Freight Facility Location Selection: A Guide for Public Officials (2001) / Chapter Skim
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From page 29... ...
; Whencompaniesevaluatesites,somecriteriaarefarmore importantthanothers.Theabilitytoaccesskeymarkets, availabilityofefficienttransportation,sufficientqualified labor,andtotalcostsareconsideredkeycriteria. ; Proximityand/oraccesstomarketsisthemostimportant drivingfactorthatdeterminestheregionorcommunityin whichafreightfacilitywilllocate. Proximity and/or access to markets is the most important driving factor that determines the region or community where a freight facility will locate.
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From page 30... ...
Freight Facility Location Selection: A Guide for Public Officials30 ; Freightlocationdecisionsrarelyrespondtoa"builditand theywillcome"approachbythepublicsector,yetitisalso truethathavingthenecessarysupportinfrastructurein placecanbeagreatincentiveifthelocationisagoodone andotherfactorsarepositive. Thischapterwillbroadlydescribehowcompaniesdecidewhereto placefreightfacilities–beginningwiththeearlyplanningstagesup throughfinalsiteselection.Chapter5willprovideamorein-depth lookat11keycriteria typicallyused toevaluate candidate sites. (Chapter3hasalreadydiscussedtheimportanceofthegroundwork communities can undertake and the collaboration they can build to greatly increase the potential for success for freight facility developmentintheircommunities.)
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From page 31... ...
Freight Facility Location Selection: A Guide for Public Officials 31 tospecificmarkets,costs,andpopulationtrendsmaydrivetheearly stages. A secondary screening may involve examining highway andrailnetworkstodetermineareaswithserviceadvantages.The third screeningmayevaluate total costsofoperation for thefinal candidatesites.Thefinalstagemaytheninvolvemoresite-specific issuessuchasspecificfacilitiesandthelaboravailableinaparticular community. Stages of site selection While these steps are shown above as a sequence, stages often overlap and recycle in an iterative manner. For example, some organizationscombinethenetworkmodelingandlocationscreening stages.Othersdevelopthefinancialmodelearlyintheprojectto determine overall feasibility and then refine it based upon new knowledge throughout the process. Sometimes location selection needstocyclebacktoapreviousstage.
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Freight Facility Location Selection: A Guide for Public Officials32 Planning and strategy Thelocationselectionprocessforanyfreightfacilitybeginswiththe identificationofaneed.Thisneedmayarisefromthedesiretoserve anewmarket,tomergefacilitiesacquiredfromanothercompany,or torespondtoachangeinmarketconditions. Distributionfacilitiesareinextricablylinkedtodistributionnetworks. Achangeatonenodeinthenetworkmayhaveimplicationsupand down the entire supply chain. As a result, companieswill usually begin site selection planning by revisiting the goals and business context for their distribution network as awhole. As part of this process,acompanymayaskitselfaseriesofquestions,suchas: Why seek a new site? ExPAnD: To service a new market COnTRACT: To downsize into a smaller facility, fewer facilities, or merge networks CHAnGE: To adjust for changing market or network conditions Who are our customers?
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Freight Facility Location Selection: A Guide for Public Officials 33 Anyformofadvanceplanninginvolvesacalculatedrisk.Unforeseen businessevents,marketchanges,andotheroutsidefactorsintroduce theriskofsignificanterrorintoanyplanningprocess,andthemargin ofvarianceincreasesthefurtheroutthetargetyear.Nonetheless, anynetworkorfacilityplanusuallyadherestothefollowingrulesof thumb: FACILITy CHARACTERISTICS PLAnnInG HORIzOn Significantinfrastructureinvestment (suchasaportorintermodalfacility) 20+years Capitalormachineryintensive investment 7-10+years Commodity-basedornon-capital intensive 3-5years Oncethecompanyselectsaplanningtimeframe,thesales,operations, and/or supply chain staff can forecast or project the remaining strategicconsiderations: • Salesorthrough-freightvolumebytype.
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Network modeling and analysis Timetomarketandoveralllogisticscostsareprimefactorsdriving freight facility location decisions. As a result, the first stage for locating a freight facility is to examine the interplay between locationandfreightcosts.Transportationisalargeconsiderationat thispointintheanalysis. Companies use computerized network modeling programs or equivalentmethodologytoestimatetotalshippingcostandtimeto market forarangeof scenarios. Theseapproachesusecustomer or store locations, sourcingpoints, freight loads, fuel costs, facility operating costs, and transportation modal choices to develop Time to market and overall logistics costs are prime factors driving freight facility location decisions.
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From page 35... ...
Freight Facility Location Selection: A Guide for Public Officials 35 idealized distribution center networks. Modeling programs and other analyses may evaluate a variety of scenarios, examining the sensitivity of issues such as freight volume, population growth, customerchange,sourcing,operationscosts,andfuelcosts. Linkagesandinfrastructureinanymodelingmustbecomparedagainst real-worlddata to reflectactualconditions,whichnetworkmodels sometimes have difficulty incorporating. Congestion and traffic on roadwaysmaycompromisewhatappearstobeanidealnetwork,as maypolicies thatpromotepassenger traffic takeprecedenceover freight on rail networks. Companies often need to make off-line corrections, as networkmodels do not always incorporate on-thegroundissues. The networkmodelsdonot identify final sites,butonly show recommended areas where freight facility nodes would yield the best performance. Companies typically use this information as a startingpointandattempt tofindsiteswithinareasonableradius oftheserecommendations.Thisradiusmaybelarger(50miles)
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From page 36... ...
Freight Facility Location Selection: A Guide for Public Officials36 informationtoindividualcommunityeconomicdevelopmentagenciesif theteamneedsmorespecializedinformation.Communitiesprepared withavailableinformationorameanstoreadilyproviderequested informationmayfindthemselvesinabetterpositiontocompetefor afacility. Theplanningteamtypicallyconstructsanevaluationmatrixormodel basedonthisdata.Byapplyingtheevaluationcriteriadevelopedin thestrategicplanningphase,theteamcanobjectivelytesthowwell eachof thecandidatecommunitiesorsitesmatches thecompany's needs.Theteammaytestavarietyofalternativescenariostoreflect changingpriorities.Theteamalsoexamineshowthecommunityor sitelocationimpactsoperatingandcostconsiderationsascompared tothenetworkmodel'sideallocation.Communitiesthatscorewellfor theteam'sidentifiedprioritiesandthatcanalsoadapttoalternative scenariosmakethe"shortlist"forfurtheranalysis. Onceacommunityorregionisplacedontheshortlist,thelocation planningteamwill furtherevaluatespecificsitesorfacilitieswithin thearea.At this stage, the location teammay seek theassistance of localgovernmentoreconomicdevelopmentofficials toexplore possiblesites,findoutaboutpermittingandregulatoryrequirements, andlearnmoreabouttransportationandutilityinfrastructure.
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Freight Facility Location Selection: A Guide for Public Officials 37 • Size,configuration,orpermittingabilityvis-à-viscompany needs. • Thesiteorfacility'sabilitytoaccommodategrowthor otherwiseadapttofuturerequirements.
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From page 38... ...
Incentives, negotiations, and final selection
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