Cost and service are the key considerations here. The other supplementary factors are:
1. Nature of product: This influences the number and location of warehouses. For perishable commodities, proximity to the consumption centers is essential. It is preferable to have limited number of warehouses, which have delivery limitation in terms of distances and geographical reach.
2. Infrastructure: The efficiency of the warehouse operations improves with the availability of suitable infrastructure like roads, utilities (water, electricity, communication etc.) and labour, the unavailability of which will increase the transportation cost. For example, for cold storage, availability of electricity is a major influencing factor.
3. Access: Again, when there the warehouse is located at a place where there is little accessibility, the transportation costs will escalate.
4. Availability: The availability of warehouse space is an issue, especially in the metros. In the case of non – availability, alternative location at the outskirts will be the alternative, but which will increase the transportation costs.
5. Market: To offer better service to customers, warehouses need to locate in proximity to consumption centers so that frequent deliveries by customers in small quantities can be organized at a limited time.
6. Regulations and local taxes: Government regulations guide the site selection for certain hazardous chemicals, explosives etc. In such cases, there are limited options for site selection. Also the regional sales tax and charges influence the site selection. With a lack of uniformity in the sales tax structure across the States, warehouses will be planned to make maximum utilization of this.
7. Product – Mix Consideration: The product mix is directly related to the design and operation of a warehouse. Considerations such as product sales, demand, weight, bulk, packaging etc. needs to be made.
8. Future Expansion: Some consideration about the estimated requirements for future operations in case of expansion must be made. A five – to – ten-year expansion plan must be considered while establishing the warehouse facilities so that normal operations are not disturbed during expansion.
9. Selecting the material handling system: As movement is the primary function within a warehouse, it is necessary to select the appropriate material handling system.