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© Foremost Quality Logistics Confidential 1
How the Site Selection Game is Played?
September 10, 2013 PREPARED BY: Tim Feemster Managing Principal Foremost Quality Logistics O: 469-554-9873 C: 214-693-7689 [email protected] @tsfeemster - twitter
© Foremost Quality Logistics Confidential
What about Site Selection & Using a Professional
• Site selection is both an art and a science, best handled by professionals
• Almost all companies are risk averse • Most company employees have never moved a site in their
existing company or even their entire career • I have done over 100 start-ups in my career, most site
selectors have not done that many • Many site selection companies have specialties- incentives,
taxes, data centers, etc. but don’t team with others • You may know more about a subject than the site selection
company. Use this to your advantage? • Incentives rarely make a bad location a good one, be careful • We are site eliminators, not selectors
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© Foremost Quality Logistics Confidential
Teamwork- Team projects like those that come down from the State. Who is LEADING, who is not committed, are you on the same page?
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Seven Trends Affecting Industrial Site Selection
1. Growing demand in emerging global markets 2. Rising transportation costs 3. Emerging logistics hubs and the expansion of
the Panama Canal 4. Downward pressure on rents, now ending
and a “flight-to-quality” in real estate 5. Opting for more flexibility with 3PLs 6. Navigating more stringent financial hurdles
7. ecommerce, mcommerce, scommerce
Source: Napolitano, Maida (2009), “Site Selection: 5 Trends for the New Economy,” Logistics Management, Vol. 48, No. 9, pp. 42-47. and Foremost Quality Logistics Logistics
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© Foremost Quality Logistics Confidential
10%
20%
30%
40%
50%
60%
Rent Labor Transportation 0%
50.3%
21.8%
9.5% 7.8% 4.3%
Customer Service
Admin Supplies Other
2.7% 2.2% 1.2%
Inventory
Logistics Cost Breakdown- 2006
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17.3%
Source: Establish, Inc/HWD & Foremost Quality Logistics
© Foremost Quality Logistics Confidential
Logistics Cost Breakdown- 2012
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0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
Transportation Inventory Warehouse Labor est
Warehouse Fixed est
Administration Other
62.8%
22.9%
5.9% 3.9% 3.8% 0.8%
Perc
ent o
f Log
istic
s C
ost
Cost Category
14.4%
Source: CSCMP & Foremost Quality Logistics
© Foremost Quality Logistics Confidential
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
High Tech Regional Retailer
Consumer Fulfillment
Light Manufacturing
CPG Manufacturer
National Retailer
Food & Beverage
41% 42%
24% 12%
62%
34%
19% 21%
72%
50% 65%
23%
54% 5% 4%
5% 5% 5%
2% 6%
29% 19%
9% 8% 3%
9% 2% 5%
14% 14% 12% 16% 4% 4%
Inbound Trans Outbound Trans DC Fixed Inventory DC Variable
Freight, Freight, and Freight, then Labor and Love
Source: CHAINalytics
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% o
f Sup
ply
Chai
n Co
sts
60% 63%
72% 74% 77%
85% 88%
© Foremost Quality Logistics Confidential
Data Center Project
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Start With Supply Chain Strategy to Get Leverage
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Source: Gartner / AMR Research
© Foremost Quality Logistics Confidential
Location Screening for Industrial/Manufacturing
Let the data lead us. Identify locations by looking at everything at the start instead of artificially starting with a set of predefined “preferred” or “best-in-class” areas.
First Pass: Fatal Flaws Screen out locations with fatal flaws e.g. Locations with insufficient connectivity or high logistics cost.
Second Pass: Major Flaws Rule out Locations with major flaws e.g. Locations with key attributes but inadequate infrastructure like no intermodal, international airport or seaport access.
