As companies reconsider distribution center locations, consolidate facilities, and redesign supply chains, operational execution may determine whether their strategies deliver the intended savings.
Where should a company locate its distribution centers? How many facilities does it need? Which operations should remain in-house, and which could be supported by an experienced partner?
These questions are becoming increasingly important as businesses evaluate the cost, complexity, and performance of their distribution networks.
Recent industry developments highlight the changes underway.
An October 2026 report from Cushman & Wakefield found that inland markets accounted for 83% of U.S. industrial-space absorption, the highest share since 2010. Meanwhile, industrial manufacturer 3M has reported closing 16 manufacturing sites and distribution centers since the beginning of its fiscal year, with changes planned at 10 additional facilities.
These developments represent different approaches to a common business challenge: improving supply chain efficiency while maintaining dependable operations.
But there is an important distinction between designing a better distribution network and operating one successfully.
A distribution strategy may look efficient on paper. The warehouse operation determines whether those efficiencies can be realized.
Are Distribution Centers Moving Inland?
New research suggests that more industrial real estate activity is occurring away from traditional coastal logistics markets.
According to Supply Chain Dive’s November 3 report, Cushman & Wakefield identified increased interest in inland distribution markets, where labor, real estate, and energy costs may be lower than in some port-adjacent locations.
Inland markets accounted for 83% of industrial-space absorption in the research cited.
However, industry experts disagree about whether these figures establish a permanent relocation trend. Prologis has cautioned that changes in freight routing or temporary inventory placement do not necessarily mean companies are relocating their distribution centers.
That distinction matters.
Industrial-space absorption is not the same as the percentage of warehouses moving inland.
For distribution executives, the question is less about following a real estate trend and more about evaluating whether a different location or network configuration can improve total operating performance.
Lower facility costs may create an opportunity. But transportation requirements, customer proximity, workforce availability, and operational execution all influence whether a location delivers measurable value.
Why Are Companies Reconsidering Their Distribution Networks?
Businesses continually assess whether their distribution infrastructure supports changing customer requirements and financial objectives.
Those evaluations can lead to new facilities, regional distribution strategies, facility consolidation, or changes in how individual operations are managed.
A recent example is 3M.
According to November 3 reporting from Supply Chain Dive, 3M has closed 16 manufacturing sites and distribution centers since the beginning of its fiscal year and plans changes at another 10 facilities over the following 12 months.
The broader restructuring targets approximately $1 billion in annual productivity improvements by the end of 2027.
For companies pursuing similar initiatives, the challenge is translating strategic objectives into operational performance.
Consolidating facilities may reduce certain fixed costs. Establishing a regional distribution center may improve service coverage or access to labor.
Yet either strategy can introduce new demands on warehouse operations.
Inventory may need to be transferred. Receiving volumes may increase. Order-selection requirements may change. Workforce availability may differ significantly between locations.
The financial benefits depend, in part, on how successfully those changes are executed.
What Can Go Wrong During a Distribution Network Transition?
A distribution network transition involves more than moving inventory between buildings.
It can affect nearly every function required to keep products moving.
Consider a company consolidating operations from two distribution centers into one.
The receiving facility may suddenly face additional inbound trailers, increased storage requirements, more complex replenishment needs, and higher outbound order volume.
Even if the building has sufficient physical capacity, existing processes and labor resources may not be prepared for the additional workload.
Common challenges include:
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Receiving backlogs: Additional inbound freight may exceed available unloading and receiving capacity.
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Inventory availability: Product transfers and inaccurate location information may delay put-away and fulfillment.
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Workforce disruption: New labor markets, unfamiliar processes, and employee turnover can affect productivity.
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Order-selection delays: Existing picking and replenishment operations may struggle with changing volumes or SKU mixes.
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Transportation coordination: Appointment schedules, trailer availability, and loading capacity may require adjustment.
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Service continuity: Operational disruptions can affect customers before planned efficiency improvements are realized.
These challenges are not inevitable.
They are risks that companies can reduce through operational planning, performance measurement, and appropriate workforce support.
