The question ‘where’ is a matter of establishing the setting or location, and thinking about where the action is to take place in the illustration. 
In picture books I usually have, in the back of my mind, a notional geography of the story’s location.
One also needs to speculate upon the disposition of the various elements in the composition, including their proximity and relationship to one another. 
You have to interpret your own story (which this one is) in just the same way as if you’re illustrating another author.