How to Select a Distribution Center: Complete Guide for 2025

Picking the right distribution centers is essential for any business as factors such as warehouse location can make a drastic difference in your transportation costs. This may leave business owners asking “how to select a distribution center?”.

Worry not, here you will learn what factors go into warehouse selection and the challenges associated with choosing a warehouse. Warehouses know there is a demand for their services and that sums up why many businesses are looking for the best storage facility.  

Your selection criteria are not going to be limited to warehouse location. This is because even with the right location, great performance is not guaranteed. Believe it or not warehouse accidents are more common than you would expect.

Understanding Distribution Centers

What makes an ideal distribution center

With any supply chain, the warehouse is a crucial link between you and your customer base. So if a warehouse were to face any delays then your customer’s deliveries are directly impacted and delayed.

Though there could be worse outcomes in the case of a warehouse mishap where your goods are at risk. In this scenario, you could also have to bear the loss of your goods being damaged due to a lack of skilled workers.

This is why diligence is key for any business looking for a distribution center. One has to take all factors into consideration in such processes. Even local environmental factors can make a massive difference in your delivery performance.

Key Benefits of Strategic DC Selection

Choosing the right distribution center (DC) directly impacts your supply chain performance, customer satisfaction, and operational efficiency. A well-selected DC minimizes risks and ensures a seamless flow of goods from storage to delivery. 

Below are two core benefits of strategic DC selection:

Cost Efficiency Benefits

1. Reduced transportation costs: Strategically located distribution centers help you shorten delivery distances, reducing fuel and logistics expenses.
2. Lower storage costs: Modern DCs optimize inventory management, allowing you to store goods efficiently and reduce unnecessary warehousing expenses.
3. Minimized losses: A reliable DC with skilled workers and robust safety measures reduces product damage and financial losses.

Operational Advantages

The strategic selection of a distribution center goes beyond mere cost considerations. An ideal location provides numerous operational benefits:

• Reduced shipping times and improved delivery speed
• Enhanced ability to meet customer expectations for quick and reliable order fulfillment
• Flexibility to scale operations based on market demands
• Improved inventory management and reduced logistics complexities
• Better risk management through strategic geographic positioning

Essential Factors for Distribution Center Selection

The problems caused by a bad warehouse facility are clear though understanding the things to look out for are not. This is why a comprehensive list of features to look out for would be helpful when you choose a distribution center. 

1. Location analysis

Proximity to target markets

There is no effective way to be punctual with your deliveries if your warehouse is located in an isolated area. Sure pricing might be far lower than in other areas but they will make your company’s ability to deliver much more time-consuming and expensive in other ways.

Delivery times might look negligible at first sight but they will quickly add up over a given amount of time. This leads you to not only have issues with customer satisfaction but it might also allow your competitors to edge you out. 

Not to mention that due to the isolation of the area delivery charges might also spike as excess fuel consumption comes into play. There is also a chance of low workforce availability if your warehousing facility is not within a fairly populated area.

Transportation infrastructure

You also need to consider the weather conditions of your strategic warehouse location. For example, if your warehouse location has a problem with water logging then it might be difficult to store items that are not good with moisture.

Additionally, access to well-connected road networks, ports, and airports is crucial for maintaining delivery speed and efficiency. Poor infrastructure could lead to transportation delays and additional operational costs.

2. Workforce considerations

Labor market analysis

The number of skilled workers can make all the difference when it comes to overall supply chain efficiency. This often-overlooked aspect of site selection controls every part of a supply chain network.

If your warehouse is located in an area with low workforce availability, you may struggle to meet delivery demands, especially during peak seasons.

Skill Requirements

A reliable and experienced workforce deserves every single penny it makes and should be on top of your list when choosing a warehouse location. There is a direct connection between an employee’s skill level and customer satisfaction.

Unskilled employees are the greatest cause of failure for any given company. By investing in a warehouse space with a skilled labor force, you eliminate most potential points of failure. There have been plenty of cases where losses of hundreds of thousands of dollars have been caused by warehouse accidents.

3. Facility requirements

Size and layout options

It is crucial for you to first understand if your warehouse locations are equipped to handle your demands. Let’s say that you deal with a lot of raw materials, then you need to assess if the warehouse has what it takes to handle that raw material.

This includes all factors such as storage space and workforce availability. Even during peak traffic hours, your warehouse should be able to handle all your shipping needs. This might be more difficult in high-cost markets due to lesser building availability.