Five Priorities for Successful Distribution Network Changes
1. Evaluate the total operating cost—not just the facility cost.
Lower rent or a more favorable geographic location can make a distribution network change attractive.
However, the true cost of operating a distribution center extends beyond the building.
Transportation, labor availability, productivity, equipment, inventory handling, management, and service requirements all affect the economic outcome.
A facility with lower occupancy costs may still be more expensive if inefficient processes increase labor hours or additional transportation requirements offset the savings.
Before implementing a network change, evaluate the cost of moving products through the entire operation.
That means understanding not only what it costs to occupy the building, but also what it costs to unload, receive, store, replenish, select, and ship each unit.
2. Build the warehouse labor strategy before the transition begins.
Workforce planning should begin well before the first inbound trailer arrives at a new or expanded facility.
The labor model needs to reflect the anticipated workload, operational complexity, and productivity requirements.
Important considerations include:
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Forecasted cases, pallets, orders, and shipping volumes.
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Labor requirements by warehouse function.
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Recruiting and training timelines.
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Availability of qualified supervisors.
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Expected productivity during startup and stabilization.
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Contingency capacity for unexpected volume or delays.
A new facility rarely operates at mature productivity levels immediately.
Companies should establish realistic startup assumptions and define how performance will improve as processes stabilize.
FHI’s article, Operating Models for a First U.S. Site, explores how companies can structure operational responsibilities during a facility launch.
3. Protect inbound operations during inventory transfers.
When a distribution network changes, inbound activity often creates one of the first operational pressure points.
Inventory transfers may arrive alongside normal supplier deliveries. Receiving teams must distinguish new inventory movements from established inbound processes while maintaining accuracy.
Without sufficient labor and coordination, staging areas can become congested and put-away can fall behind.
That creates problems downstream.
Inventory may physically exist inside the facility without being accurately received or available for order selection.
Distribution leaders should develop clear receiving priorities, staging plans, inventory-verification procedures, and productivity expectations before transfer volumes increase.
An experienced managed unloading and receiving operation can help maintain freight flow while internal teams concentrate on broader transition requirements.
FHI’s managed distribution services support unloading, receiving, put-away, replenishment, order selection, loading, and related warehouse functions.
4. Establish measurable performance standards early.
A distribution center transition creates uncertainty.
Leadership needs objective measures to determine whether the operation is stabilizing and whether planned improvements are materializing.
Useful performance indicators include:
| Operational function | Recommended KPI |
|---|---|
| Unloading | Cases or pallets per labor hour |
| Receiving | Accuracy and time to complete receipt |
| Put-away | Units processed and dock-to-stock time |
| Replenishment | Pick-location availability |
| Order selection | Cases or lines per labor hour; accuracy |
| Outbound loading | Shipment readiness and on-time loading |
| Workforce management | Productive labor utilization and overtime |
| Overall distribution | Cost per unit handled and service-level attainment |
Establish baseline performance before the transition whenever possible.
Then monitor results during startup, stabilization, and normal operations.
This gives management a clearer understanding of whether operational changes are delivering the intended improvements.
5. Build flexibility into the operating model.
Distribution transitions rarely follow a perfectly predictable schedule.
Inbound transfer volumes may exceed forecasts. Hiring may take longer than expected. Existing facilities may need to remain operational while new locations begin processing freight.
These conditions can create temporary labor requirements that do not justify permanent staffing increases.
Contingency warehouse labor can help address concentrated workloads, temporary backlogs, and operational interruptions.
FHI NOW provides experienced warehouse teams that can mobilize in as little as 72 hours, depending on operational requirements.
For longer-term operations, a managed labor model can provide consistent onsite execution, supervision, productivity measurement, and coordinated support across defined warehouse functions.
The objective is to match operational capacity to actual business requirements.
Should Companies Operate Their Own Distribution Centers or Outsource Certain Functions?
A network redesign creates an opportunity to evaluate the distribution operating model itself.
Some companies prefer to manage every warehouse function with an internal workforce.
