As companies decide where to locate their distribution facilities, they must take into account big changes in costs, technology, customer demands, and global economic conditions.
John H. Boyd (jhb@theboydcompany.com) is founder and principal of The Boyd Co. Inc. Founded in 1975 in Princeton, New Jersey, and now based in Boca Raton, Florida, the firm provides independent site selection counsel to leading U.S. and overseas corporations.
Organizations served by Boyd over the years include The World Bank, The Council of Supply Chain Management Professionals (CSCMP), The Aerospace Industries Association (AIA), MIT’s Work of the Future Project, UPS, Canada's Privy Council, and most recently, the President’s National Economic Council providing insights on policies to reduce supply chain bottlenecks.
There is a complex web of factors that influence where a company chooses to locate a warehouse or distribution center (DC) and how it chooses to operate it. These factors can vary depending not only on the company's own individual business needs but also on economic conditions and trends in the marketplace. The following are four significant trends that our clients say are affecting how they look at their distribution site selection and operations.
1. Focus on costs
Costs have always played a large role in deciding where to locate a distribution facility. But in the face of uneven growth and economic uncertainty on both the global and domestic fronts, many cautious companies are keeping an even closer eye on costs. Hot-button areas include the rise of temporary labor staffing, expected to increase at a strong 3.5 percent pace this year, and industrial rents for warehousing space, up 8.6 percent nationally and well over 10 percent in markets like New Jersey, South Florida, and the Bay Area of California.
Article Figures
[Figure 1] Total annual geographically variable operating-cost rankingEnlarge this image
The comparative cost of doing business in terms of labor, land, DC construction, power, and taxes can vary dramatically, even within the same geographic region of the country. For example, Figure 1 compares the cost of operating a representative distribution warehouse in various locations throughout the vast consumer markets in the northeastern United States and eastern Canada. Annual operating costs range from a high of $21.3 million in the Meadowlands of northern New Jersey to a low of $13.4 million in eastern Ontario—a differential of over 30 percent. (All figures are in U.S. dollars.)
Companies looking to keep costs low, then, may be tempted to locate their warehouse or distribution center in a lower-cost area. For example, the Boyd BizCosts analysis shows that the least costly location for a distribution center in the northeastern part of North America is eastern Ontario, which is located between Toronto and Montreal and has easy cross-border access to the U.S. Northeast via I-81. Eastern Ontario's cost effectiveness is driven by a number of factors, including a favorable exchange rate, low land costs, absence of development fees, and lower corporate fringe-benefit costs owing to Canada's national health-care system. Our supply chain clients in the United States typically pay about 40 percent of their payroll for benefits; in Canada, that figure is closer to 20 percent. Additionally, the consulting company KPMG ranks Canada first among the G7 nations in terms of tax policies because of its low corporate taxation rates. These advantages end up trumping administration issues at the borders, which have been greatly streamlined in recent years by the Free and Secure Trade (FAST) program.
2. Increasing automation and the talent gap
Advances in technology and changes in the workforce are also having a large effect on how companies shape their distribution network and design their DCs. Automation on the manufacturing and warehouse floor is a well-established trend. Foxconn, for example, has already automated an entire factory in China and eliminated some 60,000 jobs. Meanwhile, "lights out" warehousing technology continues to advance, with key players like Amazon Robotics (formerly Kiva Systems) at the forefront. The International Federation of Robotics (IFR) reports that sales of industrial robots achieved an all-time record of 248,000 units in 2015, up 12 percent from the previous year. This trend will only intensify as robotic technology continues to advance, replacing not just blue-collar jobs but white-collar ones as well.
In terms of site selection, the trend toward automation means that companies are looking at whether a prospective site has high-speed fiber and sophisticated telecommunications infrastructure. Additionally, it will become increasingly important that a site be able to provide continuity of operations and be insulated from natural and human-induced disasters. These are factors that in the past were more commonly linked to our data-center site-selection projects than to distribution centers. But DC relocations will increasingly need to consider energy costs and the reliability of the grid due to the growing use of automation, the cloud, and robotic applications.
