A Step-by-Step Guide to Choosing the Right Site
A five-phase process can take your company from defining the key attributes for its success to picking the optimal PLACE and site to do business.
Tim Feemster, Managing Principal, Foremost Quality Logistics (Nov 07)
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Phase 2: Make an initial screening of
locations that meet your requirements. Rate communities in a specific
geographic area on each key requirement: labor attributes, cost
structure, operating environment, etc. Use a scale of 1-10 for each
element. List the top four or five candidates and analyze their
benefits based on such variables as number of customers overall and
average distances to customers and expected delivery time. Use the
results of this and Phase 1 to narrow your list of possible locations.
This usually takes one to two weeks.
Step by step:
• Gather estimates for agreed upon "subjective" criteria outlined in the first strategy meeting for each location.
• Narrow the list to a manageable number of locations.
3: Create a "qualitative-cost matrix" for each location on your list,
showing the trade-offs. If, for example, the matrix shows "City 4"
rates 20 percent lower for quality (of labor force, operating
environment, etc.) than "City 5," but that "City 4" costs 10 percent
more, you now have a clear idea of the trade-offs between the two
cities. You use this matrix to create a shorter list of locations. This
process takes about two weeks.
Step by step:
• Put ratings into the matrix for all finalist locations.
• Add the results of the site location model on supply-chain costs.
4: Conduct field visits to the remaining locations on your list. Assess
them for potential site-building operations, incentive possibilities,
the labor market, and supply-chain infrastructure and costs. This is
the first time you should be in contact with the local economic
development offices. Distribute requests for proposals for construction
or leasing and analyze the proposals you receive. Present your analysis
and recommendations to senior management. This process takes two to
Step by step:
• Develop a request for proposal
that outlines the requirements of your site as it relates to building
purpose, size, ceiling height, sprinklers, special requirements for
power, refrigeration, rail access, etc. so everyone is working off of
the same data.
• Travel to multiple site locations for meetings with local brokers, developers, and economic development groups.
• Return and recap the results of your meetings.
Meet with the team to narrow down the list to the final two or three
locations identified for specific negotiations on incentives.
5: This phase prioritizes and finalizes the negotiation process
relative to the final two or three locations. This ensures the
preservation of viable alternatives to utilize during the negotiation
process. There has to be some level of competition to ensure the
maximum level of incentives for your project. There is a little "poker
playing" here, i.e., you may know where the "best" site is already, but
you never reveal this to the economic development groups or they will
lose interest in negotiating incentives.
After the final
incentive packages are presented, the location team meets to make the
final choice based on all the components - operational costs,
supply-chain costs, qualitative elements, and economic incentives.
While the negotiations are being conducted with the economic
development groups, you are also negotiating with landlords for leases
and/or purchase of a site. Again, you should develop a letter of intent
to give to the two or three finalist sites. You always need a backup in
case you cannot come to terms with a specific landlord or owner on your
first-choice location. Once you have your lease or land purchase
agreement in hand, you go back to the winning economic development
group to sign up for your incentives.
Step by step:
• Negotiate with landlords and/or owners for specific site locations.
• Request "final offers" from the top candidates' economic development groups.
• Get formal approval from your winning economic development group for your incentive package.
five-phase process should take your company from defining for itself
the key business success attributes, through translation to location
attributes and the vetting of potential markets and locations against
these, yielding an optimal place and site to do business. Attributes
and their weightings vary across business types, but this replicable
analytical process will provide a consistent roadmap and discipline to
ensure a successful outcome.