How Companies Select Sites For Industrial Projects

The Gadsden-Etowah County Industrial Development Authority has been asked how manufacturing companies undertake the process of selecting a location for a new project. In reality, this is more of a site elimination process. We thought this short explanation might be of interest to you, too.

Initially, most companies look at a broad geographic area consisting of several states.  Current and future markets, and supply chain management, are fundamental at this point.  Companies want to optimize their access to existing and potential customers and suppliers, so freight costs, transit time, and proximity issues are key concerns.  Some will also look at places outside the U.S. due to market and operating cost considerations, as well as to avoid duties on imported parts and exported products.  Ultimately, their purpose is to minimize their total landed cost and to maximize their expected return on invested capital.

After determining other locational requirements (such as an available building or site, workforce skills and availability, training programs, transportation infrastructure, utility reliability and costs, tax costs, support services, and business climate) they contact state development agencies and/or power company economic development departments to solicit information about localities which potentially meet their needs.  Many will hire a site-selection consulting firm to perform these tasks for them.  Projects are code-named to assure confidentiality.  These Requests for Information are then transmitted to communities which meet a project’s evaluation criteria to get their responses.

Companies and their consultants also perform their own screening of candidate locations via the Internet, without communities knowing it.  They research facts and figures on state and local websites, as well as government databases.  Their main task at this stage is to narrow down the large number of location options to a more manageable number.  It is not unheard of for a community to be eliminated from consideration solely because the desired information could not quickly and easily be obtained.

Therefore, the most important local marketing initiatives are to:
• keep up-to-date information about sites and buildings on the state database of available property
• maintain a website that contains a great deal of relevant data, both in breadth and in depth
• stay in contact with the state department of commerce and others about local advantages
• have detailed “product” information readily at hand, enabling fast and complete responses to RFIs

But more important than marketing is to have a product that customers will want to buy, available and ready to use when they want it, at a competitive price.  Without this, promotion is futile.

Product advantages such as excellent schools, first-class technical training programs, favorable labor climate, good transportation network, excess utility capacities, low operating costs, the availability of manufacturing services, government support, and an appealing quality of life will be scrutinized by every company seeking a new location.  Deficiencies in any of these can cause a location to be cut.

Companies and their consultants usually perform these investigations with an evaluation matrix, where many items are prioritized, quantified or rated, and compared.  When locational options are further narrowed to a few finalists, cost-reduction incentives become an important factor in the final decision.

However, companies locate on a site or in a building that meets their needs.  If a suitable site or building is not available, or one can’t be provided within their time frames, then all the other local advantages become irrelevant, and a community won’t even be considered as a project location.

This is why local governments are placing so much emphasis on site development.  For example, the City of Gadsden is developing more industrial sites at the airport.  Rainbow City is developing a new light industrial park on Lumley Road and is building a new wastewater treatment plant.  The City of Attalla is working to construct a new sewage treatment plant, too, which is needed to serve its industrial property.  And Etowah County is assembling property to create an industrial megasite.

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