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1、Trends in Site Selection:A Location Strategists Perspective,City of Madison Economic Development CommissionDarin M.Buelow,Todays Theme,Madison A Forbes 2004 Best PlaceWhy(or why not)Madison for a business location?OutlineA quick profile of Deloittes Site Selection practiceThe location selection proc
2、essTrends driving location decisions“Best practices”in business attraction,Darin Buelow,Senior Manager with Deloitte Consultings Fantus group,based in Chicago13 years development experience,including site selection,due diligence,negotiation,location strategy,and construction servicesCorporate client
3、s include:Best Buy,HP,UBE Automotive,Sherwin-Williams,ThyssenKrupp,Cintas,Suzuki,Schwan,Kohler,Pitt Plastics,Radio Flyer,VolkswagenNegotiated over$100M in incentives across dozens of projectsEconomic development clients include:State of Iowa,State of Washington,Cape Breton(Nova Scotia),Lake County(I
4、L),Altoona-Blair County(PA),LaPorte County(IN),Deloittes Fantus Group,The first and largest specialized location strategy consulting practiceBegan in 1919Many thousands of engagementsDedicated practices in Chicago,LA,New York,San Francisco,Atlanta,and BrusselsFocus on facility and location strategy,
5、site selection,economic development,real estate portfolio structuring/management,and real estate operations.,Client base across industry and facility type,Recent Field Experience,Counties(since 1993)where recent field evaluations,due diligence,negotiations,and employer interviews have been conducted
6、 by Deloitte Consultings Fantus Group.,Fantus typically conducts between 100 and 200 engagements annually,An ever-evolving mix including:Manufacturing our traditional“bread and butter,”especially for Midwest practice and during industry growth cyclesHQ/Call Centers/Shared Service strongest in the Mi
7、dwest and West Coast practices;increasingly globalDistribution/Warehouse strongest in Midwest;focused on large,big-box retailers and consumer products companiesTechnology emphasis on bio-med;many projects international;strong base in West Coast practicesPublic Sector/Economic Development State,local
8、,and international,The Location Selection Process,Location decisions can be very troublesome for companies,Long-term and significant allocation of major capital and human resourcesOccur infrequently internal skills are rare or rustyHuge commitment of resources over a short period of timeHigh degree
9、of uncertainty and riskEmotionally charged and politically sensitive,Who are the“Consultants”?,A wide range of companies have specialized site selection practicesThe Big 4:Deloitte Consulting-Fantus,KPMG,E&Y,PWCEngineering and construction firms:Fluor Daniel,Lockwood GreeneLarge real estate brokerag
10、e firms:JLL,Grubb&Ellis,CB Richard Ellis,StaubachThe boutiques:smaller,specialized companies of 1-5 experienced consultantsspin-offs of the other firms and ex-ED professionalsAssorted others:general management consulting,HR consulting,logistics consulting,architecture firms,etc.,And why should anyon
11、e pay attention to them?,They lead an increasing number of location studiesLocation“influencers”are believed to be involved in nearly half of all major site selections Tend to manage larger projects and companies that produce significant economic impactHave many repeat clientsMOST know what they are
12、 doing and can manage a project to a successful conclusion,Typical Site Selection Process,project driverssuccess factorsproject specificationssearch area,Implementation,Negotiations,Due Diligence,Screening,Strategy,countries/regions/statesfatal flaw analysiscompare costs and conditionsidentify 6-10
13、top areas,field investigationsverify screening and process-drill downidentify specific opportunities and risksbest 3-5 community/site options,risk analysisreal estateincentives,transition planningfacilities planvendor selectionconstruction ramp-up,1.Access to customers2.Stable social/political envir
14、onment3.Ease of doing business4.Reliability/quality of other utilities5.Ability to hire tech professionals6.Ability to hire management staff7.Level of corruption8.Cost of labor9.Ability to hire skilled laborers10.Crime&safety11.National taxes12.Cost of utilities13.Roads14.Avail/quality-university/te
15、ch training15.Local taxes,Factors that are most critical to a corporate global location decision,16.Access to raw materials17.Available land all services in place18.Air service19.Labor relations/unionization20.Access to suppliers21.Preferential trade agreements22.Available building/space all service
16、s23.Cost of shipping(freight cost)24.Labor regulations25.Cost of real estate26.Access to finance27.Ports28.Healthcare29.Ability to hire general laborers30.Availability of grants/incentives,Location Process Drivers,Domestically,costs are the key factor for the majority of competitive projectsSome com
17、panies screen strictly on costs to narrow the fieldOften very focused on costs early in the engagement,but may lower the bar once trade-offs are understoodA threshold screen“eliminate all areas with wages over 10%above the regional/national averages”Performance-based solutions are key for some talen
