The Site Selection Process

The Site Selection Process:

Site selection is a very individual process. Every company has specific demands no simple list of guidelines can capture. This section of is intended to help site selectors better understand the general process and its various phases.

The basic site selection process can be broken into three steps:

  1. Pre-Project Planning — When site selectors scan the major search area and select a number of possible communities.
  2. Narrowing the Search — When site communities are surveyed in order to get community specific data and options are narrowed to five or six.
  3. Community Fieldwork and Site Visits — When selectors visit finalist communities.

1) Pre-Project Planning

When a company has a clear need for a new or additional facility in a new location the site selection process begins. Specific reasons for relocation vary according to the needs of the individual business. Often they include proximity to customers or suppliers, the need for a more qualified labor force, lack of highway accessibility, or local government restrictions hindering operations.

The first step is to form a location team that handles the whole process. It should consist of personnel with varying experiences. Skills needed are finance, marketing, manufacturing operations, human resources, transportation/distribution, engineering, law and environment.

The next step is to identify goals and objectives that are to be achieved by the new facility, such as lowering operating costs or entering new markets. Other needs could be human resources or a necessity for new technology.

Then site selectors must analyze the feasibility of the project. Design and engineering concepts, facility requirements, market research and financial feasibility must be considered. A budget must be established as a project framework.

The team then needs to identify critical location factors and project parameters that will serve as a guide for site evaluation. Needs can include quality and quantity of work force, transportation and utilities, characteristics of sites and buildings, capital investment figures and time schedule. These are connected with goals and objectives.

Final activity of this phase is to divide chosen parameters and critical location factors into necessities and desirable aspects, and analyze them to define the geographical area of search. For small to medium-size companies this area will normally range between five and ten states. Among the factors to be considered:

  • Proximity to competitors
  • State legislative climate
  • Size of community
  • Proximity to commercial transportation services as rail and airway
  • Availability of suitable buildings
  • Climate conditions that could affect the facility
  • Demographic characteristics — such as population by age groups, number of households, and average household income
  • Labor force characteristics — such as employment numbers by industry group and unemployment rates by industry group

This data is easily available from national sources. This level of the process often occurs before communities even know the process is in motion. The outcome of the process is to identify an appropriate sample of possible sites.

2) Narrowing the Search

To narrow the search, the site selection team then collects more specific data on the community, usually sending out questionnaires. There are typically about 15 to 20 sites and communities to consider. At this point, state and local economic development organizations are brought into the process to provide necessary data and community profiles.

Community profiles offer valuable information on major employers, local utility company prices and capacities, labor costs and public education standards. Site seekers should try to gather statistics on average wages for specific cost titles to see where they’re going to be positioned within the community wage chart. Workforce availability is highly important, and the community profile usually provides information on the number of employees on the local labor market and qualifications. Data evaluated at this point includes:

  • Leading employers
  • Research base
  • Higher educational resources
  • Workforce educational attainment by years
  • Payroll costs
  • Average salaries
  • Transportation
  • Quality of life

This data is usually not available from national sources. It must be provided by communities. Questionnaires should be customized to the company’s specific requirements. For many different reasons, some site seekers may choose to hide their identities from the public because they want to avoid premature publicity or speculation.

Some communities and many economic development organizations maintain this kind of information in databases and make it accessible for site seekers. Connections can be found through this site. See Buildings & Site Database.

With this cost and non-cost data, site selectors should now narrow down the number of potential sites to 5 or 6.

3) Community Fieldwork and Site Visits

This is the most essential phase. Selectors should visit every site of the final candidates. They should also contact state or local economic development organizations to assist them.

During the visit, selectors should meet major employers and local leaders, and gather individual information on:

  • Labor market conditions
  • Government relationships
  • Local industrial composition
  • Labor costs and availability
  • Workers education and skill standard
  • Transportation and utility services and their capacity
  • Neighborhoods, housing and living conditions

Sites and buildings should be seen and judged on:

  • Capacity of the site’s utility provider
  • Number and capacity of elevators
  • Topographic details
  • Construction date

Site candidates should now be narrowed to two or three. Evaluation must be very detailed to ensure a good match between the business and the community.

Site selectors should now prepare a report on the results of their work and present the final candidates to top company management. The report should include a tabulation of occupancy costs that lists site specific factors like land costs, site-development costs, utility-extension costs and potential construction costs for each possible site.

Once a final decision is made, depending on company requirements, more data should be collected on site topography and geology.

  • Are there any severe soil conditions, contaminations or topographic problems that could cause unexpected costs?
  • Have selectors taken advantage of community financial assistance programs?
  • Should you open a one-stop permitting center to ease the process of necessary permits and licenses concerning environment, building and zoning?
  • If you want to purchase the site, have you contacted the corresponding real estate broker and gotten a purchase option?

The Key to Site Selection

The key to effective, long-term site selection success is doing the groundwork necessary for making the best, most informed decision possible. Stay on course by clearly defining the project, setting realistic goals, and allocating the necessary resources to complete the job. Successful site selection relies on many factors, but none is more important than commitment to the process. A company is best located where where its long-term needs are met. Incentives, though excellent tiebreakers for a decision, should not solely drive the decision.

The process can be involved and confusing — but it will be even more so if the process is shortchanged. Good location decisions require careful, systematic analysis of the facts. Every location problem should always begin by taking a close look at the operation to be located. From those requirements the best location can be selected from among all the possible locations.

The Process Has Changed

Globalization and economic restructuring have led to changes in the site selection process. Corporations need to respond and adjust to changing market demands more quickly to maintain their position. This has resulted in increased relocations and expansions, as well as companies considering relocations to sites worldwide.

But corporate downsizing has also eliminated location work from many corporations’ internal management. Many rely on site selection consultants — more than 50 per cent of site selection work is done by professional site selection consultants today. Competition has increased the speed of the site selection process. Selectors have to do their work within a very tight time frame.

General Site Selection Considerations

The following are general lists of important considerations to use in the site selection process:

Location Factors in Back Office Search:

  • Low operation costs (occupancy, labor, telecommunication)
  • Availability of labor and telecommunication services
  • Reliable electric power services
  • Public transportation
  • Highway access
  • Postage services

Corporate Headquarters Location Factors:

  • Proximity to customers
  • Transportation
  • Telecommunication
  • Support services
  • Quality of life
  • Business climate
  • Corporate and personal taxes
  • Operation costs
  • Secondary education

High-Tech Industry Location Factors:

  • High quality workforce
  • Strong research base
  • Air transportation
  • Quality of life
  • Utilities (electric power)
  • Education (including multilingual schools)

Traditional Manufacturing Location Factors:

  • Availability of workforce
  • Operation costs
  • Transportation
  • Utilities
  • Soil/floor capacity needs to be sufficient to heavy machinery/equipment
  • Topography

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