A Story of Redemption

NEW ORLEANS – Let the record show that I am noticing. I have actually been noticing for some time now. It would appear that this city is not just back, but it’s better.

Now I’m not just hearing this from economic developers who will sell you a pig in a poke if you let them. No, longtime residents tell me that things are looking up, that the city is changing. Previously I had known New Orleans as an interesting if not largely broken place headed in some very ugly directions. That is no longer the case.

That is not to say that serious deep-rooted problems do not remain. Crime and poverty remains a pox here. Establishing quality public education is still not a top priority for some. And entrepreneurship and diversity is still viewed with antipathy or even suspicion by some old money. But those attitudes are breaking down. People do die.

I am here for a “fam” tour, which I welcome, as it gives me an opportunity to learn about a place. Because of the time constraints of my consulting business, I do not nor cannot accept all such invitations. I will certainly not consider a fam tour in which the inviting community is not covering my travel expenses. I got one of those invitations this past week.

But if my schedule permits, I go to places where a) a corporate client may want to go and b) there is a heightened degree of business activity and c) a community needs help and will pay for my consulting services on how to better compete for private investment.

I arrived in New Orleans a day early so as to knock about on my own, and get a feel for the place.

An Old Haunt

I have been to this city a number of times over the course of many years – the first time as a young hitchhiking vagabond back in 1974. I know I must have worried  my parents half to death back then with my youthful antics. I have only vague memories now, but they include a place called Cooter Brown’s, which served a wonderful cheap breakfast.

As a young newspaper reporter in the 1980s, I would knee wobble with friends in the French Quarter into the wee hours only to discover that some of those pretty girls that we were buying drinks for weren’t who we thought they were. Enough on that. Jaegermeister is an evil concoction designed for personal destruction.

Years later, I now look at New Orleans through a much different lens, not so much as Partytown USA, a Gulf Coast version of Vegas, but a place where serious business investment can and does take place. According to a new report from the U.S. Department of Commerce, Bureau of Economic Analysis, Greater New Orleans had the ninth fastest GDP growth in the nation in 2012.

Being a port city certainly doesn’t hurt. Occasionally, even magazine editors can get it right. My friend Jack Rogers with Business Facilities magazine did when he wrote this: “With its proximity to the center of the U.S. via a 14,500-mile inland waterway system, six Class One railroads and a nexus of interstate highways, New Orleans is the port of choice for the movement of everything from steel, rubber and manufactured goods to commodities like coffee.”

Back from the Abyss

New Orleans has been a port city ever since the Spanish and French waved flags here. The presence of a resurgent oil and gas industry also provides for a degree of wealth and stability. But something else is out there that that has changed the environment and even the outlook of the city.

I am not going to be so heartless as to say that Hurricane Katrina eight years ago was a good thing for “Nawlins.” Lives were lost. (About 1,800.) People’s personal finances were devastated and many forever lost their homes and left never to return. But I will suggest that Katrina, a near death experience for this city, has served as a rallying point for one of the greatest turnaround stories in American history.

Americans love comeback stories as it reaffirms hope and what can be. The Great Chicago Fire of 1871 did not stop Chicago. It bounced back. So, too, did New York City when it faced an almost financial meltdown in 1975, but somehow avoided bankruptcy. The cocaine cowboys were shooting up Miami in the late 70s and early 80s, making it a literal war zone between rival drug gangs, but law enforcement eventually regained control.

These cities pulled themselves back from the abyss, which I believe can only happen when local government and the business community band together to fight for positive change. That public-private partnership is key. It certainly happened here.

Winning with Technology

Prior to Katrina’s landfall in 2005, the economy of New Orleans relied heavily on being a port city. Tourism and government were the other major sectors of an economy in decline and the business community was not taking the leadership role that it should have. But that has changed.