18、t and market driven projectsScreen almost entirely on non-cost,operational factors such availability of technical talent,access to a specific customer,etc.,The location selection process generally takes 6-8 months for large projects,Trends Driving Location Decisions,Trends in Site Selection,Cost red
19、uctionGlobalizationFunctional Trends and Issues,job reductionsreal estate consolidation and dispositionsevering lower value functions from corerelocations to lower cost environments expanded search areasmulti-country searches,not just multi-statefocused off-shore,particularly for labor intensive ope
20、rationsAsiaMexico,Central America and BrazilE.EuropeJVs and outsourcing,actions/impacts,intense pressure to reduce costs pre and post economic downturnconsolidation,relocation,and rationalization of operationsincreasing global competitionproducts and servicesfactors of production,issues/trends,Cost
21、reduction continues to bea corporate imperative,Globalization and Offshoring,foreign direct investment(FDI)more likely,even for mid-sized companiescontract manufacturing JV/outsourcegreenfieldmitigation of FDI risk through country/city selection(political,labor,human,natural disaster etc.)mobile inc
22、ome tax strategies,actions/impacts,increasing need to compete globally create/improve market accessreduce costcreate/improve access to source materialslabor availabilitybarriers to entry falltechnology enables globalizationrisk a growing concernglobal taxation,issues/trends,Who is Madison Competing
23、With?,The usual suspects:Other Wisconsin communities/countiesIllinois,Minnesota,Michigan,IowaTier 1 U.S.R&D Centers:Boston,San Diego,San Jose,Research Triangle,Atlanta,Front Range,etc.Mexico(manufacturing)The unusual suspects:ChinaIndiaCentral America(CAFTA),Chinas Advantage in Costs and Skills,Comm
24、ercial EnvironmentLabor Force,“The Sky is Falling”.!,Is everything moving offshore?No.Food manufacturingHigh cube to weight ratio products(e.g.,tissue)DistributionDefense,Homeland SecurityCritical time-to-market products(e.g.,Tier 1 automotive)Small or specialized manufacturingEntrepreneurial enterp
25、riseHigh water content product manufacturing(e.g.,Windex)Healthcare related industriesR&D requiring unique linkages to universities,Manufacturers face intense global cost competition,US companies focused offshore,particularly for labor intensive operationsnon-US companies also looking offshore,buthe
26、ightened focus on Mexico and Canada to serve North Americaareas with abundant technical and skilled production labor will thriveneed for advanced training,training partnerships,actions/impacts,exodus of US labor intensive industryshedding lower skilled operationsstill struggling with higher and tech
27、nical skilled labor availabilitywage pressuresUS wages increasingly highneed for global positioningnew markets/customersglobal JIT suppliersoutsourcing,issues/trends,Typical Location Criteria:Manufacturing Projects,Critical,Cost,Conditions,Skilled labor supply/talent poolLabor qualityLabor relations
28、Market access(suppliers&customers)Real estate quality and availabilityUtility capacity/quality,LaborFreightPower Gas/Fuel(processors),Important,Real estateTaxesIncentivesOther Utility costs,Transportation infrastructure/serviceSemi-/unskilled labor poolIndustrial trainingRegulationsQuality of Life,D
29、istribution centers areoptimizing their global networks,less handling,more automation,improved inventory management,higher number of turnsfocus on all costs(e.g.,labor,taxes,utilities),not just freightrationalizing vendors,strategic sourcing supplier capabilitiesoutsourcing(3PL&4PL)regional focus(gl
30、obally and within U.S.)fewer,larger facilitieshub and spokesuperior transportation infrastructure and capabilities by key modes,actions/impacts,concurrent focus on cost and customer serviceneed to improve efficiency and lower cost through the entire supply chain and physical networkglobal sourcing a
31、nd networksconsolidation/rationalizationof current networkwith acquisitions,issues/trends,Typical Location Criteria:Distribution Center Projects,Critical,Cost,Conditions,Semi-/unskilled labor poolHighway accessMarket access(suppliers&customers)Real estate quality and availability,LaborFreight(inboun
32、d,outbound)Real Estate,Important,Taxes(property,inventory)Incentives,Transportation servicesWater pressure(mega-DC)Labor relationsIndustrial trainingRegulations,Shared services/contact centers arecost and customer service focused,shared services centerslarge regional centersAmericas,Asia/Oceania,EME
33、Alocations with broad financial skills and multi-lingualdiversification of riskcustomer contact centersoutsourcing wave3rd and 4th tier US locations and low-cost offshore locationsmultiple operations to cover time zone and maintain reasonable sizelow-risk,technology-capable locations(phone,internet