Similarly, one of the biggest challenges facing our site-seeking supply chain clients is finding skilled labor to assemble and run the high-tech tracking and material handling equipment on the warehouse floor—not to mention recruiting workers with much-needed skills in using the telecommunications technology and software related to this equipment. Today, the distribution warehousing sector is increasingly high-tech, and as a result, it suffers from many of the same problems recruiting skilled workers that advanced manufacturing companies in fields like aerospace and medical technology do.
In many markets, the available workforce is not properly trained, so our clients need to do their own in-house training. Site searches for new warehouses or distribution centers, then, should include a thorough examination of state workforce training programs and of local academic programs in logistics that can provide support for training, continuing education, and recruiting.
Some of the top logistics schools we have worked with recently include Northeastern University, Lehigh University, and Rensselaer Polytechnic Institute in the Northeast; Georgia Tech and the University of Tennessee in the Southeast; Purdue and the University of North Texas in the Central region; and University of California, Irvine, University of California, Berkeley, and the University of Washington (Seattle) in the West. States with some of the best workforce training programs include Georgia, South Carolina, Louisiana, Nevada, and Ohio.
3. Last-mile delivery and storage lockers
Probably the most dynamic link in the supply chain in recent years has been the "last mile": that movement of goods from a DC to a final destination in the home. E-commerce king Amazon has done much to challenge and ultimately rewrite the rules of last-mile delivery. Last-mile delivery has also produced a new warehousing subsector: the locker. Studies show that online shoppers not only want their packages now, they also want their packages delivered to places other than their homes. These lockers can be viewed as "micro warehouses" and will come with additional costs. We expect many to be operated by an emerging sector of third-party logistics (3PL) providers specializing in this particular segment of the supply chain.
Lockers are now common in Europe, where densely populated and congested urban centers make them a natural fit. We anticipate that lockers will also become the next boom sector within logistics/distribution site selection in the United States. Amazon already has automated lockers in six states, while the U.S. Postal Service has lockers located within post offices in the Washington, D.C., area.
Upstart third-party logistics providers will be looking for sites where they can locate lockers, such as in transit centers, apartment buildings, convenience stores, or any establishment that provides off-hours access for picking up packages. Also, the growing online meals industry is expected to fuel the need for temperature-controlled lockers for the delivery of perishables.
4. Uncertainty in international trade
It's not just local or national concerns that are altering how companies make warehouse site-selection decisions. Export opportunities and trade agreements are also of growing importance to our clients. But there seems to be growing resistance in some regions toward free-trade agreements, as demonstrated by "Brexit"—the United Kingdom's planned departure from the European Union (EU)—and opposition to the Trans-Pacific Partnership (TPP) in the United States.
In general, we believe that it will take years for the details of Brexit to take shape, and to understand its resulting influence on warehouse site selection. That said, one of our first takes on Brexit relates to human resources. Many of our distribution center clients in the United Kingdom depend on low-wage, often immigrant labor to staff positions in fulfillment, light assembly, pick and pack, and material handling. As the immigrant labor pool contracts in the post-Brexit United Kingdom, our clients will likely be faced with labor shortages, inflationary wage pressures, and the need to beef up benefit offerings. At the professional level, non-U.K. talent in engineering, software, and information technology will also be more difficult and costly to hire and retain. Workforce training programs—already a pivotal site-selection variable here in the U.S.—will have to be expanded and better funded by U.K. policymakers.
It is likely that Brexit will also have the effect of slowing the pace of negotiations for the Transatlantic Trade and Investment Partnership (TTIP) agreement between the United States and the EU. That trade pact would create the world's largest free-trade zone—dwarfing even the North American Free Trade Agreement (NAFTA). Today, the U.S. and the EU together account for one-half of global gross domestic product (GDP) and one-third of all world trade. New DC investments related to TTIP in Europe as well as in the environs of U.S. East Coast ports like New York/New Jersey; Charleston, South Carolina; and Savannah, Georgia are also likely to stall given the slowed pace of TTIP negotiations.
The Trans-Pacific Partnership—which would connect the United States with 12 countries that together account for another 40 percent of global GDP—is currently stalled in Congress, and its likelihood of approval after the fall presidential election is uncertain, given both Hillary Clinton's and Donald Trump's stated positions on the controversial trade pact. Moreover, both candidates' positions on free trade overall are creating apprehension within the U.S. supply chain and are raising questions as to what trade and tariff challenges shippers will be facing under the next president—factors that could also influence decisions about new DC investments.
