The success of any Manufacturing facility hugely depends on its feasibility report. This feasibility work includes the selection of a site for setting up the manufacturing plant after factoring in multiple quantitative and qualitative variables. Businesses leading those projects need to consider various implications while selecting a manufacturing location. They have to extensively study the consequences of selecting one particular manufacturing plant site for the operating expense, product quality, profit margins, logistics, supply chain, and the environment. With such significance, any business and corporation must select a manufacturing location with extreme diligence.
Committing a mistake when choosing a manufacturing site can prove to be very costly for the given business in many aspects. We will discuss six mistakes that every business should avoid while picking a manufacturing location:
- Starting Work without Getting Consensus on Search Parameters
Oftentimes, organizations commit a mistake in choosing a manufacturing location right at the beginning of the process without proper specifications laid out. This mistake materializes when site searching teams start their work in the absence of a consensus of what the company is actually looking for in the new site. Any selection work of a manufacturing location involves a set of search parameters that guide the searching team in the right direction for picking the best possible site and without these clearly laid out, site location could be off the mark.
However, it is vital to develop a consensus among all the decision-makers and stakeholders about what should be laid out in terms of the search parameters. From coordinating all parts including HR issues and environment to construction cost concerns, everything must be addressed in that document and has the seal of approval of all the concerned parties. Developing this agreement before starting the search will make sure the site searching team doesn’t end up assessing and shortlisting suboptimal locations. Such an exercise will only result in wasting time, money, and other resources.
- Picking Site Based on Offered Incentives Rather than Operational Requirements
Local governments and communities offer incentives to businesses for setting up their manufacturing facilities in their jurisdictions. These incentive packages can serve as a tiebreaker when you can’t decide between two manufacturing sites. However, giving more weight to incentives instead of operational requirements is something that every business should avoid while picking a manufacturing site.
For example, you may choose a manufacturing site based on its low and lenient tax details. However, if that site doesn’t offer you the best in terms of your logistical requirements and labor needs, the tax benefits won’t make this site selection a good investment in the long run.
Choosing a Site for Current Operational Needs
Many times corporations just consider their current operational requirements when choosing a manufacturing site. While it is important to keep your current operational requirements at the top of the list, it is equally necessary to factor in your expansion plans and future roadmaps. Building a manufacturing facility from scratch entails a lot of groundwork and investment. Therefore, make sure that it is not going to become insufficient or redundant in the next five or ten years.
These are a couple of things you can do to make sure a new manufacturing site is not just meant to fulfill your existing operational requirements.
- Make sure the location you choose will remain business-friendly for a long time.
- Check the economic forecast of the region and how its industrial and manufacturing landscape is going to perform in the next few decades.
- Make sure there is enough acreage and technological capacity on the site to accommodate any of your expansion plans.
- Ending Up with an Option with no Alternatives
When searching for a manufacturing location, businesses should always go for two sites that fulfill all the parameters set in the beginning. These sites should meet all the requirements set forth in the initial phases and be an optimal choice in the end. Limiting yourself to just one site can leave you stuck in the end if your one and only choice falls through. Also, having more than one location gives you bargaining and negotiating power between the various locations and can help broker the best deal.
- Not Fully Understanding Topographical and Geotechnical Issues
Costs, logistics, and incentives are not the only elements to factor in when choosing a manufacturing location. A business must have experts on board that can factor in the geotechnical, topographical, climate, environmental, and archeological factors as well. Factoring in all these things will answer many important questions. For instance, you will find out:
- How to approach wastewater treatment at that particular location?
- What are the environmental protocols and compliance measures you will need to follow to set up wastewater treatment of your manufacturing facility?
- What are the potential locations of freshwater wetlands?
- Is the site suitable for 12-month operations?
- Is the site in the floodplain?
Not finding answers to all these and similar questions can weaken your basis for selecting any particular site for your manufacturing facility.
- Failing to Maintain Confidentiality
Site searching for a new manufacturing facility is a business secret. You don’t want to let your competitors know about your future/ expansion/ reorganization plans when they are still in the nascent phase. This makes the entire project of searching and selecting a manufacturing location a confidential affair. Nonetheless, very few businesses manage to maintain that confidentiality.
Most businesses fail to maintain that confidentiality because:
- They use actual titles and names instead of using codes for the project
- They are operating without stricter NDAs (Non-Disclosure Agreements)
- No organizational hierarchy is set for information sharing
By being mindful of these six mistakes in choosing a manufacturing location, a company can manage to have a successful beginning for its new business plans. On the other hand, if companies commit these mistakes in picking the manufacturing site, they will not just fail in leveraging this decision (i.e. setting up a manufacturing facility). They can also lose millions of dollars in the opportunity cost in the long run. Moreover, if the manufacturing facility is a part of an expansion or relocation plan, the bad site selection will neutralize any potential competitive edge of this move.