Insight on Sites
Sept. 1, 2011
by Darryl Wernimont
Your business continues to grow, your products are well-received and demand is opening up new territories. All good problems to have, but how do you respond? Temporarily ramping up production may give you the opportunity to test the waters; however, your window of opportunity is limited.
Historically, identifying the most cost-effective site for a new production facility required a baker or snack manufacturer to evaluate the company’s strategic objectives, the supply chain, available economic incentives, workforce and total developed costs. Today, an area’s economic conditions and the possibility of a large inventory of existing buildings have added new dimensions.
FIRST THINGS FIRST.
To kick off the site selection process, a manufacturer should bring in an experienced team that can be brought up to speed on its strategic needs and can develop a supply chain analysis, which is the starting point.
A supply chain analysis takes into consideration raw materials to finished goods distribution. The team weighs the values of each step in the supply chain and identifies viable locations capable of supporting the company’s projected manufacturing and distribution needs. It then adds logistics, infrastructure, labor costs, incentives and multiple operational factors to the mix.
The team should include regional professionals such as but not limited to state economic development groups, local and state chambers of commerce and industrial real estate professionals. At this point in the process, the bakery’s or snack manufacturer’s name is held in confidence so as not to bias the initial discussions. The team will identify and compare pros and cons of the various locations.
The team’s goal will be to initially identify five to seven sites for a new plant. They will confirm land availability for current and future manufacturing needs, as well as compare existing buildings that offer brownfield opportunities. The team will develop a supply chain business model for each site.
Once the team has accumulated sufficient data on five to seven sites, select team members will take initial site tours. Coinciding with the tours, the team should evaluate state and local incentives, identify greenfield vs. brownfield
options and assess the labor situation.
In regard to state and local incentives, companies need to investigate job training opportunities, employee tax credits, enterprise zones and fee reimbursements that may be available. Also, they should look at infrastructure funding, property and personal property tax abatements, and tax increment and tax exempt financing options.
When considering greenfield vs. brownfield sites, manufacturers will want to study the cost of each option as well as the availability and schedule. They also may want to consider if there are any additional incentives for one vs. the other and ensure that their choice will be able to accommodate any future expansions that may become necessary.
In addition, during a preliminary site analysis, the company will need to look at the projected site development costs as well any potential environmental impact the project may have. It needs to see what impact it may have on area wetlands as well as water and storm water issues. The company should have an idea for site configuration and discuss easements and infrastructure issues. Also, it must consider topographic and soil conditions of the potential site as well as permitting schedules, taxes and utilities, including fire protection services.
After the new facility is built, it needs to be staffed, and a company would be remiss if it didn’t do its due diligence by looking at the labor situation at each potential building site. What technical skill sets are required, and is an appropriate workforce available in the area? Is the region’s workforce typically union or nonunion? The company also needs to look at workforce demographics and cost of living as well as tax implications on its workers.
Upon conclusion of the site tours, the team initiates a comparative analysis, taking into consideration the overall costs, community environment and key differentiators for each of the prequalified sites. The group ranks the potential sites, and at this time, representatives of the baker or snack manufacturer join the team to tour the short-listed sites, typically the Top 3.
Team members then rank the sites and choose the preferred location. Then, the team must conduct an even more detailed site analysis to validate constructability and ensure that the location fits the purpose. As part of the final analysis, companies need to survey the property for boundaries, easements and topography as well as research the title status. It also would be prudent to perform a geotechnical investigation of the property to look closer at soil or special conditions that may exist.
Also, the company should study the property’s former uses and perform hazardous materials and endangered/threatened species research as well as an archeological investigation. The baker or snack manufacturer will want to ensure the property is free of government or politically sensitive issues and that no permitting or zoning concerns exist for the site. The bakery or snack producer needs to verify available utilities and study road issues, including access and jurisdictions. It also should evaluate local community health and emergency services. And it will want to ensure that its building plan is adaptable to the proposed site.
Upon conclusion of the detailed site analysis, company representatives should meet with state and local officials to confirm all parties’ involvement and document final details. Then, final negotiations and contract formalization can take place.
The overall time frame from supply chain analysis through contract negotiation can take 12 to 18 weeks. Darryl Wernimont has 33 years of global experience in food and beverage manufacturing and facility development. He currently is a market specialist, food, beverage and consumer products at POWER Engineers, Hailey, ID. He has been actively involved in facility design, site selection, equipment manufacturing, process development, systems design, packaging, program management, sustainability/LEED and regulatory validation/compliance.