as transportation costs.
Warehouse operating costs are scaled to a hypothetical 175,000-square-foot facility employing 75 nonexempt workers and shipping over-the-road to a national U.S.
market. The format of the exhibits in the report can help corporate planners tailor the cost data, warehouse specifications, shipping patterns and staffing levels to reflect alternate scales of operation and market expectations.
The report is designed to help companies stay on top of the shifting trends and choose sites that are most advantageous to their overall operation. “Every project has unique drivers,” John Boyd, Jr., principal at The Boyd Company told Modern, “But this study is a benchmark and a platform for discussion.”
The locations in the study include major U.S. and Canadian distribution gateways such as Boston, Meadowlands/Northern New Jersey, Atlanta, Memphis, Orlando, Dallas/Ft. Worth, Chicago, Kansas City, Riverside/San Bernardino, Toronto and a series of other regional distribution hubs. Among the findings: Annual operating cost totals range from a high of $12.6 million in San Jose/Sunnyvale, Calif., to a low of $7.4 million in Sioux Falls, S.D.
“This study is great news for cash strapped municipalities,” Boyd added. Since one trend is for consolidation, distribution centers are getting larger and paying significant property taxes to the communities in which they are located. In addition, Boyd said, the consolidation trend is turning the tide on outsourcing certain functions overseas. While outsourcing will continue because overseas costs are less for certain jobs like manufacturing, the consolidation trend means that companies are able to offer blue and white collar jobs, as quality jobs and projects wash back ashore.
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