Earlier this year, the Brookings Institution identified New Orleans as having the best economy among 100 large metropolitan areas. And while I do not necessarily put a lot of stock in the thinking of muddled editors (I can speak from experience on this), it may be worth noting that the Wall Street Journal named New Orleans the No.1 most improved metro in the country. Bloomberg called it the No. 2 “boomtown” in America, and Forbes ranked it third in terms of winning technology jobs.

But as much as this comeback story is inspiring and deserves further scrutiny (which is why I am here), it is not an absolute given that economic growth is sustainable for the long term. So says my host, Michael Hecht, president and CEO of Greater New Orleans Inc. I thought it quite revealing and candid when he wrote this:

“Our gains are real, but they are fragile. And as tens of billions of Katrina funding wind down, the rest of the country is reviving from the great recession. The ‘new’ Greater New Orleans is about to enter the ‘new’ normal.

“So for all the challenges of the past few years, the coming may hold even more. Competing on a level playing field now will be our opportunity to prove to the rest of the world that the Louisiana Renaissance is real, and that the post-Katrina resurgence was not a swan song, but the prelude to a story of redemption.”

Heck, Hecht can write. How can you not want to stay abreast of a story of redemption?

Issues that inhibited corporate investment, like corruption, vulnerability to flooding, and a problematic permitting and regulatory climate, are being addressed largely at the insistence of the business community. (Detroit, are you listening?)

Now there is no question that federal aid, as alluded to by Hecht, played a huge role. The Federal Emergency Management Agency said last month that it provided $19.6 billion to Louisiana to rebuild and protect property against future storms in the eight years since hurricanes Katrina and Rita struck Louisiana.

But so too does political leadership. I think it safe to say that Louisiana and New Orleans has had some pretty nefarious politicians at the forefront in its history. That might be good for the anointed few but it’s usually not good for the many. In that regard, business can be a progressive force in essentially demanding clean government, much less a pro-business environment. I think that is happening here.

Following in the Mold

The evolution toward a new New Orleans was apparent this past week when Chentech said it would establish a new software development center here. A subsidiary of ChenMed, ChenTech will create 50 new jobs with an average salary of $83,000 year, plus benefits. Economic developers say the same number of new indirect jobs will be created.

I never would have thought of New Orleans for this type of business until recently. But keep in mind that Forbes ranked New Orleans only behind Silicon Valley and San Francisco in the battle for IT jobs. The same magazine ranked the city first in “America’s Biggest Brain Magnets” for attracting people under 25 with college degrees. And that has been a part of the story as the city has repopulated itself after Katrina.

The fact is that when educated young people want to come to your city, that’s a good thing. You have a future based on greater expectations rather than protecting a musty patriarchal status quo. In short, your children and grandchildren are risk takers looking for opportunities to build their own lives and New Orleans is increasingly viewed as an attractive option.

Of course, providing targeted tax relief, greasing the skids so to speak, can always help. Louisiana has a digital interactive media and software development incentive, an offshoot of prior efforts to attract film industry production to the state. The incentive provides a refundable tax credit of 35 percent for most software payroll expenditures for state residents and a 25 percent refundable tax credit for production expenditures related to hardware, software and lease space.

Game On

Paris-based Gameloft, a publisher of mobile games, credits the incentive as a reason for picking New Orleans for its second U.S. game development studio. The company is on track to fulfill its goal of 100 employees by 2016.

One of the biggest coups in reshaping the “new” New Orleans happened in 2010, when after a 17-month search, GE decided the Crescent City would get its first IT Center of Excellence for GE Capital. It has meant 300 jobs and six-figure salaries.

A forward-thinking GE Capital wanted to work with academic institutions to ensure a future talent pipeline. To ensure that would happen, the state committed $5 million to fund expanded computer-science programs at the University of New Orleans and other universities. A substantial workforce training and recruitment package also was offered in addition to a 6 percent annual rebate against new payroll for the first 10 years of operation. That sounds like a pretty sweet deal.

Such inducements get my attention and say something about a changing environment. I notice and so, too, is the world noticing a changing New Orleans. No doubt about it. It’s happening.

