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Location, Location, Location: A Midwest Fulfillment Center Saves You Money
Tod Yazdi, TAGG Logistics
When it comes to order fulfillment and product distribution, the three biggest factors in determining the most efficient and cost effective method of getting your products to your customers are location, location, location. If you are shipping product to a nationwide customer base and doing so from outside of the Midwest, chances are you have a more expensive and slower supply chain than necessary.
Look at a map. Where are your customers? Now pick a spot on the map that geographically makes sense to distribute from, centered in the middle of your customer base. You are probably pointing to the Midwest. In doing so, you are not alone. The central states are quickly becoming distribution and order fulfillment hubs for companies all across the country. Missouri, Illinois, Indiana, Tennessee and Ohio have all seen a substantial increase in the building of order fulfillment, warehouse and distribution center space, and most of these states are actively courting logistics operations as a source of economic development.
But if you need more analytical proof than just pointing your finger at a map then lets go through the numbers. To show this, lets walk through a simplistic supply chain for a Southern California-based company. We will assume that this company imports a container of product every month through Long Beach to their facility outside of LA and then sells its product nationwide shipping with UPS. The chart below illustrates parcel shipping rates from Los Angeles versus St. Louis to a nationwide sample of cities. As you can see, the savings from shipping from the Midwest can really add up!
To/From |
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Seattle |
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Denver |
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Houston |
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Miami |
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Dallas |
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San Francisco |
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Baltimore |
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Chicago |
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Atlanta |
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Indianapolis |
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| Average Cost/Package | ||||||
Average Shipping
Days/Package |
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Monthly Cost 250 Packages/Day |
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Monthly Savings by Shipping from St. Louis |
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Yearly Savings by Shipping from St. Louis |
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| Notes: UPS Ground publicly published rates for shipping an 8 lbs. package to a residential address. | ||||||
Another cost we should look at is getting product from the port to your distribution center. In our example, the product is imported on a container and then placed on a truck to its Los Angeles destination. If routed to the Midwest, the container would be transported by rail to St. Louis and then taken over-the-road to the order fulfillment center. This extra leg adds roughly $1,600 to the overall container transportation cost. The comparison varies greatly if your product is manufactured domestically, and the overall cost savings of using a Midwest center is magnified if product is sourced in the Midwest.
Savings by Shipping Outbound Goods from St. Louis |
$100,328 | |
Additional Container Transportation Cost to St. Louis |
$19,200 | |
Transportation Cost Savings Using a Midwest Facility |
$81,128 | |
In our sample supply chain, the company saves $81,128 per year in transportation costs just by shifting distribution from the West Coast to the Midwest. In addition, customers are getting product on average 1 day sooner because of the Midwest fulfillment center.
This analysis focuses solely on transportation costs. Remember, transportation is the single highest cost within your supply chain, averaging 3 to 4 times higher than your warehousing and fulfillment costs. Translation: even a slight reduction in transportation expense can make a big difference!
Factoring in warehouse/fulfillment cost comparisons only make the Midwest look even better! Generally, the cost of land, warehouse space, labor and overhead runs cheaper in the Midwest than on either coast. But for our hypothetical Southern California company, the transportation savings alone is enough to justify exploring a switch.
Geographically speaking, the Midwest is the most logical location for a distribution/order fulfillment center. Give TAGG Logistics a call today and we will trace all the costs of your supply chain, from source to consumer, and provide you with a comparison. Chances are the logic of location, location, location will translate into dollars, dollars, dollars of real savings.
Would your organization benefit from a more cost effective outsourced logistics partnership? Contact TAGG Logistics for a free comprehensive review of your order fulfillment, shipping and distribution needs. Let us compare your current distribution costs to the costs of shipping from our facility. We are confident that our Midwest location can save you money.
TAGG Logistics - Where a Midwest logistics location translates to lower shipping costs and faster delivery of your orders.
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