Where The People Are
By Jim Schultz, Past President - MHMS Chicagoland Chapter
So you need to add another distribution location. Where do you put it?

If you answer this question incorrectly you might wind up putting your company on a course that will lead to Timbuktu, or worse yet, Bankruptcy Court. A location that is perfect for a two location network, such as Northern Ohio, is a less than optimal choice for a three through eight location network, but again becomes a good choice for a network with nine or more locations. The best solutions usually revolve around where the people are. People usually are the reason you are in business, therefore a network based on servicing the population centers usually provides a good solution.

When preparing a national distribution network model the most important questions that need to be answered are:

• How many locations do you ultimately want in the network; and

• Are there any regions that you are not planing on servicing.

Once the ultimate number of nodes and the service regions are identified , the locations speak for themselves. Based on recent census information some practical population based national distribution network solutions are:
 
One Location: Northern IN/IL    
             
Two Locations:   Northern OH   Central CA    
             
Three Locations:   Northern IN/IL   Central CA   Eastern PA/NJ
             
Four Locations:   Northern IN/IL   Northern CA   Eastern PA/NJ
    Central TX        
             
Five Locations:   Northern IN/IL   Northern CA   Northern NJ
    Central TX   Northern GA    
             
Six Locations:   Northern IN/IL   Northern CA   Southern CA
    Northern NJ   Central TX   Northern GA
             
Seven Locations:   Northern IN/IL   Northern CA   Southern CA
    Northern NJ   Central TX   Northern GA
    Western W        
             
Eight Locations:   Northern IN/IL   Northern CA   Southern CA
    Northern NJ   Central TX   Northern GA
    Western W   Central FL    
             
Nine Locations:   Northern IN   Northern OH   Northern CA
    Southern CA   Northern NJ   Central TX
    Northern GA   Western WA   Central FL
             
Ten Locations:   Northern IN   Northern OH   Northern CA
    Southern CA   Northern NJ   Central TX
    Northern GA   Western WA   Central FL
    Eastern CO        
             
Once you have identified the network you want, don’t try and cut back by picking a halfway point between two locations just to provide single point service for those two regions. What will inevitably happen is that the halfway point will in fact be closer to Timbuktu than a major market. The result will be that your labor pool will be limited in size and your transportation costs will go up because carriers will have to deadhead either to, or from your location. On top of that the outstanding service that you could have given to the local major market will evaporate into mediocre service to the two more distant locales.

While the above prototype is a good direction finder, there are many outstanding mathematical modeling software packages available through professional logistics consultants that will give you detailed answers, including head to head location comparisons, that you will need to make the best overall decisions. These packages will look at your business, with your costs, and will generate a plan that is best suited for your company. This plan will be based on where you are today and where you want to be tomorrow. The bottom line is PLAN, PLAN and PLAN some more, for today’s location selection may become tomorrow’s never ending nightmare.