Posts Tagged ‘site selection’
The purpose of information is to help us make better decisions. Making a good business-location decision is essential to success. To do so requires high quality, accurate, up-to-date information and an understanding of what it means.
In the past, many small firms making site-selection decisions did not have the resources to undertake this all-important, make-or-break decision in a methodical, thoughtful way. They were forced to make this decision with limited information. We have all felt the consequences of poor decisions based on incomplete, inaccurate or misleading information.
A new Web 2.0 tool, www.ZoomProspector.com, attempts to address this need. This geographic information system-based application (called GIS) enables the user to select demographic and building/site parameters, weight them by importance, and then search among US cities or counties to find the location that best fits the parameters. The system is a fast and easy one-stop place to gather data to narrow the site-search process to a handful of suitable locations.
The application includes a searchable database of site location consultants and economic development organizations to help the user engage qualified experts to take the next step in the site-selection process. For new locations, relocation, expansion or consolidation, this Web 2.0 application provides the information necessary to make a smart, well-informed decision. Through a ZoomProspector partnership with Whittaker Associates, Inc. (a firm specializing in predicting corporate behavior), companies predicted to seek a new location will be offered the use of the Web tool at no charge.
ZoomProspector is all about connections. It connects communities interested in improving their local economies with companies seeking a location. ZoomProspector also connects owners of available property (or their agents) with businesses considering relocation. A prompt transaction and maximized property value is achieved by closely matching a self-selected audience of potential users to the property.
ZoomProspector connects companies to the expertise of site-location consultants and economic development organizations. In the past, finding talented professionals to assist in a complex site-location decision has been hit or miss. With this new tool, finding the person with the industry and community knowledge has just gotten easier.
The significant increase in energy cost is forcing many companies (particularly those with high-energy inputs, such as food processing) to re-consider their current location in order to optimize their proximity to raw materials, talent, and customers. Competing in logistics has emerged as an effect business strategy. To maintain their globally competitive advantage, companies must continuously re-evaluate their location as conditions change. ZoomProspector gives them the tools to do so.
By Joel Burgess
Corenet Michigan Chapter invited Dennis Donovan, principle of Wadley-Donovan-Gutshaw Consulting, to Livonia, MI to present on the Latest in Corporate Location Strategy. With Dennis’ permission to report, below are a few of my “take-aways” from his course:
Current Relocation & Expansion Activity:
- Levels: Down 10-15% in 2008, expected to rebound in 2009
- Most Active Industries: Bio/Pharma, Medical, Scientific Instruments, Food Processing, Distribution, Back Office, Call Centers, Shared Services, and Data Centers
- Most Activity by Region: Concentrated in the Atlantic Sunbelt (Virginia to Florida), Texas, and Inter-Mountain (Idaho to Arizona) regions because of infrastructure improvements, human capital, and business climate
Global Strategies: 18% of expansion/relocation activity in the US is foreign investment
Factors Influencing Relocation & Expansion Decisions (in priority order):
- Labor Market – present and future – supply cost, and quality
- Most locations are branch location
- 60% of the jobs required are entry level
- 20% of the jobs required are skilled
- Favorable labor ratios
- 3:1 for employment surplus
- 200:1 for particular occupation
- 200:1 for total population
- 10% of projects require rail transportation
- Backhauling presents the biggest opportunities
- Electric Power – capacity, generation, and reliability
- Available Buildings
- 70% of clients seeking existing building
- For call centers: 3% employment in market is saturated
- Risk of Natural Disasters
- Tax Credits preferred
Attracting Talent in High-Tech Firms (in priority order):
- HR Practices
- Career Advancement
- Achievement Recognition
- Company Reputation
- Internal Work Environment
- Onsite Amenities
- Challenge of Job
Strategies for Offshoring (in priority order):
- Risk – socio, political, and financial
- Cost of Benefits
- US roughly 25%, other countries greater than 50% of compensation
- Cost of Extraction (layoffs, closures)
For more information regarding Dennis’ presentation, you can visit the CoreNet website (www.corenetglobal.org) and click on the Michigan Chapter.
by Cory Koch
Labor Factors Influence Decisions
Labor has worked its way to the top of the priority list when it comes to selecting a new warehouse site. Over the past few years, IKEA, Sears and Target have purchased or leased distribution centers where the local work force has demonstrated a proven and successful track record of performance. Labor availability, cost and quality were critical in these site-selection decisions.
