Responding to Changes in the Supply Chain

By Christopher Steele, President, CWS Consulting Group LLC

In the eight months since this column first appeared in Cargo Business News, the global economy has changed significantly. The Dow Jones average has dropped about 5,000 points, global trade is down, and industrial real estate vacancy rates have risen tremendously. (The reader is cautioned that there is no known causative connection between this column’s appearance and the economic downturn.) Current circumstances have created a different set of challenges and, possibly, opportunities in supply chain real estate and asset management.

Even with the best planning, companies and investors are likely to find themselves with a host of what we in the industry typically refer to as “excess real estate.” There is a bevy of other terms that can be used — many of them utilizing words not suitable for a trade magazine — but the upshot is that these assets no longer fulfill their original purpose.

Reverse Site Selection
As with anything else, the success of a sale lies in understanding and meeting the motivations of the buyer. Understanding the site selection process and applying it in reverse can help highlight how excess property might be re-used. It can also — in the best of cases — point to new users for this excess property.

Any site selection process begins with determining the function that the new facility is expected to perform and how it fits in with the user’s value chain(s) or production strategy, etc. The next step of the process is to examine the staffing, skills, logistics access, market proximity, regulatory issues, quality of life, and features needed to make the operation successful.

Essential items, such as market access or infrastructure requirements (one-day drive to “n” markets, proximity to international shipping, etc.), facilitate filtering and removal of candidate communities that are unable to deliver them. From this point forward, the site selection process becomes a weighting game. No candidate location will completely match the prospective user’s ideal location profile. Some preferred criteria, such as access to key markets and the availability of highly trained labor, may outweigh others such as low cost of operations. Finding the right balance ensures the success of the enterprise by achieving a location that will provide for the users’ needs now and during a reasonable range of downstream scenarios.

Turning it Around
Increasingly, the same process is being applied in reverse to help companies, developers, and public agencies reuse abandoned, vacant, and underutilized properties. Labor, market access, infrastructure, climate, cost, utilities, regulations, and other data provide the clues to determine who might be a prospective new user for the site or facility and, moreover, give insight into the packaging and marketing that can be used to make that site more attractive and competitive.

Industry and use-specific profiles, coupled with weighting schemes, can add substance to marketing plans that demonstrate the location’s and community’s strengths relative to competitive alternatives. The information is also useful for putting together incentive plans later.

Working backward from site and community characteristics, the company or developer trying to get rid of an excess property can find alternative users or investors for whom the property meets key business goals. State and local government agencies can also be enlisted (through incentive, credit or other programs) and become active partners in bringing economic vitality to what would otherwise be a drain on the community.

Reverse site selection for disposal of excess real estate is not an exact science, and is by no means easy when few companies (potential alternative users) are looking for new facility locations. Still, a ready-to-go facility can be exactly what the doctor ordered if the match is right.

Perhaps we’ve done this out of sequence, but next month we will take a look at an example of “forward” site selection – A case study of how a company made the decision to invest in a new manufacturing site in Pennsylvania.

In This Issue

News, Trends & Analysis
New Items

Inventory Investment and the Implications on GDP Growth

Supply Chain
Responding to Changes in the Supply Chain

Compliance Corner: How to Utilize Technology to Manage Global Trade Compliance

Overseas Opportunities for Exporters

Create a Strategy before Cutting Costs

Features
Gateway at a Glance – Great Lakes, St. Lawrence Seaway

2009 Ro-Ro Trend

Supply Chain product review
Automotive Supply Chain Software

Ports & infrastructure
Five Major Ports, Five Different Ways to Handle the Recession

Funding a National Freight Policy

Commentary
Will the Stimulus Package Help the Trade Conditions?

Casualties

Who, What, Where, When

Final Say