34、etc.),actions/impacts,consolidation,rationalization and relocationoperating costs(labor,labor,labor)customer needs and geographic coverage drive deployment globallyre-engineering process and technology enabled greater mobilityskill requirements both higher and lower data and call volume management,i
35、ssues/trends,Typical Location Criteria:Shared Service and Call Center Projects,Technology companies no longerfocus on“growth at any cost”,exodus of labor intense operations to low cost countriesoverseas outsourcing to reduce costsassembly operations focus on low-cost countriesmulti-country R&D effor
36、tspaying more attention to labor,freight,taxes,and utility costsfocus on the ability to effectively recruit scientific,engineering,technical,and skilled production talentcritical mass of existing local talent access to top universities and programs,actions/impacts,consolidation and downsizingincreas
37、ed FDInew production operations more focused on traditional locational measuresstill driven by talent and the environment in which to attract themcluster in regions with a substantial scientific,technical and/or academic presence and eminence,issues/trends,Typical Location Criteria:Technology Projec
38、ts,The competition for technology projects,Media Del Rey,Silicon Hollow,Silicon Forest,Silicon Gulch/Silicon Hills,Silicon Village,Silicon Vineyard,Silicon Gulch,Silicon Valley,Multimedia Gulch,Silicon Island,Silicon Beach,Digital Coast,Silicon Desert,Cyberchella Valley,Silicon Mesa,Silicon City,Sil
39、icon Prairie,Telecom Corridor,Silicon Freeway,Biotech Beach,Silicon Bayou,Silicon Beach,Silicon Swamp,Telecom Valley,Silicon Triangle,Silicon River,Automation Alley,Silicon Tundra/Silicon Valley North,WebPort,Silicon Island,Silicon Alley,Silicon Valley Forge,Philicon Valley,Silicon Holler,Silicon Mo
40、untain,Silicon Seaboard,Silicon Dominion/Silicon Plantation,E-Coast,Cyber District,Silicon Hill,Silicon Necklace,Silicon SandbarDot CommonwealthSilicon Mountain,Silicon Snowbank,Silicon Plains,Silicon Glacier,Silicon Orchard,Silicon IslandSilicon Rain Forest,Biotech/Biopharma is Growing,Sales of bio
41、pharmaceuticals grew from$8 billion in 1993 to$22.3 billion in 2000 small compared to the pharmaceutical industry:$400 billion(2002)The future looks bright,with an estimated 371 biotech-based drugs in development.At the end of 2002,approximately 122 biotech-based drugs were in Phase III trials or aw
42、aiting approval in the United States.The top 10 biopharmaceutical companies accounted for 64.7%of the segments global sales in 2002.Of those,six companies had sales of$1 billion or more 2002:Amgen,Genentech,Serono,Chiron,Biogen,and Genzyme Corp.,Competition for Biotech/Biopharma Investment,Clinical
43、development(R&D)locations vs.manufacturing locationsTop cluster locations include:BostonSan FranciscoSan DiegoLong Island Princeton Philadelphia corridorLos Angeles/Thousand OaksWashington Baltimore corridorRaleigh-DurhamSeattleInternational manufacturing candidate locations include:SingaporeSwitzer
44、landPuerto RicoIreland,Headquarters examining redeployment at a steady pace,evaluating joint deployment with existing operations:shared serviceregional HQR&DTaxes and incentives seem to be more compelling to the C-suite than operational issues,actions/impacts,corporate and personal tax issuesrationa
45、lizing deployment of global vs.national HQMore willing to consider relocation from“granddads”hometownimagecustomer/operational accessease of doing business(regulations)politics,issues/trends,Typical Location Criteria:Headquarters Projects,“Best Practices”in Business Attraction,Economic Development P
46、erspectives,Cost reduction,consolidation of operations,shifting focus on global investment,and strained capital markets have combined to reduce the number of prospects and projects in nearly every industry:,Then,Now,Source:Site Selection Magazine,What are Leading Economic Development Agencies Doing
47、to Stay Competitive?,Understand the“Hooks”that attract business investmentDevelop an Economic Development Strategy:Vision Reality MissionMarket wiselyGet prepared on all frontsData/information,sites,training,incentives,infrastructureFocus on meaningful targetsBuild coalitions to help in the effortBe
48、 organized and industry-knowledgeable,What are the“Hooks”That Draw Prospects to Communities?,Past successesFavorable infrastructure/geographyAvailable real estateFavorable statisticsDeep/unique labor skillsLow operating costsIncentivesStrong E.D.strategiesAggressive marketingMarket access/business s
49、ynergies,Hard$,Soft$,One-Time,Ongoing,Property tax abatement(real,personal,inventory)Reduced property assessmentReduced rentReduced utility ratesUtility tax exemptionsFTZ designation,Corporate income tax credits(subject to actual liability)Low-interest loans/financingCustomized training(instruction,
50、travel,wages),Cash grantLand cost write-downSales/use tax exemptionsSite improvements(grading,utility extensions,etc.)Free soil/environmentaltests,Zoning/covenant variancesExpedited permittingRelocation assistanceHiring assistance(recruiting,advertising,testing,screening)Temporary spacePower reliabi
