Out of site

April 15, 2003
Experts say you can land yourself a great location for your next plant if you know how to look
If geography alone determined where you built your next food plant, chances are you'd find yourself breaking ground in Topeka, Kan. So, for that matter, would every other food company. Situated at the virtual center of the continental U.S., Topeka is also at the crossroads of six major highways and interstates and enjoys easy access to air and rail. Bottom line: You'd be closer to your markets, your product would enjoy a longer shelf life, and you'd likely minimize your shipping and transportation costs. If only it were that easy. "Proximity to market does count," says Gene Winter, senior vice president of The Greater Richmond (Va.) Partnership, Inc., an economic development agency that has managed to attract Kraft, Tyson and other heavy hitters to the Richmond area. "I think one of the reasons we've done so well is that we're ideally situated between one of the nation's largest consumer markets to the North and one of its largest agricultural markets to the South."On the other hand, Winter acknowledges that geography is only one variable of a much larger equation. "Does a given region or metro area have the desired workforce?" he says. "Are programs in place to ensure that workforce training is adequate? What environmental regulations are in place? What are the area's energy costs? What's the quality of the area's distribution network?"All good questions, says Don Schjeldahl, director of E/A firm Austin Company's Facilities Location Grou, Cincinnati, Ohio.  And the answers, he notes, are changing all the time. "Customer demand changes. Transportation and infrastructure change. Regulations change. Add to that the fact that most food companies usually want their plant projects built as quickly as possible, either to satisfy new market demand or contend with capacity problems, and it becomes clear that site selection is more complicated than it looks." So how do you start?Schjeldahl and others maintain there are essentially five steps to selecting a site location: defining the project and establishing procedures; screening candidate cities; developing a shortlist of candidate cities; conducting a detailed field investigation; and conducting tours of finalist communities that include negotiations with community officials.  Defining the project

According to Schjedahl, corporate managers first need to decide what the project is all about. Is the plant being constructed to launch a new product? To meet increased demand for an existing one? To replace an outmoded facility? What types of infrastructure are required to support plant operations? And finally, what is the anticipated start-up date? "Typical manufacturing projects can take up to two years," Schjedahl says, "but food-related projects tend to have a much shorter project life-cycle  -- 12 to 18 months -- since the emphasis usually is on getting product shelves as quickly as possible." Accordingly, many food companies  -- as many as 50 percent by Schjedahl's estimates -- look for existing facilities, preferably food facilities, in order to save time. "If you find the right building, it can save you a lot of trouble with regard to sanitation standards, environmental regulations and so forth," he says. Once project parameters are set, Schjeldahl recommends that management form a site selection committee comprised of employees "who really know the process, including plant engineers, production managers and environmental officers. Because food plants tend to be relatively labor intensive, Human Resources should also be included. And, of course, you'll need perspective from someone in finance." Screening candidate cities

Candidate locations should be evaluated in terms of the project's most important drivers, whether they be low-cost labor, proximity to market, transportation costs, utility infrastructure or quality of life. Winter notes that while ingredient suppliers tend to cluster themselves near the sources of their raw materials, processors involved in the manufacture of shelf products tend to prefer proximity to consumer markets. Whatever the case, "it's important to be in a city that wants you there and wants to work with you," Schjeldahl says. He says that evaluation of candidate cities is perhaps the most data-intensive phase of the relocation project.  It can also be the most confusing and time-consuming, he adds.  To the extent possible, care should be taken to ensure that data are uniform and comparable from region to region and state to state, he says. Although data collection may require frequent contact with local economic development officials, utility companies and real estate representatives, several on-line national data sources provide the same types of information, including demographic and employment data sources; environmental conditions and regulations; power and utilities; quality of life; and transportation and logistics (see accompanying chart.) As the data begins to flow in, Schjeldahl recommends incorporating it into various spreadsheets. Human resources, he says, should handle labor data, operations labor data and so forth.  Field investigations 