Meanwhile, Canadian export opportunities and trade agreements are gaining the attention of the U.S. logistics industry. Canada has free-trade agreements with 40 countries, while the United States has only 20. Popular support for free trade with Japan and China is much higher in Canada than in the United States, and the TPP trade agreement is expected to be ratified in Canada later this year along with its own free-trade accord with the European Union, the Comprehensive Economic and Trade Agreement (CETA). As a result, more U.S. companies are locating warehouses and DCs there to take advantage of these trade agreements.
These four trends clearly show that warehousing has been at the crux of many changes in the past few years: new technologies, new customer demands, and new talent requirements. Meanwhile, a sluggish economy and an uncertain future have company executives keeping a close watch on costs. To navigate these changing times, warehouses and distribution centers will need to transform their operations to meet new economic realities while continuing to monitor costs like never before.
ReposiTrak, a global food traceability network operator, will partner with Upshop, a provider of store operations technology for food retailers, to create an end-to-end grocery traceability solution that reaches from the supply chain to the retail store, the firms said today.
The partnership creates a data connection between suppliers and the retail store. It works by integrating Salt Lake City-based ReposiTrak’s network of thousands of suppliers and their traceability shipment data with Austin, Texas-based Upshop’s network of more than 450 retailers and their retail stores.
That accomplishment is important because it will allow food sector trading partners to meet the U.S. FDA’s Food Safety Modernization Act Section 204d (FSMA 204) requirements that they must create and store complete traceability records for certain foods.
And according to ReposiTrak and Upshop, the traceability solution may also unlock potential business benefits. It could do that by creating margin and growth opportunities in stores by connecting supply chain data with store data, thus allowing users to optimize inventory, labor, and customer experience management automation.
"Traceability requires data from the supply chain and – importantly – confirmation at the retail store that the proper and accurate lot code data from each shipment has been captured when the product is received. The missing piece for us has been the supply chain data. ReposiTrak is the leader in capturing and managing supply chain data, starting at the suppliers. Together, we can deliver a single, comprehensive traceability solution," Mark Hawthorne, chief innovation and strategy officer at Upshop, said in a release.
"Once the data is flowing the benefits are compounding. Traceability data can be used to improve food safety, reduce invoice discrepancies, and identify ways to reduce waste and improve efficiencies throughout the store,” Hawthorne said.
Under FSMA 204, retailers are required by law to track Key Data Elements (KDEs) to the store-level for every shipment containing high-risk food items from the Food Traceability List (FTL). ReposiTrak and Upshop say that major industry retailers have made public commitments to traceability, announcing programs that require more traceability data for all food product on a faster timeline. The efforts of those retailers have activated the industry, motivating others to institute traceability programs now, ahead of the FDA’s enforcement deadline of January 20, 2026.
Inclusive procurement practices can fuel economic growth and create jobs worldwide through increased partnerships with small and diverse suppliers, according to a study from the Illinois firm Supplier.io.
The firm’s “2024 Supplier Diversity Economic Impact Report” found that $168 billion spent directly with those suppliers generated a total economic impact of $303 billion. That analysis can help supplier diversity managers and chief procurement officers implement programs that grow diversity spend, improve supply chain competitiveness, and increase brand value, the firm said.
The companies featured in Supplier.io’s report collectively supported more than 710,000 direct jobs and contributed $60 billion in direct wages through their investments in small and diverse suppliers. According to the analysis, those purchases created a ripple effect, supporting over 1.4 million jobs and driving $105 billion in total income when factoring in direct, indirect, and induced economic impacts.
“At Supplier.io, we believe that empowering businesses with advanced supplier intelligence not only enhances their operational resilience but also significantly mitigates risks,” Aylin Basom, CEO of Supplier.io, said in a release. “Our platform provides critical insights that drive efficiency and innovation, enabling companies to find and invest in small and diverse suppliers. This approach helps build stronger, more reliable supply chains.”
Logistics industry growth slowed in December due to a seasonal wind-down of inventory and following one of the busiest holiday shopping seasons on record, according to the latest Logistics Managers’ Index (LMI) report, released this week.
