Site Selection – Part 4 – Weighing the Intangibles

When retail giant Wal-Mart decided it needed a food distribution center to serve the U.S. Northwest, several site selection criteria had to be weighed before it eventually chose Grandview, Washington, as the location for its 800,000-square-foot facility. For instance, it was advantageous that the land had been zoned for light industrial use and environmental reviews had already been completed. Although the land had to be annexed into the city of Grandview, relatively few people lived in the area, so the vote went in Wal-Mart's favor.

Grandview is situated near an interstate highway, 1-82, and the land chosen was flat, which were important considerations for the retailer. The city is centrally located within 200 miles of three major cities: Seattle, Spokane, and Portland. More than 60 local trucking companies serve the outlying area, as well as two railroads and nine air freight operators. Nearby, the Port of Pasco, located at the convergence of the Yakima and Snake Rivers, offers barge service on the Columbia River to the Port of Portland for containerized cargo.

In Grandview, Wal-Mart (not exactly known for paying top wages) found a populace with the lowest median wage in the area for warehouse workers—$8.11 per hour, more than $2.00 lower than the $10.58 Seattle pays. What's more, the average hourly wage for truck drivers in Grand-view is $14.02, considerably lower than the $17.62 they earn in Seattle.

And then there were the intangibles that no index or study can accurately categorize, but that played a huge part in Wal-Mart ultimately opting to go with Grandview. One of those intangibles is that the community was anxious to attract Wal-Mart's business and the jobs that went with the new DC. Other companies that had chosen Grandview as a distribution site—notably retailer Ace Hardware, which operates a 500,000-square-foot DC there—spoke positively of the area's capabilities. Even the mayors of surrounding communities came forward to support Grandview as the best site for the DC.

Yakima County, where Grandview is located, offered hiring and training support, and hooked Wal-Mart up with the state employment services agency, WorkSource Washington. The agency screened more than 6,000 applicants for the 400 jobs at the DC, and then sent the best candidates to Wal-Mart for final interviews. Overall, while labor costs and logistics capabilities made Grandview an attractive site for a DC, Wal-Mart's site selection best practices demonstrated a willingness to explore the qualities of a community that aren't necessarily published in a government report.

QUALITY OVER QUANTITY

Sometimes, having just one DC is plenty, even when a company has gotten too big for its current facility. That describes The Container Store's situation, a retailer of storage and organization products. Thanks to a 20 percent annual growth rate, the Dallas-based company outgrew its 300,000-square-foot DC, so it added a 155,000-square-foot satellite facility nearby That still wasn't quite sufficient, though, so it also arranged for space for 5,000 pallets under a third-party contract.

Even when the retailer reached the point where it had more than 30 stores throughout the United States, it still determined that one centrally located DC would be enough. "We looked into our whole network and asked whether it was time to do store replenishment out of our DC and direct customer fulfillment out of a different site," explains Amy Carobillano, The Container Store's vice president of logistics and distribution. The retailer decided that keeping to a single site worked to its advantage. For instance, all of the inventory is in one place, with corporate headquarters directly attached to the DC. That central location works well for the company's logistics network, which imports from Asia through the U.S. West Coast and from Europe through the Gulf of Mexico at the Port of Houston.

So the retailer opted to remain in Dallas, but to expand into a new 1.1-million-square-foot DC in another part of town. Not all of that square footage is currently being used, since The Container Store's master distribution plan calls for taking over the entire facility in stages. "If we're where we want to be, we'll need a conveyor in 2007 because that's when we'll have enough of our products conveyable to justify the expense," Carobillano says. In the meantime, the retailer focused its layout on its present needs. "Once you know what the vision is, you can buy part oi it now and develop the solution in phases." A lot of things will change before they take over the entire DC, she notes.

Even though The Container Store was staying in the Dallas area, it recognized that a move of any distance could affect some of its workers, so it sought their input throughout the site selection process. "We took out a map of the Dallas-Fort Worth metroplex and put a pin where every single employee lived," Carobillano explains. Then the retailer looked for a site that would allow it to retain its employee base. "We talked to the employees who lived farthest away and would have the longest commutes," Carobillano notes, and offered to help them find a different way to get to work or to hook up in carpools. As a result, the company didn't lose a single warehouse or office worker after it relocated. "Nobody knows your business or cares about your business like you do," she points out.

When moving day arrived, The Container Store shut down its old DC over a four-day weekend and opened the new facility, and then began moving the merchandise from the old DC to the new one. The entire process took about eight weeks, at which point the retailer began receiving inbound merchandise at the new DC.

Focusing on its employees is definitely a best practice for The Container Store, where the corporate philosophy of "one great employee is worth three good ones" has fostered an environment conducive to developing great people. That kind of thinking pays off, as the company is consistently listed on Fortune magazine's list of "Best Places to Work."