If the collected data is thorough and uniform, project team members shouldn't have too much difficulty developing a short list of candidate cities. Depending on the project, the number of cities on the list may be as few as two or as many as 10. Like data collection, field investigation and analysis can be quite involved. And it should be, Schjeldahl says. In a nutshell, the objective is to ensure that local operating conditions meet the requirements established for the proposed facility , both for the present and the foreseeable future. Winter says that many companies inquiring about the Virginia region, food companies included, are particularly concerned about the quality of the workforce. His advises companies to investigate whether local schools and industry members are working together to develop workforce training programs. Schjeldahl says it's important to look at trends, perhaps over a five-year period, to identify emerging labor characteristics that may be unfavorable in the long term. He also recommends that project team members take a good, hard look at the water supplies and wastewater treatment and disposal programs of candidate cities. "So much of food processing involves water , and large quantities of it," he says. "If a city changes the biological oxygen demand (BOD) loads its willing to accept  , or can accept ,  from effluent, that can knock a plant out of the ballgame. Alternatively, the processor may find it must treat the water itself, a proposition that can add considerably to project or operations costs, at least in the short term. (Assuming it can clean up and reuse the water, the processor actually may, in time, save money.) In addition to water, Schjeldahl also recommends that project team members investigate whether emissions and odors are regulated in the candidate city.  Community/site analysis According to Schjeldahl, community visits all should be performed by the same team members, preferably team leaders, to ensure continuity in data gathering and in the assessments of candidate cities. Ideally, Schjeldahl says, the community tour should include a community orientation; meetings with utility and public works departments; a visit to the candidate site; a vocational school visit; a community tour; and a wrap-up meeting to discuss further information needs.  Final selection

And the winner isActually, project team leaders need to get a consensus among others in the group. In addition to recommendations, the team needs to evaluate project assumptions and research methodologies, as well as review the reasons other candidate communities were eliminated. Prior to a final decision, Schjeldahl recommends that the entire project team tour the short-listed communities. Finally, project team members should prepare to negotiate with community officials.  "Many cities and regions offer incentives to industries they want to attract," says Winter. "They'll help with utility extensions, road extensions , items of that nature. I'd put Virginia in the middle of the pack. We've tried to keep taxes and business costs at the lower end of the spectrum, but we're clearly not operating in a desperation mode." Most desirable areas aren't. But that shouldn't stop project team members from negotiating for the best incentive package they can get. Top Ten States New or Expanded Food FacilitiesAugust 2001-August 2002Rank                                                No. Facilities

1)       New York                                      402)       Kentucky                                      283)       North Carolina                               25    4)       Michigan                                       245)       California                                       236)       Illinois                                           217)       Texas                                           208)       Missouri                                       129)       Mississippi                                   1110)    Florida                                           9Source: Conway Data Site Selection Data Sources

Demographics (Populaton/Income/Workforce)Applied Geographic Solutions        www.appliedgeographic.comAmerican Community Network      www.can.netACCRA                                           www.accra.orgConway Data/IEDC                        www.developmentalliance.comCACI                                               www.infods.comClaritas                                            www.claritas.comU.S. Bureau of Labor Statistics      http://stats.bls.govEnvironment/Natural Hazards

U.S. Geological Survey-Geological Hazards   www.usgs.govEPA non-attainment areas                                www.epa.gov/oar/oaqps/greenbkVistaInfo.com                                                   www.vistainfo.comPower/Utilities

American Gas Association  www.aga.comAmerican Public Power Association  www.appanet.orgEdison Electric Institute  www.eei.orgElectric Power Grids by the North American   Reliability Council  www.nerc.com Telecommunications

KMI Corp.    www.kmicorp.comCDS Mapping  www.cdsys.comAtlas of Cyberspace  www.geog.ucl.ca.uk/casa/martin/atlasSecondary and Post-Secondary School Data

SAT scores and other public school data   www.theschoolreport.comU.S. Department of Education- enrollment and degrees  Conferred , post secondary     http://nces.ed.govQuality of Life/Cost of Living

Realtor.com                  www.realtor.comYahoo Real Estate        http://list.realestate.yahoo.com/ACCRA                       www.accra.comHomefair  www.homefair.comMonster Moving  www.monstermoving.comTaxes

Tax Planet  www.taxplanet.comVertex    www.vertexinc.comWages/Salaries

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