The monthly LMI was 57.3 in December, down more than a percentage point from November’s reading of 58.4. Despite the slowdown, economic activity across the industry continued to expand, as an LMI reading above 50 indicates growth and a reading below 50 indicates contraction.
The LMI researchers said the monthly conditions were largely due to seasonal drawdowns in inventory levels—and the associated costs of holding them—at the retail level. The LMI’s Inventory Levels index registered 50, falling from 56.1 in November. That reduction also affected warehousing capacity, which slowed but remained in expansion mode: The LMI’s warehousing capacity index fell 7 points to a reading of 61.6.
December’s results reflect a continued trend toward more typical industry growth patterns following recent years of volatility—and they point to a successful peak holiday season as well.
“Retailers were clearly correct in their bet to stock [up] on goods ahead of the holiday season,” the LMI researchers wrote in their monthly report. “Holiday sales from November until Christmas Eve were up 3.8% year-over-year according to Mastercard. This was largely driven by a 6.7% increase in e-commerce sales, although in-person spending was up 2.9% as well.”
And those results came during a compressed peak shopping cycle.
“The increase in spending came despite the shorter holiday season due to the late Thanksgiving,” the researchers also wrote, citing National Retail Federation (NRF) estimates that U.S. shoppers spent just short of a trillion dollars in November and December, making it the busiest holiday season of all time.
The LMI is a monthly survey of logistics managers from across the country. It tracks industry growth overall and across eight areas: inventory levels and costs; warehousing capacity, utilization, and prices; and transportation capacity, utilization, and prices. The report is released monthly by researchers from Arizona State University, Colorado State University, Rochester Institute of Technology, Rutgers University, and the University of Nevada, Reno, in conjunction with the Council of Supply Chain Management Professionals (CSCMP).
As U.S. small and medium-sized enterprises (SMEs) face an uncertain business landscape in 2025, a substantial majority (67%) expect positive growth in the new year compared to 2024, according to a survey from DHL.
However, the survey also showed that businesses could face a rocky road to reach that goal, as they navigate a complex environment of regulatory/policy shifts and global market volatility. Both those issues were cited as top challenges by 36% of respondents, followed by staffing/talent retention (11%) and digital threats and cyber attacks (2%).
Against that backdrop, SMEs said that the biggest opportunity for growth in 2025 lies in expanding into new markets (40%), followed by economic improvements (31%) and implementing new technologies (14%).
As the U.S. prepares for a broad shift in political leadership in Washington after a contentious election, the SMEs in DHL’s survey were likely split evenly on their opinion about the impact of regulatory and policy changes. A plurality of 40% were on the fence (uncertain, still evaluating), followed by 24% who believe regulatory changes could negatively impact growth, 20% who see these changes as having a positive impact, and 16% predicting no impact on growth at all.
That uncertainty also triggered a split when respondents were asked how they planned to adjust their strategy in 2025 in response to changes in the policy or regulatory landscape. The largest portion (38%) of SMEs said they remained uncertain or still evaluating, followed by 30% who will make minor adjustments, 19% will maintain their current approach, and 13% who were willing to significantly adjust their approach.
Specifically, the two sides remain at odds over provisions related to the deployment of semi-automated technologies like rail-mounted gantry cranes, according to an analysis by the Kansas-based 3PL Noatum Logistics. The ILA has strongly opposed further automation, arguing it threatens dockworker protections, while the USMX contends that automation enhances productivity and can create long-term opportunities for labor.
In fact, U.S. importers are already taking action to prevent the impact of such a strike, “pulling forward” their container shipments by rushing imports to earlier dates on the calendar, according to analysis by supply chain visibility provider Project44. That strategy can help companies to build enough safety stock to dampen the damage of events like the strike and like the steep tariffs being threatened by the incoming Trump administration.
Likewise, some ocean carriers have already instituted January surcharges in pre-emption of possible labor action, which could support inbound ocean rates if a strike occurs, according to freight market analysts with TD Cowen. In the meantime, the outcome of the new negotiations are seen with “significant uncertainty,” due to the contentious history of the discussion and to the timing of the talks that overlap with a transition between two White House regimes, analysts said.