Powering Logistics Development
B usinesses considering where to expand or move their operations evaluate myriad factors. Among the top considerations, says Jeremy Sowders, economic development manager with Hoosier Energy Economic Development, are access to a skilled workforce; proximity to a population center and customer base; easy access to infrastructure like interstate highways or ports, so the company can move goods ef ciently; and a location that can meet the needs of the company. In some cases, tax and other incentives in uence their decisions.
business is expected to create, and the multiplier effect the investment and jobs likely will have on the community, Sowders says. Typically, the greater the number of higher-wage jobs created and the larger the capital investment, the greater the incentive. The jobs that warehouses and distribution centers tend to create historically haven’t been seen as highly skilled or offering the types of higher- wage positions that more technical operations often do, Wassmansdorf says. However, that’s starting to change as more distribution operations implement technology. The global warehouse automation market is forecast to grow at a compound annual rate of 15%, hitting $41 billion in 2027, LogisticsIQ reports. S G I The expression “greening the supply chain” has been around a long time. Now, however, more companies are responding to the challenges posed by climate change, Wassmansdorf says. Among other steps, they are connecting with their utilities to evaluate renewable energy sources and trying to cut physical waste from production processes. “Many companies are making more focused efforts to gure out how to de-carbonize the global footprint of manufacturing and supply chain operations,” he says. While sustainability might not lead the site selection process, “it’s de nitely on the list,” Comerford says. When companies pick nal locations, those that can provide more support to help them meet sustainability goals might gain an edge, she adds. That’s particularly true if the company sells to consumers, or operates in the sustainability market in some way. Similarly, more agencies that award incentives are seeking companies that focus on environmental, social, and governance (ESG) initiatives. “This can in uence how discretionary incentives are awarded and how companies comply with incentive program performance requirements,” Wassmansdorf says.
more production and inventory closer to customers,” says Gregg Wassmansdorf, senior managing director of global strategy and consulting with Newmark, a global real estate services rm. Wassmansdorf also chairs the board of directors for the Site Selectors Guild, a global organization of the world’s foremost location strategy and site selection consultants. Along with customers, companies want to be close to workers, Sowders says. Yet even as many companies look for access to population centers, they also need affordable properties. In trying to balance these often con icting goals and hit “the sweet spot,” some consider properties just outside a metro area. “While this was already happening, the pandemic accelerated the shift,” he adds. Higher transportation costs and the truck driver shortage also are impacting distribution network locations, Newmark research shows. “Firms looking to control costs and appeal to a broader- based potential labor pool may expand the number of warehouse/distribution points along the supply chain,” according to the rm. I T I I In general, economic incentives have been more prevalent in manufacturing and technology rather than distribution activities. These sectors are generally known for offering jobs that pay well and require highly skilled workers. “Incentives are a tool for economic developers to incent growth that’s considered desirable for a local area or region,” Wassmansdorf says. Many tax and property incentives are calculated and awarded based on the investment level, the number of jobs a
Incentives can play a role in closing deals, but typically aren’t the rst consideration. “The most important site selection question is nding the right place for a facility to operate,” says Michelle Comerford, project director and industrial and supply chain practice leader with Biggins Lacy Shapiro & Company, specialists in site selection. Once a company has narrowed its options and decided on a handful of places that should work, it assesses the initial and ongoing costs. That’s generally where incentives come into play, Comerford says. For instance, a company may check into any offsets available to help cover the cost of needed infrastructure upgrades. C D N Over the past two years, nearly three- quarters of supply chain leaders adjusted the size and number of locations within their supply chain networks, a recent Gartner survey nds. “In a fragmented world, global rms have been making changes to their heavily cost-optimized, one-size- ts all networks, and now favor a mix of global, regional, or local elements,” states Kamala Raman, vice president with Gartner’s supply chain practice. This “once-in-a-generation shift” of many companies’ manufacturing footprint is a result of the shutdowns and disruptions the pandemic caused. To protect against future supply chain disruptions, “we see a shift to more regional production, all in line with a mindset of ‘make local, for local,’” Comerford says. Customer demands for speedier access to goods are also driving these changes. “Companies have to bring
58 Inbound Logistics • August 2022
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