Land	Availability (zoning). Lower acquisition (or renting) costs. Preferential taxation.
Accessibility	Proximity to terminals and customers (for imports or exports). Lower distribution costs (distance).
Infrastructures	Provision of basic utilities and roads. Leasing of warehousing space and equipment.
Planning and regulations	Fast track (construction and operation). Additional infrastructure (development phases). Compliance to safety, security and environmental regulations. Free trade zone status.
Economies of agglomeration	Lower distribution costs (scale); shuttles to terminals. More FTL. Shared services (labor, transloading, telecommunications).
Internal multiplying effects	Diffusion of best practices (management, information technologies, compliance). Labor training.

 

Advantages of Freight Distribution Clusters

Managed large distribution centers tend to develop on the principle of internal economies of agglomeration (within the distribution center). The larger the distribution center, the lower their operational costs. Freight distribution clusters (FDC) expand these advantages through external economies of agglomeration implying that the concentration of distribution centers within the cluster, even if they concern different supply chains, has the potential to reduce an array of costs:

• Land. One important aspect behind a managed distribution cluster is the availability of land that has already been zoned for such a use. For a user, land acquisition (or renting) costs are thus reduced, particularly in relation to a standalone initiative. A careful analysis of the demand can lead to the provision of a mix of functional parcel sizes reflecting the needs of the industry. Local and regional governments are also able to establish preferential taxation procedures if a logistical cluster fits regional development policies.
• Accessibility. This is a standard factor based upon the proximity of the FDC to terminals (rail and port) and customers. The notion of accessibility tends to vary based upon if the FDC is mainly import or export oriented. Import-oriented FDCs tend to be at intermediary locations along corridors towards main consumption markets. Export-oriented FDCs tend to be in proximity of major transport terminals, particularly ports. In the context of higher energy prices accessibility becomes even more important as final distribution costs ("last mile") tend to increase exponentially with distance because of empty backhauls.
• Infrastructures. Another common strategy is the provision of utilities (electricity, water, sewage, etc.) as well as roads as an incentive. FDCs also offer the opportunity to provide warehousing space available for various term leases as well as equipment supporting logistics and distribution activities.
• Planning and regulations. A managed FDC has the advantage of being able to provide a "fast track" process for the construction and operation of freight distribution activities. Procedures granting permits are already in place in addition of insuring compliance to safety, security and environmental regulations. Since the FDC is part of a planning process (commonly a public-private partnership), there are provisions for expansions and additional infrastructures as it develop and expand. One important attribute that can assist FDC at attracting added value activities and consolidate their role and function is the status of a free trade zone. This can include custom clearance and flexibility for importers and exporters about which type of added value can be performed.
• Economies of agglomeration. The principle of economies of agglomeration for a FDC implies a variety of cost reduction because a critical mass is attained. Because of the volume of freight being handled within a specific area, there is a potential of consolidation of loads from a variety of users into shuttles, particularly between the FDC and major transport terminals. There are thus more full truck loads (FTL), improving the efficiency of distribution. The FDC thus can become a logistical market in itself with a variety of service providers bidding for contracts that are "outsourced". This can include shared services such a labor, transloading or information technologies and telecommunications.
• Internal multiplying effects. The proximity effect involving several logistical firms within a FDC also leads to the diffusion of best practices related to management, information technologies (e.g. software) and efficient compliances to rules and regulations. This promotes the training of a pool of labor leading to an array of productivity gains.