Star Search: Discovering the Best Site for Your Business
Finding the right site for your new manufacturing plant or distribution facility isn’t an overnight sensation. You have to pay your dues by investigating infrastructure, quality of life issues, utilities and taxes, and more. These locations deliver the goods.
Averting a Crisis in the Crossroads of America
To succeed today, businesses need to be positioned in areas situated for quick turnaround and efficient transportation to points across the country, as well as around the globe. Many sites across the United States offer geographic benefits, but geography is not the only factor that can help make a new distribution center or manufacturing plant location a success. Workforce availability, economic support, and general business climate also come into play. Which aspects of a location are the most critical in determining the best fit for your business?
One important consideration is the type of business involved. Retailers have different needs than manufacturers, for example, says Jim Clewlow, chief investment officer for CenterPoint Properties, an Oak Brook, Ill.-based company that focuses on developing, acquiring, and managing industrial property and transportation infrastructure.
"Manufacturing facilities will look at locations that offer highly skilled, low-cost labor, and great logistics qualities," says Clewlow. "A manufacturer that manages its own distribution will also consider supply chain implications, so transportation costs become even more critical."
Meanwhile, retailers heavily involved in the fast-growing e-commerce arena may need to locate near an overnight shipping hub to enable critical expedited shipping to customers.
But no matter what the type of business, given the high cost of transportation today, companies need to consider their best options for bringing product inbound to the United States, then sending it outbound to customers. The following regions boast unique combinations of geographic, workforce, economic, transportation, and business climate benefits that make them the stars of logistics and supply chain site selection.
Joplin, Missouri: More Than Just a Great Location
For the Joplin region—which is comprised of seven counties in southwest Missouri, southeast Kansas, and northeast Oklahoma—it’s all about location. Situated near the population center of the United States, nearly equidistant between Los Angeles and New York, as well as the Mexican and Canadian borders, Joplin’s location alone is a draw. But the area offers much more than just great logistics.
An excellent highway system puts the Joplin, Mo., region within easy reach of major markets such as Chicago, Dallas-Fort Worth, Tulsa, Little Rock, and Memphis. Three Class I railroads service the area, including Kansas City Southern, which provides connectivity to major ports on the Gulf of Mexico and the Pacific Ocean—a benefit to companies importing from or exporting to Asian markets. Air service is available at the Joplin Regional Airport, and airports in Tulsa, Okla., Springfield, Mo., and northwestern Arkansas are within a 90-minute drive.
Nearly 40 trucking companies are either headquartered or have a presence within the Joplin region. "Companies can access a full array of truck transportation services, from truckload to less-than-truckload, refrigerated, oversize and overweight freight, and other specialty services," says Rob O’Brian, president of the Joplin Regional Partnership. "The transportation connections in and out of this area are strong."
In addition, the Joplin region has a workforce of more than 125,000 people trained in manufacturing and transportation skills.
"Jasper County, Mo., was one of the first areas in the country to become a nationally recognized ACT Work Ready Community," says O’Brian. "All of our counties are now looking to achieve that national recognition, which is a testament to our great workforce and training opportunities."
Employers in the region can take advantage of customized training programs offered through several institutions of higher learning. On the Missouri side of the border, Crowder College, a two-year institution, and Missouri Southern State University both offer training with state support through the Alliance for Business Consulting and Development. On the Kansas side, Pittsburg State University and two community colleges provide similar opportunities.
The Joplin Regional Partnership offers site selection assistance, incentive and business tax information, key contacts in business and local government, demographic and economic data, and other services. Contacting the alliance allows site selectors to access information about multiple locations throughout the area that meet their specifications. This can reduce the number of inquiries a site selector has to make, and help expedite the selection process for companies looking to move, expand, or begin operations.
Indiana at the Crossroads
The five major interstate highways that converge in Indiana have earned the state the nickname "Crossroads of America."
