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Relocate for cost reasons, or to access qualified employees or support


It is certainly possible for a business to cost justify another facility, instead of or in addition to, because of location-sensitive operating costs, community incentives and tax combination, regulatory climate. Access to qualified employees or specialized vendors and support is another reason for a company to urgently seek another locale even in a poor economy, in order to maintain product volume or quality.

For cost justification, the characteristics of your company will determine what costs can be lower in another community, and if a payback is possible after relocation cost.


A. In a relocation or expansion, there WILL be short term costs. There MAY be long term benefits. A company will need to identify, quantify and compare one time and operating costs and benefits at the current and alternative new locations, then calculate the net financial payback of each alternative. Be sure to consider:

1. Direct and indirect headcount at all levels of the organization: cost of pay; cost to hire and train at the destination, cost of an attrition plan or termination at the source.

2. Buy or build or lease space in the facility for: Equipment, Inventory, Headcount related, Maintenance, Other support and administration.

3. Equipment added for operation, purchase and depreciation, tooling

4. Utilities and energy, including waste treatment, waste disposal and emissions

5. Transportation in and out; and this variable is increasingly important in the time of rising fuel costs.

6. Regulatory cost of being a resident of a particular state and community, and those costs vary dramatically.

7. Startup costs: to disconnect, move, reconnect, train, absorb learning curve losses; for travel, for process qualification and validation. Technology transfer costs usually increase as complexity of the operation increases. Cost of the move itself increase as machinery size, weight, plumbing and foundations increase.

8. Cost of closedown at the source, and any property actions.

9. Possible interruption to channels of supply

10. Costs of actions to avoid business interruption, such as inventory buildup, or parallel operation of facilities.

11. Taxes and the offset of relocation incentives which can possibly be negotiated.


B. For access to people, vendors and support, the characteristics of your company will determine what communities could offer resources more attractively than at present.

1. People
One of the most significant considerations in facility location is the availability of qualified employees. The unemployment rate in a community is important and easily quantified. Whether or not there are potential employees suited for your business is another question, much more difficult to evaluate in advance.

First, what kind of requirements does your company have? And are you able to meet that requirement where you are?

Does the educational system provide people trained to the level you need, generally? In a community you consider? Will you pay to relocate skills from another location? Can you train employees in the skills? Is training one of the incentives that a community will provide? (Training subsidies are quite common.)


2. Support
Similar questions should be asked about the availability of specialized vendors and support that you will require in the community you choose. There are many technology centers in the US, areas such as Silicon Valley in California; a similar community near Boston; Research Triangle in North Carolina. Large cities sponsor attempts to create such centers, in one or another technology, in their vicinity. These centers can provide services just across the street that are vital to the success of a company, so be sure that you understand the importance of support that you depend on. In this day of overnight package service, perhaps local support is not as important as before but check it out.

Thanks for the time, I hope the article was useful. JPR welcomes the opportunity to discuss your particular application.

Jack Greene, Jackson Productivity Research Inc.

What's Next?

You have searched the web to understand how the principals of relocation can benefit your organization, but maybe don't know quite how to proceed. I'll be glad to share what I know about the subject, and will welcome your call or email. Tell me as much as you'd like, confidentially, about your organization's situation and objectives, timetable and budget, and I'll describe some practical actions to accomplish your scope. You will have a better understanding of the options.

 

There's no cost or obligation to contact Jack Greene at 843-422-1298  
jack@jacksonproductivity.com