Labor Costs Are Warehouses’ Largest Line Item
On average, labor makes up almost 65 percent of total warehouse operating costs. In the meantime, warehouses continue to experience pressures to improve services, reduce cycle times and reduce costs. When an area provides a labor-cost advantage, the ears of the Operations and Logistics executives stand at attention. In most cases, site-selection decisions are made because of significant labor-cost savings. Some companies have seen savings of $2 million annually by making this selection. Other reports I have seen estimate labor-cost savings of $1.2 million annually when companies chose a smaller rural community only 30 miles away from a major metropolitan area.
Warehouse Clusters Deplete Local Labor Pools
Some industrial areas across our country have been too successful at attracting major warehousing operations. They have created huge clusters or concentrations of warehouses which all compete for the same labor pool, especially in metropolitan areas such as Memphis , Atlanta , Indianapolis and Chicago . These cities find they are competing more and more vigorously to attract and keep their people. Higher costs and increasing turnover rates have resulted. In some cases, companies have had to limit staff hiring because of inflated wages.
In these cluster areas, serious increases in logistical pressures have also caused interface clashes with the residential areas surrounding warehouse districts. This clash with residential districts can be serious, especially when warehouse operations are being pressured to be more flexible and frequently operate on a 24-hour, 7-days-per-week basis to meet consumer demands and expectations.
Secondary Warehouse Locations Offer Benefits
Companies are increasingly turning to outlying areas to solve labor challenges and avoid potential for residential and logistics interface clashes. For example, the southern Central Valley of California has become a region where several large retailers have implemented a better warehouse solution. West Coast Logistics analyzed the region and its warehousing operations, learning that the area’s available labor pool exhibits a strong work ethic and employee loyalty very similar to that of the Midwestern United States.
A high percentage of those workers grew up toiling in the local agricultural fields. These workers appreciate the opportunities that a warehouse position brings. Attendance is excellent. Employees are dedicated and work with intensity. They give 110 percent as an expression of their appreciation for having a satisfying job.
Two companies have benefited handsomely by locating in this region. Sears’ 1.3 million-square-foot regional distribution center in Delano , California , is currently being expanded by another 1.5 million square feet. It has consistently ranked at or near the top as the company’s most productive operation in North America . Similarly, IKEA, the world’s largest and most profitable furniture company, operates a 1.7 million-square-foot regional distribution center at the Tejon Industrial Complex. IKEA boasts that it consistently meets or exceeds forecasted productivity and performance goals.
Clearly in today’s world of warehouse site-location decisions, the key is labor–cost, quality and availability. With the demands on corporate supply chains to move products faster, cheaper and better, labor components will continue to be critical. Be sure that the site you’re considering has the labor resources to meet this vital challenge.
By Leigh Howe
What features and environmental factors do corporate headquarters consider and need in a business location? To answer this question, we look at the location factors important to any headquarters, and current trends in relocation. Then you can evaluate how your community stacks up in the areas that are important to corporate headquarters operations.
Location Importance Factors
Both quantitative and qualitative factors are considered in headquarters locations–the cost of doing business and the quality of life. Overall operating costs for corporations will be a factor in the location decision, but the greater concern will be whether the business can function well in a given environment.
A skilled and available labor pool and reasonable labor costs are likely the top concerns of most corporations. Recruiting and retaining the needed top talent depend on cost of living and quality of life factors. The location’s image, amenities, and access to recreational, cultural, and educational opportunities become increasingly important for executive employees. The availability of suitable executive housing is also a consideration. Access to world-class, highly connected commercial airline services will be important to executives, who may spend a substantial amount of their time on the road.