Others choose to retain overall facility control while outsourcing specific labor-intensive activities such as unloading, receiving, replenishment, or order selection.
Still others may explore broader third-party operational support.
There is no universally correct model.
The appropriate approach depends on factors such as internal management capacity, workforce availability, operational complexity, required flexibility, and the performance responsibilities a company wants to retain or delegate.
For many organizations, a managed warehouse labor partnership offers a middle ground.
The company can retain strategic control of its distribution network while engaging an experienced provider to manage defined operating functions with measurable expectations.
FHI works with distribution operations to establish dependable labor execution, onsite leadership, and performance visibility.
The focus remains on achieving the operational outcomes the business requires.
How Do You Maintain Service While Changing Distribution Operations?
Maintaining customer service throughout a transition requires deliberate planning.
Before moving inventory or shifting responsibilities between facilities, operations leaders should establish clear expectations for volume, staffing, inventory accuracy, transportation coordination, and shipment readiness.
A successful plan should include:
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Baseline performance: Understand existing productivity, costs, and service levels.
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Transition sequencing: Determine how inventory and workloads will move between locations.
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Workforce readiness: Confirm labor coverage, training, supervision, and contingency resources.
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Operational controls: Establish processes for receiving, inventory verification, replenishment, and outbound execution.
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Performance monitoring: Track service levels, productivity, exceptions, and corrective actions throughout stabilization.
The objective is not simply to complete the transition on schedule.
It is to establish an operation that can consistently deliver the performance improvements the network redesign was intended to achieve.
Distribution Strategy Creates the Opportunity. Execution Delivers the Results.
Whether a company is establishing an inland distribution hub, consolidating facilities, or evaluating a different operating model, the success of its strategy ultimately depends on execution.
A better facility location cannot compensate for recurring receiving backlogs.
A consolidated distribution network cannot deliver expected savings if order-selection productivity deteriorates.
And a new operating model cannot sustain performance without qualified labor, effective supervision, and reliable processes.
The facility is only one part of the distribution strategy. What happens inside it matters just as much.
For more than 30 years, FHI has supported distribution operations through managed warehouse labor, unloading, receiving, order selection, and related operational services.
We help companies establish consistent performance, improve productivity, and maintain dependable freight movement as operating requirements evolve.
Is Your Distribution Network Changing?
Whether you’re planning a new facility, consolidating operations, or evaluating how to improve an existing distribution center, FHI can help you explore an operational support model aligned with your goals.
Talk with FHI about your distribution operation.
Frequently Asked Questions
Are companies moving distribution centers inland?
Some commercial real estate research indicates increased industrial-space demand in inland markets. However, industry experts disagree about whether this represents a sustained relocation of distribution centers. Companies should evaluate location decisions based on their own transportation, labor, customer service, and operating requirements.
Why do companies consolidate distribution centers?
Companies may consolidate distribution facilities to reduce duplicated costs, simplify operations, improve inventory management, or better align their distribution networks with customer demand.
What are the biggest risks when opening or consolidating a distribution center?
Common risks include receiving backlogs, inventory inaccuracies, labor shortages, reduced productivity during startup, transportation coordination problems, and disruption to customer service.
How should companies plan warehouse labor for a new distribution center?
Labor planning should account for forecasted workload, required functions, productivity assumptions, recruiting and training timelines, supervision, and temporary capacity needs during startup and stabilization.
Can managed warehouse labor help during distribution network transitions?
Yes. Managed warehouse labor can provide experienced teams, onsite supervision, defined productivity expectations, and operational support for functions such as unloading, receiving, replenishment, and order selection.
What metrics should companies monitor during distribution center transitions?
Important metrics include dock-to-stock time, receiving accuracy, labor productivity, order-selection accuracy, shipment readiness, cost per unit handled, and service-level performance.
How can FHI support a distribution center startup or consolidation?
FHI supports labor-intensive distribution functions through managed warehouse labor and contingency services. Depending on operational requirements, that support can include unloading, receiving, put-away, replenishment, order selection, loading, and temporary workforce capacity.
We’re here to help. There’s no pitch – just a conversation.