That does not mean that I will not continue to have questions and concerns. I will always have questions and concerns — about every place, everywhere, all the time. It’s what I do.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a site selection and economic development consulting firm based in Plano, Texas.

If your company needs an optimal location for future operations anywhere in North America, we can help. If your community needs to improve its competitive standing, we can help. All requests for information are considered confidential.

Telephone: 972-767-9518. Email: dbarber@barberadvisors.com  Visit our website at http://www.barberadvisors.com

© Unauthorized use of this blog is strictly prohibited. Excerpts and links may be used, but only if expressed permission has been granted.

 

 

Beyond the World of Sic ‘Em

Anyone with a cursory knowledge of corporate site selection is aware that workforce transcends nearly all industries.  Having knowledgeable workers is paramount to functioning and competing on a global stage.

On the manufacturing side, skilled brains have replaced unskilled brawn. The days of high-school dropouts working in factories, and actually making a good living at it, are over.  Now de facto junior engineers increasingly populate the floors at most manufacturing plants as thinkers and problem solvers are required.

But even if company executives, site selection consultants, and economic developers acknowledge and agree that this human resources component is hugely important, they will too often underestimate the value of a location in terms of logistics and transportation.

Why Intermodal Matters

Later in this blog I’m going to tell you about a friend and colleague who has expert knowledge on how this extremely important factor figures into site selection. But first a short primer on intermodal, which is a growing trend in logistics.

As the word implies, intermodal involves moving goods via multiple modes of transport – say ship, rail, and truck — without any handling of the freight itself when changing modes. For example, standardized steel containers are lifted from a ship and put directly on a truck to be put on a rail car.

The method reduces handling, damage and loss and allows freight to be transported faster. As our friends at the railroads like to remind us, intermodal shipping takes a large number of big trucks off our already clogged interstate highways and thereby reduces greenhouse gas emissions.

Double-stack rail transport is becoming more common in trying to make intermodal shipping even more productive. As implied, containers are double stacked on rail cars.  I saw this firsthand while touring the Port of Virginia at Hampton Roads last week.

To make the double stacking of trains possible, Norfolk Southern Railway had to raise the vertical clearances of 28 tunnels on a NS rail line between Hampton Roads and Chicago. By enlarging these tunnels through mountains, double-stacked trains can now move from Hampton Roads, an East Coast port into the Midwest, which is called the Heartland Corridor.

There’s got to be a song there.

But the more important point is this: The use of intermodal hubs can dramatically lower costs for shipping freight and that cost element of transportation should play an important role in the site selection process. Robert Martinez, vice president at Norfolk Southern, said he was “amazed” that it is frequently overlooked. He’s right.

As you might imagine, the modeling and the factoring of costs involved in moving freight is a science unto itself. There are now university programs offering degrees in logistics. But it is clear to me that this specialized area of knowledge is beyond that of most site selection consultants, many of whom are real estate brokers or tax accountants.

Now I actually know for a fact that tax accountants can and do display personality as I got one to smile once. And as I said in my recent blog “Do What You Do Best: Why Companies Should Outsource Site Selection,” brokers are largely a vacuous bunch who have little business knowledge beyond that of their narrow world of chasing down the deal.

The World of Sic ‘Em

I had coffee this past week with a commercial/industrial real estate broker who called that world “sic ‘em,” as in sic the dogs on ‘em. He was not offended by my characterization of most brokers. Indeed, he was much tougher on them than me.

But we agreed that sometimes site selection is misnomer at best. If you know you need 30,000 square feet of Class A office space in North Dallas, then by all means put the hounds on the trail. And in many cases, that is all that is probably needed. Sic ‘em. Go get ‘em, boys.

But I considered this broker an anomaly in that it was quite apparent that he had business knowledge that extended far beyond that of buildings and dirt or the chase. He had a better handle on logistics than me, and it was also clear that he had been studying (and acting upon) mineral lease opportunities in Eagle Ford Shale Play in South Texas and had thereby accumulated knowledge (and some corresponding wealth) about energy.

