Cities and states aggressively compete to attract new business every single day of the year. They operate economic development organizations and hire professionals to run them. Why? Because they understand that a robust local economy means good-paying jobs and increased tax revenue, and so they invest a lot of time and resources in an effort to attract, and retain, companies.
Oftentimes, those resources come in the form of inducements such as tax abatements, work force training grants, or low interest loans. While these incentives do offer a certain attractiveness, their impact is mainly on the financial side, rather than on the operations side.
That’s because incentives are really just “equalizers,” in the sense that they often mask certain situations that would otherwise eliminate the location from consideration were it not for the financial assistance afforded by the incentive.
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A metro area’s logistics infrastructure represents the basic building block upon which that region’s commercial life operates.
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A metro area’s logistics infrastructure represents the basic building block upon which that region’s commercial life operates. For manufacturers, who represent more than 85 percent of Expansion Management’s readers, it reflects their relative ability to move products from production facility to retailer and consumer. It is the network upon which commerce travels.
A common misperception about our annual Logistics Quotient is that it is simply a ranking of the best places to establish a distribution center. In reality, it’s a lot more than that. In fact, it represents a comparative measurement of a region’s ability to support a manufacturing economy.
Its real value lies in its subcategories, because they allow you to place additional weight on those factors that are most important to your company’s specific operation, while discounting any factors that are not.
For example, if most of your product or supplies travel by rail, then you should increase the weighting of the railroad category and, perhaps, discount the air and water cargo categories. If high volume overnight delivery is critical to your operation, then you probably should be looking at high volume hubs like Memphis, Louisville or Atlanta.
For most of you, though, most of your goods travel by road and that’s why our emphasis is on ground transportation factors, such as the interstate highway network, traffic and congestion, state fees and taxes levied on truck cargo haulers, as well as the state of repair on roads and bridges statewide.
Since labor is a major component of any site location decision, we also factor the availability and cost in wages for local workers in the transportation and warehousing sector.
Last, but not least, we also provide you with a means to gauge the ability of a metro to reasonably absorb your company’s new facility by looking at the overall size and vibrancy of existing transportation and warehousing operations in each metro area.
The thing about a region’s transportation infrastructure is that it takes decades to build, and tens [or even hundreds] of millions of dollars to maintain. It’s not something that can be put into place after you decide to locate a manufacturing facility there.
Sure, you can negotiate a rail spur or an on/off ramp to a nearby freeway, but the freeway itself, or the rail line, have to be there in the first place.
There are “thumbnail” tools available that will tell you that if you have, say, four facilities nationwide, they should be in cities A, B, C and D. Those are nice in theory if you’re starting a four-hub distribution network from scratch but, for most of you who are planning your fourth distribution center, you probably don’t even have a facility in city A, B, or C anyway, so automatically putting one in city D doesn’t make much sense, either.
Like most things in life, you have to look a lot deeper than that.
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