The Bureau of Transportation Statistics ranks Indiana 19 out of 50 in terms of road miles, giving companies located there many cost-effective choices for shipping and receiving freight. The state is within a one-day drive to every area east of the Mississippi River, including parts of Canada. By the first quarter of 2015, the southwest leg of I-69 running from Evansville, Ind., to Indianapolis will be complete, bolstering the southern half of the state with major corridors running east-west, north-south, south-east, and south-west.
"Indiana’s interstate system puts us in a competitive position to attract companies that rely on excellent logistics and supply chain management," says Chuck Martindale of Hoosier Energy Rural Electric Cooperative Inc. "The state offers 24-hour access by truck to about 65 percent of the U.S. population. That’s why we’ve seen a significant uptick in the number of businesses locating and expanding here over the past several years."
In addition, the state ranks ninth in the number of rail miles, with an extensive network of rail services and several inland ports, including facilities on the Ohio River at Jeffersonville and Mount Vernon.
Indiana also offers a favorable tax package for businesses, and is currently undergoing a phased reduction in corporate income tax through 2022. Eventually, the corporate tax will drop from its current seven percent to 4.9 percent.
"The state ranks about eighth in the United States overall in tax climate, compared to other locations," says Martindale.
The state also offers low energy costs. Hoosier Energy is a generation and transmission cooperative that provides electric power and services to 18 electric distribution cooperatives throughout central and southern Indiana and southeast Illinois. Hoosier Energy developed the Hoosier Energy Economic Development Department to provide comprehensive economic development services throughout its service territory. Since its creation in 2008, the department’s efforts have helped generate thousands of new jobs, $300 million in capital investment in member territories, and an estimated 25 megawatts of additional load. The Hoosier Energy Power Network provides electricity to developed sites and industrial parks along the I-70, I-65, I-64, and I-74 corridors.
Indiana currently boasts a large automotive contingent—including a Honda assembly plant in Greensburg and more than 20 automotive parts suppliers—that rely heavily on the state’s logistics network and infrastructure system for inbound and outbound shipping.
Overall, Indiana’s low development, real estate, and operations costs, compared with prices on the East Coast, make central and southern Indiana an especially good location to site a distribution center serving eastern markets. The region also offers convenient access for businesses that need to be near Indianapolis, Louisville, or Evansville, Ind., or St. Louis.
Sunny Southern California
The combined ports of Los Angeles and Long Beach are the largest in North America, and the top five in terms of global container volume.
"The West Coast has become a premier destination for shippers," says Lance Ryan, vice president of marketing and leasing with Watson Land Company, which develops, owns, and manages industrial properties throughout southern California. "Southern California is an ideal gateway for products manufactured in Asia. It’s also a less-expensive route, and shipping here reduces ocean transportation times."
Southern California also boasts an extensive freeway network. The major highway routes providing intercity connections are Interstate 5 (north to Sacramento and south to San Diego), Interstate 15 (north to Las Vegas and south to San Diego), U.S. Route 101 (north to Santa Barbara), and Interstate 10 (east to Phoenix).
"Approximately 50 percent of the goods imported through the Los Angeles and Long Beach ports move to the local population," says Ryan. "For the goods that don’t, our location provides an ideal area for a land bridge for destinations toward the Midwest and beyond, via either rail or truck."
In addition, roughly five million square feet of buildings, located a few miles from the port, are in a designated overweight corridor to provide companies a place where they can break overweight loads into smaller shipments. "The overweight corridor is both a convenience and a way to save money," says Ryan.
Watson Land Company has developed several million square feet of master planned centers within four miles of the ports of Los Angeles and Long Beach, and maintains a footprint that includes facilities in Carson/Rancho Dominguez, Chino, Apple Valley, Fontana, and Redlands, Calif.
Watson Land Company is also the first developer in southern California to design and construct speculative buildings in accordance with the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) guidelines. Each LEED-certified building features design elements, materials, functionality, and construction procedures that reduce environmental impact, enhance energy efficiency, and drive down operating costs.
