Brac presentation 9 10 13 final

© 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

mailto:[email protected]�

© 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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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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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


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


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%


Data Center Project

8 8


Start With Supply Chain Strategy to Get Leverage

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Source: Gartner / AMR Research


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


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


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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UK, Japan/Taiwan, Germany, & Canada are Top US Investors

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Source: Congressional Research Service 2012 & Schneider Consulting


Manufacturing is the Largest US FDI Sector ($83B in 2012)

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Source: Schneider Consulting


Relative to US firms in the same Industry, Foreign Company Trends

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Source: US Dept of Commerce 2012 & Schneider Consulting


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)


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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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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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Soon, I am going to be up to my neck in ALLIGATORS - Questions?

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Brac presentation 9 10 13 final

Documents

brac commute distance

logistics infrastructure highways

labor costs

transportation costs

critical criteria

public transportation

taxes

business climate