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This article has been kindly provided by Biggins Lacy Shapiro & Company, LLC (BLS & Co.).
Site Selection: Choosing the Best Location for your US Manufacturing Plant
Selecting the right location for your U.S. manufacturing plant is a complicated process. It is critical to have knowledge of the process, the stakeholders, the regulators, and the information you should consider in making this decision, to ensure nothing is missed that may otherwise cost you time and money during the site selection process or in the future.
Every project is unique, but all require a deliberate, rigorous evaluation process that incorporates consideration of operating environments and costs to ensure a location can meet the company's current and future needs.
How to Begin and Approach the Site Selection for Your New Plant
Step 1: Create the Project Team
Your new operation will have many important operating criteria which will require input from all facets of your business. Consider creating a project team that includes the following people/perspectives for input on the design and location criteria:
- Project Manager (Lead)
- R&D / Engineering
- Human Resources
- Finance / Accounting
- Sales / Marketing
- Executive Management
Your team may also include outside advisors, including consultants, a construction manager, architects, and/or engineers. Note that not everyone will participate in the same capacity throughout the life of the project, but capturing their perspective in the beginning of the project and at certain key points along the course of the project will be key to the success of the future operation.
Another important consideration during this formative phase is how you want to manage communications around the project. Most companies prefer to tightly control information about the project and process for several reasons:
- To avoid premature concerns and rumors among the existing workforce;
- To maintain control of messaging to the market during real estate negotiations and to the economic development community during incentive negotiations;
- To allow the company to move forward without its competitors being aware of its plans; and
- To prevent unwanted contact by a flood of vendors and suppliers regarding the project.
Step 2: Define the Proposed Operational Requirements
Before beginning to evaluate location options, it is critical to first define the proposed manufacturing facility and its operational requirements in order to properly evaluate location opportunities that will suit the needs of the operation. If not complete already, you may need to work with a process engineer to design the production process, which, in many cases for a reshoring project, may be much more automated than the current production process overseas.
Once the production process is designed, you will then need to define the required production inputs and requirements for the operation. Below is a list of criteria to help guide this process:
Location Requirements Checklist
- Inbound Shipments - Identify raw material sources and other suppliers, locations, annual volumes, number of shipments, modes of transportation
- Outbound Shipments - Identify customers to be served from the new facility, locations, annual volumes, number of shipments, modes of transportation
- Labor Requirements - Number and types of jobs, desired skill sets, wages and benefits, shifts and schedules, work ethic, and labor/management relationships
- Building Requirements - Size, configuration, breakdown of manufacturing/warehouse/office space needs, clear heights, truck docks, and other facility needs
- Site Requirements - Size, configuration to support vehicle circulation, on-site storage, employee and truck parking, and other project needs
- Electric Power Requirements - Electric power usage (demand and consumption by month), line size required, service type preference (primary vs secondary), service redundancy needs
- Natural Gas Requirements - Natural gas usage (consumption by month), line size required, service redundancy needs
- Water Requirements - Water usage (volume by day and month, peak usage by hour), line size required, redundancy needs, fire service needs
- Wastewater Requirements - Discharge volume (by day and month, peak volume by hour), line size required, wastewater effluent characteristics
- Telecommunications Requirements - Service requirements
- Air Emissions - Description and estimated volumes of air emissions by type
- Community Preferences - Community characteristics and amenities preferred, training resources available, highway proximity and infrastructure, community culture, sustainability aspects, other requirements
- Project Investment - Estimated value of land and building, equipment purchases and installation, other start-up costs
- Incentives - Desired types of incentives programs including tax credits, loans, grants, and other financing assistance
- Project timeline - Target real estate acquisition date, staffing ramp-up schedule, utility ramp-up schedule, equipment commissioning, production start date, etc.
- Other Factors - Other location criteria factors that are unique to the operation
Step 3: Plan your evaluation proces
An efficient site selection process is really more of a site "elimination" process. Location screening and scoring criteria, beginning with high-level, large-geography considerations and then evolving into site-specific considerations, will guide you through a progressively shorter and shorter list of potential locations. While each project will require a customized approach, weighting of factors, and sequencing of analysis, each step of the process should allow you to narrow down to options that hold the greatest potential for the new operation, while eliminating those that do not. The process should look like a funnel: