Growing demand. Supply chain realignment. A merger or acquisition. There are many reasons companies may need to reexamine their location footprint. This analysis often leads to critical decisions about where and how to geographically distribute the company’s assets — human capital, physical plant, and technology — around the world. The choices of where to place that additional capacity are many, but it’s not as easy as it might first seem, and the stakes couldn’t be higher.
Site selection may well be the single most important factor in the operational and facility planning process because it has a significant impact on investment costs as well as the future operating costs and flexibility of the facility. In fact, location-dependent costs can determine up to 80% of a facility’s operating costs: utility rates, wage rates, logistics costs, and taxes are all locked in when a location decision is made.
While many companies have internal resources that handle real estate and facility management, location decisions are unique due to their substantial cost and magnitude. With so much riding on the ultimate decision, enlisting the help of a site selector is a smart business strategy. In fact, in location decisions where a consultant was not used, many corporate executives report that the wrong decision was made, usually too late to take corrective action. So, what is a site selection consultant, and how do you hire the right one for your project?
What Is a Site Selection Consultant?
A site selection consultant is a location strategy expert who partners with your company to understand your business needs and assess the ability of various locations to meet those needs to enable future growth. An experienced site selection consultant synthesizes knowledge from multiple disciplines, including engineering, supply-chain management, construction, utilities, logistics, regulatory compliance, taxes, incentive negotiation, and human resources.
Unfortunately, no location is perfect. And the process of choosing the optimal site among a set of imperfect alternatives is complex and time-consuming. The job of a site selection consultant is to evaluate the alternatives to help you clearly understand the tradeoffs of a location decision and choose the one that is the best for your operation. A site selection consultant will include multiple factors in the analysis that fall into the following three categories:
- Investment costs including site or building acquisition costs, site preparation, foundation cost differentials, infrastructure extensions, etc.
- Operating costs including utilities, labor, logistics, taxes, etc.
- Incentives that offset investment or operating costs
Location-specific, non-financial quality attributes
- These attributes include site and building characteristics, quality and availability of labor, utility quality and reliability, access to markets and suppliers, environmental and other regulations, overall business climate, and quality of life.
Current and future risks to budget, schedule, and the ability to develop and operate your project at this location
- Cost overruns due to unanticipated site development of infrastructure costs, higher than estimated wage rates, undisclosed impact fees, or surcharges on utilities are examples of potential impacts on the budget.
- Delayed utility improvements and connections, inability to attract the right workforce in a timely manner, and delays due to zoning and permitting are examples of potential impacts on your project timeline.
- Future tightening of the labor market, potential natural disaster impacts, and changing environmental regulations are examples of future operational risks.
Once the consultant gathers and analyzes the details about each location, the analysis will clearly demonstrate the location that has the best combination of low costs, high quality, and low risk. With this knowledge, you can move forward with the confidence of knowing that you have undertaken a rigorous and unbiased approach to determining your company’s future.
What makes a site ideal?
Every project’s requirements are unique, but some attributes are desirable for every project:
● A site that is well configured and has few limitations from wetlands, floodplain, soil conditions, or other developmental issues
● A region that has a strong labor force with the skills required by your industry
● A state and community with a business-friendly climate
● A region that gives you important ties to your suppliers, markets, or both
● Competitive costs for energy, utilities, labor, and taxes
● A community capable of hosting your operation and producing economic benefits with minimal negative environmental and social impacts
Why Do You Need a Site Selection Consultant?
1. Your Key Managers Can Concentrate on Operations
The siting process is a time-consuming activity that can absorb valuable time of in-house management if self-performed. Important management responsibilities may suffer and in the final analysis, neither the site selection process nor the manager’s primary duties can be performed effectively. It makes good business sense to capitalize on the experience and expertise of an advisory firm that has the experience necessary to efficiently and thoroughly lead you through the entire site selection process while allowing your critical staff to continue to focus on their day jobs.
