While Banished is described as a city simulation with resource managements on paper, it is entirely different when played. The citizens moving about on the screens are not there for entertainment purposes, but they represent real time movements of goods and services throughout the city. They move with a purpose and have tasks they are carrying out. Taking that into consideration, here is the ultimate principle to remember when playing Banished:

If your citizens have to travel very far to work or get resources, you are doing it wrong.

The exceptions to this rule are Builders and Laborers moving Stones or Irons. Distance travelled will be the most influential factor in deciding where you are going to place buildings in this game.

The Path Tool is extremely useful in assisting in the planning of your city. This tool shows you the path and distance citizens travel to work. Click on a house, it will show where the citizen travels for work. Click on a production building, it will show where all the workers are coming from.

Luckily for us, the game will automatically rearrange the most suitable housing solution for the nearest work sites. All that you have to do is place the homes in the appropriate spot.

This tool is less relevant if you go with entirely farming for your food production. However, locations becomes an important factor when you deploy the forest cluster method, as the footprint of the forest have to be as big as possible to maximize efficiency.

As you can see here, one of the citizen has to travel very far to the Gathering Hut, he/she will not be a very efficient worker due to the distance required. This cannot be helped, as there is no 100% efficient planning of every single aspect of the game. Eventually it may be solved through another family entirely living and working in houses in the forest cluster, but these families in the forest will required to travel when they search for desired goods in the Market. In short, there is no entirely solving the distance issue when playing with the forest cluster method. The farming method might get around this in the short term, but they will have their own issues to deal with down the road.

The Market is one of the essential buildings that will guarantee the smooth operations of your city, without it, every runs at sub-optimal efficiency. Market represents the centralized location of food and tools your citizens required to carrying out their daily lives. Your citizens will search for food and tools first at the Market, then the Storage Barns next. Just think of it this way, when you want a pair of jeans, you don't get on a flight to Bangladesh. You head to your local Walmart, where your local concentration of goods are. The Market will be stocked by Vendors, so make sure you put enough citizens to maintain the availability of goods. You can argue that you can get around this by building multiple Storage Barns, but the citizens will still go through multiple Storage Barns to find what they are looking for. Why not just build the Market, which serves the purpose of gathering goods from all the Storage Barns to begin with?

Stockpile and Storage Barns are where the workers put away their goods, with the former for naturally collected goods like Stone, Iron, and Logs and the latter for produced goods like Corn, Clothes, and Tools. These two are the other half of the puzzle to ensures everything runs without a hitch. In the absence of these buildings, the workers will travel very far to in attempt to find a place to store products. This is the reason why some players can never fulfill the demand of Firewood for a population of 100 despite building numerous Woodcutters. If the workers constantly have to walk very far back and forth to perform their jobs, then they will not be very productive. With this in mind, you might have the tendency to build service buildings like the Blacksmith or Tailor out in the forest. This logic is incorrect because the availability of resource goods like Iron or Leather is not always guaranteed in the Storage Barns. Their availability in the Market however, is always maintained at a certain level.

Paved roads are necessary to facilliate speedy travel between work area and the Market area. They are the lifeblood for Vendors to travel on. In the short supply of Stones, Dirt Roads are perfectly fine. Just remember, the citizens will find the most efficient path to travel, regardless. So they will travel diagonally even if you placed some Stone paved road in 90 degree angles.

Remember that ultimately in Banished, our goal is minimizing the travel of citizens and resources while maximizing efficiency given the limits we have. By placing your buildings strategically, you minimizes the distance your citizens travelled both while living and working. The movement of goods will be faciliated by the Vendors. Without the Market, the citizens will double the distance they travelled in living and working.