Due to recent demand for higher clear heights, a number of 36-foot clear buildings are currently under construction in the area. Because average net rents trend well above national averages in southern California, many businesses are finding it more cost-effective to increase vertical storage of product by 10 to 25 percent rather than to occupy additional square footage.
"In the past 10 years, the Inland Empire has become one of the hottest industrial markets in the country," says Ryan. "A great amount of new construction is underway, so we will be able to provide the latest features in the country in terms of industrial product."
Southern California’s vast population of approximately 22 million also means a talented workforce is easy to locate and draw upon. Several logistics-focused trade schools are located in the region, and California State University, Long Beach, boasts a global logistics program dedicated to training future supply chain and logistics leaders.
A Midwest Boom
The Midwest remains a hot area for growing companies that rely heavily on logistics and supply chain capabilities. The area’s centrally located interstate highway corridors and inland ports are a testament to the critical role the area plays in moving goods throughout the United States.
"The new investments being made over the past few years in the Midwest have been significant, and make it clear that the area’s logistics capabilities are getting a lot of attention and interest," says Bill Luttrell, senior location strategist for Omaha-based Werner Enterprises Inc., a global third-party logistics provider and one of the largest trucking companies in the United States.
Logistics hubs that offer intermodal access are increasingly popular. In addition, a significant amount of new manufacturing plant and distribution center construction and expansion is underway in Chicago, as well as in southern Michigan, Indiana, and Ohio.
Workforce remains the top criteria for companies moving to the area, especially for those focused on manufacturing, Luttrell says.
"The skills needed on the manufacturing floor over the past 10 years have changed, and the education system is not always providing the technical skills that are needed today," he notes. "That is a concern to manufacturers. The advancement of robotics is having an impact as well. Overall, site selectors are increasingly considering the importance of labor availability."
Meanwhile, logistics has surpassed real estate in the past 10 years to become the number two criteria in site selection for most companies involved in manufacturing and distribution.
Incentives continue to play a key role in attracting new or expanding companies to the Midwest. "States are sharpening their pencils, especially during the downturn in the economy over the past several years," Luttrell says. "Many states have tweaked their incentives to be more competitive in attracting these kinds of investments." But incentives can only go so far.
"The most important factor is whether or not the location will work in the long term," says Luttrell. "We advise companies to look at incentives as a tiebreaker in the final decision between two sites, but not to make an investment decision based on incentives alone."
Companies and economic development entities are coming to understand that training incentives, rather than traditional tax holidays, grants, or tax cuts, might be a better solution in the long run, yet impact a company’s bottom line the same way.
"Economic development agencies realize that even if the investment goes away, the training has raised the level of skills in that community," he says.
A location’s business and regulatory climate and business friendliness is also critical.
"Factors such as shovel-ready properties and well-maintained infrastructure are big issues for companies," says Luttrell. "In addition, power and utility costs, availability of communication infrastructure, and quality of life are important areas to examine when considering new facility locations."
Averting a Crisis in the Crossroads of America
The United States faces many transportation challenges. Crumbling infrastructure, poor funding, traffic congestion, pollution, outdated technology, and truck driver shortages continue to plague the industry.
Indiana is trying to stay ahead of the game. With companies such as Google and Mercedes already testing technology for driverless cars and smart highways on the open road, states such as Indiana will need to “think big, start small, and learn fast,” as retired GM executive Lawrence D. Burns, Ph. D., told attendees of the recent 12th annual Indiana Logistics Summit. “Indiana not only should continue to sustain its current infrastructure, but it also should prepare for the possibility of transformational change,” he added.
But will state and federal money be available to help states such as Indiana move their infrastructure into the future? With the U.S. government in debt, and transportation funding being less than impressive in recent years, some believe that public-private partnerships are the answer to funding problems in the transportation sector.
“We must have constructive dialog among the manufacturing, logistics, and transportation industries, and the government agencies responsible for funding, constructing, and maintaining our transportation infrastructure,” says Indiana Lieutenant Governor Sue Ellspermann.