Another increasingly important site location factor is telecommunications services and infrastructure. Corporations will continue to move their businesses to online business models, taking advantage of the speed and automation of information technology. The globalization of business and the need to connect to divisions, offices, and customers around the world will mean that communities with a base of international corporations may look more attractive.
Headquarters locations span all industries – manufacturing, distribution, and service. Attracting a headquarters is a challenging pursuit, but offers substantial rewards. Evidence suggests that Fortune 500 corporations tend to grow and stay in place, while smaller companies are more likely to make a headquarters move. But every year, a few major companies make the news with a headquarters announcement such as Boeing’s move to Chicago.
The statistics below, from Conway Data, describe the location or expansion of corporate headquarters in 2002 by state. Conway Data is not an all-inclusive source of location and expansion information, but represents general trends in new and expanded announcements. While Conway Data reports a total of 6,782 new or expanded locations in 2002, just 4.7% or 298 of those new or expanded locations were categorized as headquarters. If we consider only new locations, headquarters account for 215 out of 3,395 or 6.3% of new facility announcements in 2002. It’s not clear from the data below whether the companies moved their headquarters away from the city of origin or simply relocated within the same city. Research on each company would be required to determine that information. But numbering headquarter facility announcements by state gives us a useful breakdown.
|STATE||New or Expanded Headquarter Facility Announcements in 2002|
Source: Whittaker Associates, Inc & Conway Data
The benefits of securing a company’s headquarters make headquarters-attraction a wise economic development strategy. Headquarters operations employ a highly skilled white-collar workforce and salaries for these executive positions are far above the average wage. Headquarters generate demand for numerous specialized business services, increasing the local multiplier effect as headquarters spending trickles down through the local economy. Also, headquarters tend to be very charitable and involved in the community. Best of all, once headquarters are established in an area they are less likely to move than division, subsidiary, and branch operations.
When headquarter moves do occur, they are usually strategic. A change in top management may precipitate a change in culture or strategy for the company, prompting a move. Consolidation has also been sited for relocations. Consolidating several offices gives the company the opportunity to consolidate real estate costs, share support services across departments, and improve communications within the firm. A corporate relocation may also be precipitated by the need to gain access to new ideas and talent. Other reasons for corporate headquarter relocations may include mergers or acquisitions activity, cost reductions, or the need to move closer to customers or suppliers.
According to Thomas Klier, an economist with The Federal Reserve Bank of Chicago, the Southern United States is winning more headquarters locations than the North and Midwest. Atlanta, Dallas, Houston, and Tampa gained 108 new headquarters in the 1990s, while New York, Chicago, Philadelphia, Boston and St. Louis gained only 68. This trend is likely to continue as the economy shifts from capital-intensive production to service. Also, companies will continue to look to second- tier metropolitan areas with less congested airports and lower business costs. Corporations increasingly compare operating costs from one location to another in order to show the shareholders a greater return on investment. While quantitative factors will grow in importance in choosing a location, qualitative factors such as quality of life will always remain in play.
By Jeff Finkle
A Task Force for Data Standardization. Since 1996, the Site Selection Data Task Force has worked to develop a set of data standards to assist economic development professionals in their communication with site selections consultants and others interested in their community as a location for a new store, factory or headquarters. The end product of the work of this Task Force is 1200 distinct data elements organized into 25 different spreadsheets. The International Economic Development Council (IEDC), leading site selection consulting firms, and municipal and state development agencies collaborated to define the standards.
This January, the Industrial Asset Management Council gave its official endorsement to the data standards developed by the Task Force. The support of this leading association of industrial asset management firms is crucial to nationwide adoption of these standards, which would facilitate and speed the task of economic development professionals in responding to the requests of site selection consultants. A set of generally accepted standards will also help communities make their case in a compelling and credible manner to consultants who have often done a significant amount of independent research through third-party sources and who may question the objectivity of the data they receive from communities.