Third Pass: Manageable Flaws Consider Locations that meet all critical criteria but have manageable issues – flaws that can be remedied or mitigated through negotiations with government officials
Preferred and back-up Locations (1-2)
Quantitative Analysis And Desktop Research
Identify All Site Selection Criteria
Site Due Diligence, Qualitative Data
Gathering, and Cost Modeling
Short List of Preferred Locations and Sites
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Source: Foremost Quality Logistics
© Foremost Quality Logistics Confidential
Business Location Services & Site Selection Process
Phase 1 Strategic Context/ Criteria
Development
Phase 2 Initial Screening
Phase 3 Location Assessment
Phase 4 Field Visits/ Alternative
Development
Phase 5 Negotiation/Selection
Derive location strategy from business strategy. Articulate location
threshold requirements based on critical attributes for target metro areas. Develop preliminary cost
profile to determine relative emphasis on critical criteria, including:
•Labor •Operational
Requirements •Operating Costs •Quality of Life/Business •Operating Environment •Other
(One day)
Finalize initial decision criteria threshold requirements. Assess initial list of
communities based on threshold requirements: •Labor attributes •Cost structure •Operating environment •Other attributes
Narrow location listing
Primary and secondary research to prioritize communities Geo-variable cost comparison
Trade-off analysis of qualitative factors vs. geo-variable operating costs
Re-evaluate market priorities – assess market factors and opportunities in relation to objectives
Confirm occupancy requirements and operational issues
Create a short-list of communities.
Conduct field visits designed to assess the following:
•Potential site/building options
•Incentive possibilities
•Labor market
•Logistics infrastructure and costs
Identify alternatives & distribute RFP’s
Analyze proposals
•Present location analysis & recommendations
Finalize location preferences:
•Revalidate location/site criteria and site options
•Site visits for final 2-3 locations
Evaluate/negotiate incentives
Establish site preferences
Negotiate lease
Finalize incentives
Maintain flexibility
Manage contingencies
Outcome Outcome Outcome Outcome Outcome Location strategy and
criteria developed
Initial screening yields ranking of potential
locations
Final communities selected for site visits
Multi-market competition/ Mgt. prepared to decide
Using multi-market leverage,
location/site chosen
Final communities selected for site visits
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Source: Tim Feemster Foremost Quality Logistics
© Foremost Quality Logistics Confidential
RFP Critical Elements
• Regionalization will get you more hits • Correct and up to date data • Answer all the questions • Use an appendix to add additional details or elements not
asked for in the RFP • Site certification can be a real plus or can be a Fatal Flaw-
remember what I said about RISK • Consistency of message between partners- state, regional,
and local- deviate and it will cost you • Site tours can make or break the process • Remember site selection is GLOBAL, not just the US or your
neighboring State/City
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Source: Tim Feemster Foremost Quality Logistics
© Foremost Quality Logistics Confidential
UK, Japan/Taiwan, Germany, & Canada are Top US Investors
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Source: Congressional Research Service 2012 & Schneider Consulting
© Foremost Quality Logistics Confidential
Manufacturing is the Largest US FDI Sector ($83B in 2012)
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Source: Schneider Consulting
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Relative to US firms in the same Industry, Foreign Company Trends
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Source: US Dept of Commerce 2012 & Schneider Consulting
© Foremost Quality Logistics Confidential
Top 10 Site Selection Criteria- Warehouse/Distribution
1. Transportation costs – both inbound and outbound 2. Logistics infrastructure – highways, intermodal, rail, FTZ 3. Labor costs & availability 4. Supply Chain interruption risk 5. Business climate- is there love 6. Rent /lease terms/ownership 7. Taxes & incentives 8. Utility rates 9. CAM charges 10. Access to public transportation- BRAC commute distance up
to 40 mi (80+% of workers in study)
Source: Tim Feemster Foremost Quality Logistics
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© Foremost Quality Logistics Confidential
Top 10 Site Selection Criteria- Manufacturing
1. Labor costs & availability 2. Transportation costs – both inbound and outbound 3. Supply Chain interruption risk 4. Logistics infrastructure – highways, intermodal, rail, FTZ 5. Utility rates 6. Business climate- is there love 7. Taxes & incentives 8. Rent /lease terms/ownership 9. CAM charges 10. Access to public transportation- BRAC commute distance up
to 40 mi (80+% of workers in study)
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Source: Tim Feemster Foremost Quality Logistics
© Foremost Quality Logistics Confidential
What does the Future Hold?
• Mobile social, and e commerce will explode • Transportation & port infrastructures will be more gridlocked • Fuel prices will remain volatile & but on average increasing • Customers will expect faster and more predictable lead times • Global trade activity will grow, but so will its costs, risks, and
complexities • There will be more sources of financial and operational risk • Sustainability initiatives will have greater influence on supply chain
networks, facility construction, and transportation choices • Ageing populations will create labor constraints in Logistics • The rules for lease accounting may change the Rent vs. Buy vs. 3PL
decision in some companies
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Source: Tim Feemster Foremost Quality Logistics
© Foremost Quality Logistics Confidential
Soon, I am going to be up to my neck in ALLIGATORS - Questions?
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