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Planning and strategy The location selection process for any freight facility begins with the identification of a need. This need may arise from the desire to serve a new market, to merge facilities acquired from another company, or Why seek a new site? to respond to a change in market conditions. Expand: To service a new market Contract: To downsize into a Distribution facilities are inextricably linked to distribution networks. smaller facility, fewer facilities, or A change at one node in the network may have implications up and merge networks down the entire supply chain. As a result, companies will usually Change: To adjust for changing begin site selection planning by revisiting the goals and business market or network conditions context for their distribution network as a whole. As part of this process, a company may ask itself a series of questions, such as: Who are our customers? Where are they, and what do they want? How much of the supply chain do we wish to control ourselves, and how much of it do we wish to contract to a vendor or set of vendors? Is our goal to optimize cost or reduce time to market? How can the company best balance its customer service goals? What kinds of people do we need, and what do we need them to do? How does this balance with our capital needs? How might any of the above change over time? When might that change occur? How might this impact our decisions? How will we evaluate and adjust our decisions as time goes by? How often will we do this? 32 Freight Facility Location Selection: A Guide for Public Officials

OCR for page 32
Any form of advance planning involves a calculated risk. Unforeseen business events, market changes, and other outside factors introduce the risk of significant error into any planning process, and the margin of variance increases the further out the target year. Nonetheless, any network or facility plan usually adheres to the following rules of thumb: Facility Characteristics Planning Horizon Significant infrastructure investment 20+ years (such as a port or intermodal facility) Capital or machinery intensive 7-10+ years investment Commodity-based or non-capital 3-5 years intensive Once the company selects a planning time frame, the sales, operations, and/or supply chain staff can forecast or project the remaining strategic considerations: Sales or through-freight volume by type. Demand points or markets to be served. Product sourcing. Product categories. Number of end (or source) points to be serviced by the facility. Freight pricing (including variability by mode). Facility ownership or leasing options. Any likely exit plan for the facility. The time frame and forecast of these strategic considerations establish the overall needs to be satisfied by the new facility or network. The location planning team will use this information to set overall parameters for the project. During the planning and strategy phase a list of criteria will be developed. Freight Facility Location Selection: A Guide for Public Officials 33