Plastics processors that have streamlined manufacturing and skimmed the fat out of the front office increasingly are taking a close look at site selection for warehouses, according to one industry location consultant. "It is now distribution's turn to be re-engineered," said John Boyd, president of Boyd Co. Inc., a Princeton, N.J., site selection firm. "What we are seeing is companies in the plastics field are assigning more and more functions to the warehouse site — these facilities are becoming more and more important."
The growth of warehouse functions to include call centers, light assembly or back-office functions, along with the development of the Internet and better-computerized inventory, are leading companies to have fewer but larger warehouse and distribution facilities, he said.
"Plastics firms are not only coming to us and saying, `Where should we locate our new plant?' but, `Where do we put our new warehouse?'|" Boyd said.
Boyd's firm recently studied the cost of operating a large plastics industry warehouse in 10 metropolitan areas across the United States and Canada. The study looked at operating costs for a 450,000-square-foot distribution center that employed 150 hourly workers and shipped 60 million pounds of finished plastic products by truck to locations in North America.
The study looked at transportation, labor, electric power and occupancy cost.
Sioux Falls, S.D., fared best at total cost, with $15.5 million a year, while Minneapolis was the most expensive, at $19.1 million.
After Sioux Falls, the next cheapest was Memphis, followed by a block with relative parity — Denver, Atlanta, St. Louis, Cincinnati and Milwaukee. After that block, Chicago came in eighth, followed by Toronto.
Some of the cities varied dramatically when specific costs were broken out. Chicago ranked second-lowest in transportation costs, but highest in building occupancy costs and electric power.
St. Louis was the most expensive market for labor, followed by Milwaukee and Minneapolis. Sioux Falls was cheapest in labor, electricity and occupancy costs, the study found.
The study was paid for by a regional economic foundation in the upper Midwest that has ties to one of the 10 cities. Boyd declined to identify the city.