September 2010 | How-To | Ten Tips

Locating a Global Distribution Hub

Tags: 3PL, Global Economy, Global Logistics, Import, Export

Before adding a global distribution hub, hone your skills in compliance and cross-border import and export, advises John Miller, senior vice president global business development, Flash Global Logistics, Inc. He offers these tips on what companies should consider when locating and choosing a global distribution hub.

  1. Map your market. Determine your customer install base, which is the exact location of sites that are under contract for service. If company X sells widgets, and the widgets are installed in locations 1, 2, and 3—that area would be the install base, and it is the key to locating and choosing a distribution center.
  2. Understand regional transit times. Each geographic region presents its own challenges and advantages to supporting clients. Know the regional transit times and ensure they will support your customers and customer contracts.
  3. Look at transportation availability. A qualified DC will meet most of your contractual timeline obligations through its ability to source carrier-based services to meet service delivery requirements. Same-day, overnight, and second-day transportation services have to be in place and map to your shipping guidelines. You can also greatly improve shipping cut-off times by selecting a location with existing carrier activity.
  4. Research taxes and regulations. Choose areas that offer a favorable tax situation and have legal entities or fiscal presence. This may allow your company to claim back value-added tax. Make sure the area offers favorable trade terms and facilitates easy movement of product into and out of the region through advantages such as fast customs processing, ease of import, and few restrictions.
  5. Consider a free trade zone. Seek out areas that have economic and geographic advantages for cross-border trade. Sites near international airports and seaports are preferred for developing free trade.
  6. Identify regulatory compliance issues. Global regulations change every day, and these shifts impact areas surrounding your distribution center. Know your compliance responsibilities and manage denied party checks, export licenses and filings, and commercial invoice preparation either in-house or with a qualified partner.
  7. Check cut-off times. Consider regional work time cut-offs, flight arrangements, and transport cut-offs in the distribution center and its surrounding area. Times vary within different countries based on local traditions, holidays, and customs.
  8. Plan to establish a local command center. Make sure you select an area where you are able to create a command center to manage parts and service orders from the DC. Staff the center with experts who speak the local language.
  9. Consider your finances. Your business growth and distribution center expansion is directly tied to management of your balance sheet. Consider costs for asset-based and asset-light resources, along with opportunities for shared or dedicated real estate. Balance your growth and distribution center against the economy and weigh your cost options.
  10. Seek expert advice. Consult referring companies, industry associations, competitors, or your third-party logistics providers. Just make sure you seek knowledge and advice about distribution center locations from qualified professionals and look at historic examples.