Your manufacturing company is at a crossroads and you, as the executive in charge, have an important decision to make.
Business has been good these past several years — so good in fact that the time has come to decide whether to expand. And if you are going to expand, the next question is whether to expand at your current site or relocate to another part of the metro area, state or country.
These are among the hardest and most important decisions that an executive will make.
Deciding wisely could mean continued growth in the company. Deciding unwisely could result in irreparable damage.
Obviously, it’s a decision that should not be made in haste.
There is plenty of homework to do and numbers to crunch before reaching the final decision, but also allow some room for the emotional aspect of a relocation or expansion. Make sure that you are comfortable with the decision and that your work force will be comfortable with the decision — no matter what the numbers tell you about a particular site.
| The most important thing to remember is to create a game plan at the beginning of the process, and stick with it through the duration. Whatever you do, don't make things up as you go along. |
With the help of site location consultant Kate McEnroe, president of Atlanta-based McEnroe Consulting, Expansion Management gives executives considering their first relocation or expansion a primer of what to look out for during the site location process.
Internal Brainstorming
Yes, it is a daunting task and can look overwhelming at the beginning, but site location is very doable for companies of any size. Like a Chinese philosopher said many years ago, “The journey of a thousand miles must begin with a single step.”
In this case, the first step is to have a company brainstorming session before any question is asked or information requested about a potential site.
The brainstorming session should revolve around two questions:
§ Why are we considering an expansion or relocation?
§ Do we want to duplicate or change our current situation? In other words, what do we want to preserve — the size of the community we’re located in, the cost of labor, the cost of real estate, etc.?
You should develop a pie chart that consists of the big-ticket items that are important to the relocation or expansion. Then, assign a percentage corresponding to the importance of each item in relation to each other.
Following the pie chart will keep you from putting too much emphasis on one particular issue.
It will prevent you from becoming overly excited about real estate that is $1 per square foot cheaper than what you’re paying now when real estate costs comprise only 10 percent of the pie chart. Or taxes in your current location have become such an irritant that you’re ready to hunt for a new tax environment when that issue may only be 5 percent of the pie chart.
Costs, on the other hand, might comprise more than 50 percent of the pie chart, and costs that vary by geography could play an important role in determining where you site the new facility.
You want your head on straight at all times so you don’t get distracted by single line items. Keep the big picture in mind. A pie chart can help you do that.
This is also the time to create a site location team.
Gathering The Necessary Data
There are a lot of places in the world but not every place in the world is an ideal site for your project.
Before you begin amassing data, you must first inject a step into the process — common sense. There are certain common sense funnels that you can run through that do not require a lot of data.
For example, there are certain areas of the country that, for one reason or another, you are not going to relocate to — no matter how great the city is or how attractive the incentive package or work force might be. These reasons can include costs, logistics or the wrong time zone, among others.
So first, look at a map and instantly eliminate the places you know would never work as the site for your manufacturing plant. And never think about those sites again.
Now, you can get on with gathering the data.
Although there are some data standards, it is very likely that the data you receive from different cities and different states will be in different formats. For this reason, you should create a box where you can drop the data into before the comparisons begin.
Don’t Be Overwhelmed or Underwhelmed
Once the data begins flowing, it can tend to look like a paper blizzard. So many issues and so many statistics from so many sources on so many sites.
You can wind up looking at too many sites because there is so much information out there — and much of it readily available from the comfort of your office via the World Wide Web.
Conversely, a marketing executive from a particular state could visit you at random and give you the hard sell about the attributes of his or her state.
Don’t let your vision be blurred. That’s great marketing for the state but that doesn’t mean it is the best place for your project.
If, at this point, you’ve decided on a relocation, don’t compare data from new sites to your current site. Compare the data of the new sites against each other.
And it if is a relocation, make sure you include in your analysis the cost of the move and how long you are willing to go before you have a payback. Also include your tolerance level for the disruption that will inevitably come when the relocation begins.
Triggering a Relocation
The decision to relocate rather than expand your current facility is huge. That decision could be triggered by a number of events, including:
* The inability to physically expand at your current location. As long as you can’t stay at that site, you decide to search the entire country.
* You have jobs that you can’t fill or can’t fill at salaries you can afford.
* A customer situation could, in some instances, trigger a relocation. It is definitely a trigger event for an expansion.
Be careful not to confuse trigger events with the criteria for a new location. Your problem might be you need a bigger building and the next city or state might have that building, but the labor costs are higher in that city or state. You could be trading one problem for another.
Making Site Visits
The decision-making team that is heading the process may supplement its efforts with telephone calls that narrow the list of potential sites to five. The team will next visit those sites and narrow the list further to two or three finalists.
The team should always document its findings, including on what basis sites were eliminated?
At this point, the chief executive joins the process.
Where in this process do you contact local economic development organizations? Thanks to the Internet and independent databases, there is a good possibility that you don’t have to contact the local ED organizations until this point of the process.
You have most, if not all, of the demographic and economic information on the various sites, so you can wait until you have more focused questions before making first contact.
It’s also at this point that you can begin to discuss incentives with the finalist cities. While many communities get upset at this, it only means that you’ve done your homework on the merits of a community and the incentive package is the last remaining question.
Give the finalist cities an idea of what costs you are trying to reduce — i.e., work force training, transition, labor, etc.
Also make sure that the city knows that the incentive package offered will be a factor in the final decision.
Selecting The City
There are a lot of potentially great sites for your manufacturing plant and very likely your decision won’t come down to one city being undeniably better than the rest.
More likely is the chance that each of the finalist cities has a number of attributes in their favor.
At the end of the day, when all the business issues are on the table, it simply comes down to where you, the chief executive, feel the most comfortable.
Sometimes, you’ll get the feeling that you’ll enjoy living in one city compared with another.
The site location decision will come down to both tangible and intangible issues.
The important thing to remember is to create game plan at the beginning of the process and stick with it through the duration. Don’t make things up as you go along.
By doing so, you will be able to make the most informed decision possible on one of the most important subjects your company will ever face — the relocation or expansion of your manufacturing facility.
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