Financial Considerations Of A New Warehouse
There are a range of financial factors involved in picking the right place to create a new warehouse. Especially finding somewhere that offers the space you need to buy or lease at a competitive price.
It could be that you find the ideal geographical base, only to discover that the local land prices, rental costs, business rates and associate outgoings make this endeavour far too costly.
For example, the average rental cost of big box warehouse space was around three times higher in London and parts of the South East than other areas of the country at the end of 2020. Therefore the costs associated with where your warehouse is located are crucial to get right to ensure efficiency and profitability.
Prime rent for big-box warehouses in the United Kingdom (UK) as of Q4 2020, by region
The purchasing or lease costs associated with where your warehouse is located need to be carefully balanced against the benefits that location would offer in terms of factors such as supply chain efficiency, transport costs and being able to service customers.
Fortunately, one of the best things about building new warehousing operations is that the road, rail and shipping access matters more than finding an attractive place. Out of town and slightly more remote locations could have the infrastructure you need nearby, but they enjoy lower business costs than premises in the heart of towns and cities.
Resourcing Your Warehouse
Finding a cheap new warehouse location near major transport links - that’s competitively priced to buy/lease and run - can bring an important challenge. If it’s an unattractive or problematic site for potential employees and suppliers, you may be storing up long-term business issues.
Even the most automated warehouse needs staff. If people struggle to get to your site using public transport or need to shell out for fuel costs to commute, it's harder to attract and retain high quality employees. You must consider the availability and costs of labour when siting a new warehouse operation.
As modern warehousing is so reliant on technology, it's particularly crucial to ensure you are in a position to recruit staff with key skills. If you struggle to attract the right team to your new warehouse, your productivity and customer service will dip. So, you may have a site next to arterial roads, but not one that will make a consistent profit.
With the number of people in the UK employed in the warehouse and storage sectors continuing to grow, it’s crucial that any new project is located in close proximity to the employees needed to operate it.
Number of warehouse and storage employees in the UK (in 1,000s)
Although online learning for warehouse teams is on the rise, you may still need to have regional in-person training resources to rely on. Another resource issue to consider is whether there is access to any regional grants or business loans that can help with start-up costs for this job-creation project?
It’s a similar story with suppliers; your warehouse needs to be easily accessible to locally-based suppliers of warehouse support services and products. For example, if you have to wait two hours for the arrival of an engineer to fix a forklift truck or pallet stacking equipment, it’s downtime that costs money. Look at your entire supply chain and the ways to optimise your warehouse location.
Last Mile & Urban Warehouses
Arguably as a consequence of the ‘Amazon Effect’, today’s consumers expect fast and convenient delivery when purchasing goods online. In order to remain competitive, delivery is something where many companies have and continue to invest in order to meet the changing expectations of their customer base.
The last mile, which typically means the last leg of a product's journey before reaching the customer, has become increasingly important, and has seen an increase in smaller warehouses or distribution facilities opening close to urban centres.
These last mile or urban warehouses enable companies to sort goods for delivery in the local area, or to supply products to customers quickly and efficiently. Some retailers have also adopted a hybrid approach, using existing stores or facilities as hubs or micro-fulfilment centres from which to deliver stocked items to customers.
As physical shopping locations have seen a downturn in recent years, most notably due to the restrictions felt during the pandemic of 2020-21, the ability to provide ‘click and collect’ options to consumers has also seen an increase in popularity. Similarly to urban warehousing, many brands now use stores to facilitate customer collection of goods stored locally, in addition to in-person shopping.
Click and Collect Turnover in the UK from 2013 to 213 (in billion euros)
This change in the way that businesses operate has led to a change in how facilities are operated. With an increase in the need for storage of a range of items for last mile delivery, as well as customer collection, intelligent inventory management as well as high density storage solutions are a must.
With the cost of warehouse and/or retail space in urban centres at a premium, it’s vital that organisations are able to maximise the storage efficiency of their spaces. This means that as many goods can be stored, picked and packed as possible in order to service customer demand. High density pallet racking systems and item storage are required in order to maximise the amount of goods that can be housed within facilities where floor space usually comes at a premium. In sectors such as e-commerce, mezzanine levels are also a cost effective way to make sure smaller warehouses or other facilities are used as efficiently as possible. Mezzanine solutions for e-commerce warehousing can be used to increase storage capacity, to house admin staff or to create specialised areas for tasks such as returns handling.
