The purpose of this paper is to find a new method for the warehouse location problem. Akinc and Khumatvala developed a branch and bound algorithm for a one-stage problem, that is, plants and warehouses are at the same location. This paper extends this method to a two-stage problem, that is, plants, warehouses and users are located at different sites, and further this paper allows direct flows from plants to users. The new method is tested at Perkins-Elmer. The test shows that the algorithm is efficient.