Corporate Survey Analysis: Respondent Base Shifts But Site Selection Factors Hold Steady by Saul Grohs, Location Advisory Services Inc.
Although the demographics of those responding to the Corporate Survey have changed, site selection factors have remained steady.
Saul Grohs, Partner, Location Advisory Services, Inc. (Winter 2011)
As a first impression from the myriad of data collected in the 2010 Corporate Survey, it appears that the respondent base may have shifted somewhat from last year. While manufacturing operations continue to represent nearly two thirds of the respondents, those representing logistics or distribution/warehouse operations have increased to 11 percent, a higher percentage than any individual manufacturing industry except fabricated metals (19 percent). Additionally, the percentage of those having a "final decision" role in their companies' location decisions has decreased from 52 percent of respondents last year to 43 percent in the current survey.
It also appears that larger companies are represented to a greater extent this year, perhaps an indication that many smaller ones have not survived the tough economic times and are either gone or have been absorbed. The percentage of respondents with three or fewer domestic facilities dropped from 56 percent to 45 percent; conversely, those with four or more increased from 44 percent to 54 percent, with the major portion of that growth in the category of larger companies with five or more domestic facilities. Since there has been no obvious uptick in new facilities, particularly in the heavily represented manufacturing sector, it is reasonable to assume that the respondent base has shifted. This hypothesis is supported by data on foreign facilities (respondents with three or fewer dropped from 41 percent to 26 percent, while those with four or more rose from 59 percent to a rather robust 75 percent).
It is interesting to note that although the respondent base has changed and the economy continues to remain uncertain, the ranking of site selection factors has remained fairly stable. More than 80 percent of the factors (21 of 26) are ranked within two places of where they were last year. Only three factors moved as much as five places - energy availability and costs and availability of advanced ICT services each dropped by five spots, while environmental regulations was ranked five places higher in importance. Similarly, none of the nine quality-of-life factors moved more than one place on the ranked list from 2009 to 2010.
Last year, there were several comments about costs becoming a more important issue in choosing a facility location. In my experience, costs have always been an overriding factor, but it is critical to know when they should be considered in the location selection process. Overall cost is the determining factor in a feasibility analysis. Comparison with existing costs or a project budget determines whether a new location search should take place or whether relocation of an existing facility can be justified.
Once a search for candidate locations is begun, however, it is important to insure that all project criteria are satisfied before a total cost comparison is undertaken. Relative costs for individual key elements can, of course, be included among the factors used to screen for and select candidates. For example, salary indexes or comparative power rates or freight cost differentials might be important in choosing potentially acceptable locations for specific projects. Finally, after a "short list" is developed (up to five locations/economic development organizations as indicated by 92 percent of the survey respondents), the low-cost place should emerge as the best alternative, since presumably all finalist candidate locations can meet operating objectives and satisfy location criteria.