2. Unbiased Recommendations
A primary characteristic of a professional siting consultant is the ability to be highly focused on your specific project while providing leadership, unbiased research, insights, and evaluation of all viable alternatives and approaches. An unbiased approach helps protect the client from internal politics and external influences. By beginning with a stakeholder alignment workshop, the process is designed to detect existing biases within the team. Once uncovered, they can be discussed and addressed in an open and logical manner.
3. Access to Data and Technology
A site selection consultant can save your company time and money by leveraging their technology, resources, and network to quickly gather and analyze information. Professional location advisors spend tens of thousands of dollars in technology and data analytics to provide accurate and efficient analysis of workforce data, demographics, logistics and utility services, environmental conditions, geophysical characteristics, taxes and incentives, and other data that is relevant to your decision. Investing in these tools for one decision would be cost-prohibitive, but consultants are able to leverage scale in order to apply world-class data and technology to your project.
Location advisors respect and understand the need for both internal and external confidentiality on capital projects. There are many reasons for confidentiality – shareholder expectations, workforce sensitivity, and public relations issues. An experienced site selection consultant is accustomed to protecting confidentiality and working closely with your company to carefully craft and control the messaging about the company and the project.
5. Negotiating Experience
While incentives cannot make a bad location good, they can make a substantial impact in making a good location better. And negotiations begin with the first outreach to a community. Experienced site selection consultants carefully weave negotiations into the entire site selection process to enhance a location’s strengths, mitigate its weaknesses and risks, and improve the return on investment for your project. It is common for negotiations to save the client millions of dollars in investment and operating costs, while improving the overall operating conditions through non-financial incentives such as expedited permitting, assigning a local ombudsman to facilitate the development and commissioning of the project, and assistance with recruiting and training.
6. Absence of Any Conflicts of Interest
Unlike real estate advisors, who are typically paid based on a transaction, site selection consultants are paid a fee for service. Since site selection consultants have no vested interest in the commission associated with a transaction, their interests are completely aligned with yours. For this reason, they can spend the time necessary to flesh out all the variables of your decision to ensure that you have considered all the options and fully understand the implications of your decision.
When and How Should You Hire a Site Selection Consultant?
The moment your company decides that it needs to shift or expand capacity is the ideal time to start working with a site selection consultant. A location advisor can help you in the early stages of a location decision by benchmarking potential locations to help you narrow the search region. When you begin your site search in earnest, they can identify the universe of alternatives in your search region and quickly and efficiently narrow the list to only those that meet your requirements and will deliver a competitive location. Doing the site search in-house will require the dedication of significant resources to the task of collecting and comparatively analyzing data from dozens of location alternatives while keeping the project on the critical path schedule.
When hiring a site selection consultant, ask the following questions:
1. Do they have experience in the geography I am considering? Some consultants focus on a narrow geography, while many are nationwide and even global. Understanding a firm’s relevant experience and how they implement boots-on-the-ground in whatever is your chosen geography is critical.
2. Do they have experience in my industry? A consultant that specializes in office operations is not likely to be well versed in the requirements of a manufacturing project. And capital-intensive projects require a depth of technical knowledge related to utilities, logistics, and environmental issues that are specific to those projects. Be sure the consultant has the type of experience that matches your needs.
3. What technology and data resources will they employ in your project? Finding the right data starts with knowing the right questions to ask and where to find those answers quickly. A tech-savvy site selector will have access to the data and analysis tools to will make him or her able to quickly narrow the field to a handful of options right from their desktop.
4. How long has the team been working together? The deeper the cumulative knowledge and global connections a consultant has, the more actionable the plan they will produce. Choosing a site is an intensely human endeavor that will impact the company and the community for generations. A successful location advisor has spent years in the field, visiting prospective sites, and understanding the nuances of a location decision.
5. Are their interests aligned with mine? Be sure to look for any conflicts of interest when reviewing firms that offer more than just location strategy services. You want to engage a firm that will drive you to the right location and not be influenced by locational variations in their own compensation.
A facility location decision is one that is likely to endure well beyond the project team and current executive management. When done right, it will have a positive and generational impact on both the company and the chosen community. Hiring a professional advisor with the technology and experience to help you make the optimal decision is not only a good idea, but it is also an investment in the future of your enterprise.