CVS chose its new logistics hub for labor, transport benefits

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Dive Brief:

  • Kansas City SmartPort recently held its sixth annual industry event focused on the factors contributing to distribution companies’ choice of location, such as costs, labor, incentives, and real estate, according to an e-mailed press release. 
  • CVS’ Jim Della Valle, senior director for supply chain transformation and outbound transportation, keynoted the event noting it chose the area considering affordable high quality labor, proximity to key road systems, low business costs and options to expand later.
  • A further topic of discussion was urban logistics and the congested cities of the U.S., where freight distributors often struggle with disorganization and lack of easy access. 

Dive Insight:

New distribution centers are pivotal if a company seeks to expand its logistics network, and the site selection process may be one of the most important. After all, building a new center will take years and hundreds of millions of dollars in capital, so the choice cannot be taken lightly.

The Kansas City, MO event, therefore, sheds light as to some of the most important factors when building a new center: labor and location. Kansas City, like much of the Midwest, benefits from access to various major markets by truck, as well as access to inland waterways. At a time of 2-day shipping, having a central distribution hub can boost competitive advantage.

As for labor, warehousing is not an easy job. Increasingly complex fulfillment solutions are requiring increasingly complex skills. When talking about scaling growth, it is not just about the available real estate but also how saturated the labor market is in a region. If a city like Kansas City is betting on warehousing for its economic growth, training programs are likely to pop up, too. Similarly, when Amazon or FedEx are already there, it likely means it is also a good location for temporary labor during peak season. 

For these reasons warehouse hubs like Lehigh Valley or the Dallas-Fort Worth area are becoming even more developed, despite the need for more diverse placement of centers. A central location with a strong labor pool is hard to beat, although the speakers also noted incentives help.

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