Thinking about moving your logistics operations out of California? READ THIS FIRST!
When it comes to logistics fulfillment services, we know that cost is a major factor for all businesses. Making decisions that will support the bottom line is crucial, and we often speak to customers and potential customers about these challenges.
As a California-based 3PL, one question that comes up: Is California the best place for my logistics operations?
In today’s article, Motivational’s CEO, Tony Altman, helps dispel some of the misconceptions about logistics in California.
Misconception #1: Operating and maintaining logistics in California is too expensive
The Reality: The cost of logistics fulfillment services is about more than warehouse storage fees. To see the true cost of logistics, businesses should also consider costs like drayage. While it’s true that storage costs may be lower in other regions, one of the tradeoffs is that drayage costs—getting your goods from the port to the warehouse—are likely to increase substantially.
“There are increased drayage costs involved in getting your product to wherever it needs to go,” Tony says. It is significantly cheaper to dray goods that arrive in the Long Beach and LA Port to California than to transport them to another state. “For us to ship a truckload of goods from Chino to Memphis is somewhere between four and five thousand dollars a truckload right now. This does not include the cost to transload the goods from an ocean container to a trailer. Intermodal transport can reduce these costs, but it is still quite costly to move goods inland or across the country.”
Misconception #2: Having logistics in another state will be better for my business’s bottom line
The Reality: While storage and drayage costs are part of what impacts a business’s bottom line, there are other variables at play. California’s proximity to China, where many goods are manufactured, as well as the access to major ports means products will make it to the warehouse faster and more cost effectively. Having a California 3PL enables your business to use a “just-in-time” (JIT) inventory management strategy, meaning that they receive the exact amount of inventory needed, with little or no excess. This can help you prevent stock issues and keep up with order volume. Sailing time from China to the east coast can be almost double that of the west coast and requires much more lead time in ordering inventory.
Our facilities are just 40 minutes from the Port of LA/LB, so it’s very time and cost efficient to get goods to our warehouses. But for businesses with operations in other states, Tony notes that “there’s a significant time difference in how long it takes to get those goods.” 
Misconception #3: California’s traffic will cause delays
The Reality: While it’s true that California is known for high traffic volume, this is unlikely to cause any notable delays in stocking and shipping. For example, our warehouses are located in the “golden triangle” of California’s Inland Empire, with easy access to State Route 60, Interstate 10 and State Route 91, all major freeways in California. Because this area is a major transportation hub, it’s easy for trucks to get in, load up, and get on the road—rush hour notwithstanding.
“There are traffic veins that lead throughout the country. Trucks that load here can easily access other parts of the country,” Tony says.
Misconception #4: The regulations in California will harm my business
The Reality: Regulations provide structure that help us run businesses in a way that aligns with important initiatives like environmental impact and improving labor relations.
“There are a lot of rules you have to follow being in California,” Tony agrees. Many consumers and brands want to work with partners that align with their own company values. “It is added work for businesses, but overall regulations like the Indirect Source/WAIRE rule, and labor laws are good. These are things that are important. They protect the environment and the interests of our local workforce.”
Businesses operating logistics in California can have peace of mind knowing that measures are being taken to offset carbon emissions, labor laws are ensuring workers are treated and paid fairly, and more.
Misconception #5: The market in California is too saturated and competitive
The Reality: The truth of the matter is this: the logistics and fulfillment industry has a large presence in California because it is an objectively better place to run these kinds of operations. As a business hub with easy transportation access, its proximity to Asia and major ports, it’s an extremely desirable location.
“It’s just like real estate for homes—it’s location, location, location. In the best locations, you see dense populations and large homes being built. This is a desirable location [for logistics], so you see a dense population of warehouses and large buildings to service our customers. This is where customers want to be.”
Misconception #6: There are too many risks of natural disasters in CA
The Reality: Compared to other regions in the U.S., California’s climate is quite favorable. Severe storms regularly sweep through the South and along the East Coast, while the Midwest is at the mercy of tornadoes.
“We get occasional rains, but they rarely rise to the level of interfering with business. But certainly in the Midwest and East Coast, you get severe weather that interferes with travel times and routes, and the ability for employees at 3PLs to get to work to service their business. You get closures … you get all sorts of things that you just don’t have to deal with in California,” says Tony.
According to Climate.gov, there were 28 separate billion-dollar weather and climate disasters impacting the U.S. in 2023. Just one of those occurred in California.
Image source: https://www.climate.gov/
In California, we do occasionally have earthquakes or wildfires to contend with. However, in our over 45 years as a California 3PL, we’ve never had a fire or earthquake cause interruptions or delays in our logistics fulfillment services.
As Tony pointed out, the vast majority of goods shipped to the U.S. come from China. If your logistics operations are based on the East Coast, you’ll also need to keep an eye on weather events and conditions around the Panama Canal, which can shut down or get backed up if water levels drop.
We also asked Tony’s advice for businesses considering moving their logistics operations out of state.
“It really depends on what your operation looks like,” Tony says. For a company with a large inventory, transferring moving operations out of California could cost millions. “It can be incredibly expensive, depending on what your current footprint in California looks like, to get up and move to another state.”
If you’re seriously thinking about a move, Tony advises considering all the potential impacts:
- Economic impact: How much additional cost will be incurred by moving your inventory out of California? What will future drayage costs look like? Will these additional costs actually be offset by lower storage costs?
- Labor availability: What does the available labor look like in the new location you are considering? Is there a sufficient labor pool to service your business?
- Transit times: How will the new location impact transit times for getting your goods from the original source to the port and from the port to the warehouse?
- Inventory planning: Are you prepared to build additional transportation time into your inventory planning process? Can you afford the extra travel time and expense?
One other thing to keep an eye on? Trends. While California experienced a steeper increase in storage costs during the COVID-19 pandemic than other regions, that cost gap is beginning to narrow and normalize. Now that things are adjusting back to normal, the costs related to California, and some of the other reasons people think they should leave California will start to dissipate and minimize.
Want to speak more to our experts about whether California is the right choice for your business’s logistics operations? Reach out to us today.
