Geographical location of warehouses and its impact on delivery time - A study of e-commerce companies in Sweden

Abstract

E-commerce is challenging the traditional way of distributing goods. An increase in parcels, lower filling rates, more trips to distribute the parcels and a demand of fast deliveries within a limited time-window lead to increased logistics costs and environmentally unsustainable means of delivering packages to end-customers. Urbanization, congestion and expansion of cities lead to higher land costs and slower distribution of parcels. Historically, companies have moved their warehouses to suburban areas to avoid high costs for land. In some parts of the world today, a “re-localization” trend has been observed, in which companies move back into central areas. This study aims to analyze how many potential customers e-commerce companies can reach within different time intervals, review factors that could impact the choice of location and identify necessary changes to manage faster deliveries. A mixed method approach has been applied. Quantitative data in form of localization of e-commerce companies have been collected and qualitative data in the form of interviews have been executed to get a deeper understanding of strategies behind warehouse localization. The quantitative data results showed that a central location in Stockholm municipality provides the highest population reach within the shortest time interval due to proximity to residential areas. A geographical shift was observed when analyzing the longer time intervals, making Eskilstuna in the region of Stockholm-Mälardalen the location with the largest potential to reach many customers. The qualitative data results showed that some companies manage same-day delivery to some parts of the country, but the large majority of the customers receives its order within one to three business days. All respondents valued proximity to transport infrastructure as an important characteristic of a suitable location of a warehouse. Swedish e-commerce customers do not seem to be willing to pay for even shorter deliveries. The conclusions of these findings are that even faster deliveries are possible, but not realistic in terms of costs and the additional environmental impacts it contributes to.