If your warehouse doesn’t have the required square footage for storage, then it might be time to look for a new location with more space.

Technology integration capabilities

This is an area where a new warehouse may be able to outperform older warehouses. The integration of new technology is a must for the logistics industry. New technology allows you to enhance responsiveness, save money, and simplify operations.

If a warehouse implements advanced technologies such as drones or automated forklifts, transportation costs will be reduced heavily. It will also allow for smooth operations and business clarity among other benefits.

With technology that automates inefficient processes, a company can drastically cut shipping costs. However, all technology comes at a cost, and it is not always possible to find the best fit without encountering challenges.

Common Challenges and Solutions

No field is complete without a set of challenges and the supply chain is no different. Since we are talking about warehouses let us look at the most common challenges faced by businesses when looking for the perfect warehouse.

1. Cost management strategies

The biggest nightmare for every single eCommerce business is the cost of shipping goods. A business can indeed lower shipping costs by choosing a warehouse that greatly improves its distribution network.

Unfortunately, this extra efficiency comes at a cost, since a warehouse will have to hire better workers and integrate better technology. Both of these factors contribute significantly when choosing a warehouse.

Solution:

To manage costs effectively, businesses should:

• Choose a warehouse location that balances affordability and accessibility.
• Look for warehouses offering flexible leasing options or cost-sharing opportunities.
• Evaluate long-term savings by investing in technologically advanced facilities that automate tasks and reduce labor costs.

2. Workforce optimization

Another factor that can create a massive spike in shipping costs is finding skilled labor. Though, to be totally honest, it is not like they are causing the hike by themselves. As the logistics industry evolves, it requires people with new and greater skills.

Since these new workers have greater educational attainment, it makes them more expensive to hire. Apart from education, there are several factors that affect employment rates. One example of such a factor is taxation.

A single change in tax structures could badly disrupt the income levels of a warehouse, as it can severely drive salaries up for workers. This is because it could directly increase income tax for employees. Sure, there are tax incentives, but they can still make life hard for a growing business.

Depending on the local demographics, it can be tough to find any workers to begin with due to low workforce availability. Some warehouses have great employees but fail to achieve their true potential due to a poor warehouse management system.

Solution:

To optimize workforce-related challenges, businesses can:

• Prioritize strategic warehouse locations with access to a large labor pool.
• Implement training programs to upskill workers and improve productivity.
• Use warehouse management systems (WMS) to streamline processes and minimize dependency on manual labor.
• Explore tax incentives or economic zones to offset workforce costs.

3. Location-specific challenges

An unfit location always negatively influences the shipping process. Knowing if your needs are met is imperative when choosing a warehouse location. A business needs to ensure that the warehouse has easy access to delivery locations.

Even a minor-seeming issue, such as traffic congestion, can turn out to be a massive hindrance to smooth operations. All of these are important factors to consider before you go about choosing a new warehouse.

Solution:

To tackle location-specific issues, businesses should:

• Perform a thorough location analysis to ensure proximity to delivery zones and major transportation hubs.
• Evaluate traffic conditions and weather-related risks before finalizing a location.
• Choose a warehouse equipped with last-mile delivery solutions to mitigate access challenges.
• Opt for route optimization software like Upper to simplify deliveries and bypass traffic delays.

Get the Fastest Routes for Shipping Goods from the Warehouse to the Buyer’s Location on Upper

A delivery business need not worry about all the complications that arise from poorly planned routes when they use Upper. This is because Upper delivers the most perfect routes known to mankind within a minute.

Upper also allows you to gain more trust with your customers, thanks to highly accurate estimated times of arrival and proof of delivery. You can also schedule deliveries months in advance thanks to the flexibility that Upper offers you. 

There are many factors that could affect the deliveries of a business though with Upper you can properly plan around them without worry. Give yourself and your customers a better experience with Upper route optimization software.

Takeaways 

Choosing a warehouse location is by no means an easy job. One has to account for factors such as cost, ability, stability, specialization, technology, and experience to make the right decision. All these factors play a crucial role in the supply chain by themselves.

It is not as if warehouses have factors to consider for themselves either since they have to not only give their customers the best service but also retain their workers. In that case, you can get the benefit of Upper to ease the workload of your team and provide a better customer experience. Try a 7 days free trial to know more about Upper. 

Though regardless of anything that happens across the globe one thing that you can always rely on is Upper’s sheer power to give you the best routes for your deliveries. Great route planning is something that can save you both time and money making it essential for any delivery business.