Bridging the Credibility Gap. The idea for a task force to develop these standards came out of a panel discussion in Cincinnati, Ohio, at the national conference of the Council for Urban Economic Development that has since merged with the American Economic Development Council to form IEDC. Leading site selection consultants, including Dennis Donovan of Wadley Donovan and Bob Ady, then with the Fantus Company, observed that much of the site information that they received from economic developers on the local, state and regional level was somewhat meaningless. Overviews of demographic information were readily available from other sources, and communities’ marketing materials frequently excluded relevant data on the local economic climate.
Charlie Webb, Vice President of the Greater Cleveland Development Corporation, attended this panel discussion and has been involved from the outset in the effort to develop these standards. He describes the key information these proposed standards would provide as “‘on the ground market info’ – such as a survey of the major industries and what their current wages and benefits are and information on which companies have moved in and out of the area.” Economic development professionals had been reluctant to share much of this information with site selection consultants, particularly information on companies that had moved out of the region. Their preference was to attempt to control the process and to present a view of the region that emphasized only its positive aspects.
Shari Garmise, President of Garmise and Associates and an expert on data standardization, explains that this view had become outdated even before the development of the Task Force. “Site selection consultants were doing a lot of work on research and background so control of the message was already gone. Therefore, economic developers are much better off with the standards.” Use of this data set will allow them to respond quickly to information requests made by site consultants who may be operating on a 30-45-day timeline rather than the traditional six months to a year. Ron Starner, Director of Publications for Site Selection magazine, emphasizes that the standards help to “bridge the credibility gap.” He uses the analogy of the development of standards for square footage. It took years for the Building Owners and Managers Association (BOMA) to promote national standards for the reporting of square footage. This effort was ultimately successful and “greatly increased market efficiency which helped to drive up rates.” Adoption of national standards for site selection could promote similar market efficiencies and greatly improve communication between community economic developers, site selection consultants and corporations.
Standards as Guidelines. It is not necessary to complete all 25 spreadsheets of the data standards before they become a useful tool for economic developers. In fact, opines George Harben, Director of Research for the Governor’s Office of Economic Development for the State of Carolina, the standards can seem “horribly user-unfriendly” and should be seen more as “guidelines.” It is impossible to get every developer and community to agree on the exact definition of what makes up a labor force. However, the standards are a “very interesting and valuable bibliography of the data elements that site selection consultants will most frequently request.”
Beginning work on completing the data standards is a worthwhile activity even if a community does not have the resources to complete the entire questionnaire. Assembling this data is an excellent training activity and familiarizes communities with the standard questions of site selection consultants as well as with the formats in which they often request this data. IEDC and Conway Data, publishers of Site Selection magazine, have partnered to create DevelopmentAlliance.com, a website devoted to training economic developers on the use of these standards. Information on how to start using the standards is freely available on this site and on the sites of the parent organizations.
Towards Real National Standards. Dennis Donovan added his site selection expertise to the work of the Task Force and is “pleased that there are national standards and would expend the time had I to do it again.” However, he puts the focus on the work yet to be done. “I am not satisfied by the rate of adoption among economic development agencies.” The organizations that have developed the standards could “take a more proactive role in promoting and training. This includes getting [organizations such as] the Corporate Real Estate Network to endorse the standards.”
Advocates of these standards are prioritizing the garnering of endorsements from major agencies, but understand that the acceptance of truly national standards will not happen overnight. “This is a movement that is in its infancy,” says Ron Starner, “It will probably be take several years before we see widespread adoption.” Even in the absence of national adoption of these standards, they remain an invaluable tool for communication between communities and corporations as the most extensive existing bibliography of the critical data elements for site selection.
By Jeff Kelley
The results are in for the first quarter. According to Conway Data’s New & Expanded Announcements these are the top 10 state for January 2002 – April 2002. The total number of announcements for the first quarter was 313.
|Rank||State||Number of Announcements|