Distribution Centers Relocating to the Second-Tier Cities - Coursework Example

 Distribution centers relocating to the second-tier cities Business in the contemporary world has become all about logistics. Businessmen and women have resorted to acting smart instead of engaging in cut throat hustles and bustles that was the traditional mode of trading. The major trade hubs of the world have become thronged to the brim and doing business there is increasingly becoming harder in regards to logistics consideration. This has steered a row of reaction where distribution centers are increasingly resorting to relocation of their operations to interior Cities that are second tier business hubs.

The resolution to act smart in the distribution process has seen to it that most of the traditionally dormant business hub are now opening up and are increasingly growing in business at an alarming rate. The process of distribution in business has a lot of logistical aspects that need to be put into consideration. The prime aspects of distribution are centered upon transportation and warehousing. Transportation is one of the most expensive elements in business in the cotemporary world. It is responsible for the escalating prices of commodities as the price one way or the other has to be passed down to the end consumers at the end of the day (David, 2003).

Considering the manner in which the major Cities and business hubs have become congested, they experience huge traffic congestions, not just in the roads but also in their air ports, railway stations and sea ports. Thanks to these congestions, transportation costs in such Cities are now sky rocketing. This has seen to it that the prices of commodities have become much more costly as the operational costs have had to be trickled down to the end consumers. The congestions in the major Cities have also seen to it that the housing prices have shot up.

With the numerous occupants of the Cities scrambling for a place to shelter, land owners have taken advantage and increased the rental prices as well as the price of land. The government has also followed suit and further increased the rental prices by increasing land rates levied on such high rise lands. This has made business in the major Cities such a hectic task as the business premises attract huge fixed costs. With the businesses becoming more and more as the number of people in the major cities keeps increasing, businessmen are compelled to engage in duplicate business activities.

This makes competition in the major cities to be cut throat and in turn businessmen are pushed to operate at the minimal profits so as to keep their clients. In a bid to beat the challenges faced in the major Cities, businesses are now taking advantage of the efforts that are being put in by the second-tier cities (Sowinski, 2007, Aug). Efforts to attract business in the cities put in by their local governments as well as non-governmental organizations have seen to it that such areas currently have very fine and smooth road networks, very elaborate railway transport systems, very sophisticated air transport provisions or quite effective water transport systems.

This is very instrumental in the exodus of the otherwise quite ailing distribution centers from the major cities to the second-tier cities of the US. Distribution centers are taking advantage of the pressure relief that is offered to them by such Cities which I essence make business quite cheaper and more operationally viable. Distribution centers have resorted to setting up warehouses in the second-tier cities so as to have their commodities being closer to their end users. This is very instrumental in the escaping of the engaged transportation costs which are associated with the daily distribution of goods to the end users especially in the event where the distance involved is a lot.

Distribution of commodities to the interior markets I much simpler and more logistically viable using this framework considering that the costs of land in such areas is relatively cheaper and both the transportation costs as well as the distance involved are also cut down. Second-tier Cities are less congested and hence both their transportation costs and the cost of land are relatively lower as compared to the high rise cities. This element makes it much cheaper to set up warehouses in such areas where commodities can be stocked in bulk for a long time.

With the bulk of the products closer to the market, the distance to be covered to the market is much small and moreover the cost of transport I also relatively less per unit distance as compared to the more congested first-tier cities. This explains why many distribution centers are shifting to the second-tier cities. REFERENCES Sowinski, Lara L. (2007, Aug) Site Selection Focuses on Second-Tier Markets. World Trade. Troy: August 2007, Vol. 20, Issue 8 David, S. (2003). Cities and Urban Cultures.

Maidenhead: Open University Press.