In short, I was impressed with this man, even if he was a broker. This is proof that I am capable of being surprised even at my age.

Tim is Nice. Me, not so much

Tim Feemster, principal of Foremost Quality Logistics, is an almost neighbor, living about 20 minutes from me. I knew Tim well before I moved to Texas, having taken a logistics class from him when he was a consultant (not a broker) for Grubb & Ellis, which is now Newmark Grubb Knight Frank.

Besides being a very nice man, Tim is well steeped in logistics and transportation, having spent most of his career in that field. He, too, does corporate site selection work, although I do not see him so much as a competitor than as a colleague.

That’s probably because I like him, and the fact that I will turn to him at times for reasons of his expertise. Indeed, my modus operandi is to serve as a general contractor on a site selection project and hire trusted subcontractors who have specialized knowledge that I do not have and which would bring great value to a client company.

I explain my operational philosophy on site selection further in the same blog (Do What You Do Best) in which I was being dismissive of brokers. I really should have been nicer.

Unlike me, Tim is always nice. And, he has this subset of specialized knowledge that I can employ on certain projects. For it is my belief that all too often, this thing called supply chain optimization is all but ignored or given short shrift during the site selection process.

Preach it, Reverend

For me to harp on that, however, is nothing short of a member of a congregation preaching to the preacher. For years now, Tim, the right reverend of transport (he is also a Presbyterian), has been preaching “to anybody who will listen” on how logistics and transportation should figure in on corporate site selection.

In short, both corporate executives trying to do their own search for their company (big mistake) and most site selection consultants (brokers but others as well) are so caught up in finding that critical location that they will often discount the total cost structure that comes with a supply chain.

“The element that is overlooked is the magnitude of the cost implication. Many times we will identify the fact that as to whether the potential infrastructure is available but they won’t take it to the point of actually calculating the cost differential,” Feemster said. “They will not show the magnitude of the differential, because they don’t have the modeling capability to do it.”

And that, ladies and gentlemen, is why Mr. Feemster is my friend. (Plus the fact that I like him.)

Despite the trend toward more automation and a digitized workplace eliminating the need for people, companies still need people. For a manufacturer seeking a location for future operations, finding, attracting, and keeping a workforce remains the No. 1 criteria or priority, which is probably a correct assessment.

But keep in mind that transportation, moving the product out of the plant into a distribution network, will eat up anywhere from 5 to 20 percent of a plant’s overall cost of goods sold. Maybe even higher. And here is where things can get rather dicey.

A Flawed Ratings System

Companies and site selection consultants will often concoct a rating system via an Excel spread sheet that will rate a location by various categories. But it’s a crude method at best.

“What site selectors don’t do is look at that total cost structure and actually calculate it typically, the entire profit and loss to the company in one city versus the next. What they do is put these Excel spread sheets together, and they rate a whole bunch of criteria across the top of the spread sheet and they go over this with the client.

“The availability of labor is one of them. Cost of labor is another one. Transportation and infrastructure is another one. Incentives is another one. They give them a one to five rating across the top and by doing so they dilute the transportation down to maybe 20 percent of the overall decision.”

Big mistake. For example, in a hypothetical project using a ratings system (don’t read anything into these numbers), Nashville may be rated a “five”, Atlanta a “four” and Charlotte a “three,” but the differential separating a five from a four in terms of transportation costs on an annual basis could be in the millions of dollars.

Special Ops

In short, what Tim is saying is that most in-house managers and external consultants will not go that extra mile to properly calculate this significant supply chain cost of moving product.

“If they are doing a data center project, they look at the electricity cost structure. All they have to do is essentially call up the electric utility and get a rate quote. But they can’t do that in the supply chain world. They really have to delve into the company and spend time with it and do work and most of the time that is not in their pricing.”

For any given corporate site selection project, I put together special ops teams, although we will not come to your town in a black helicopter. I serve as the general contractor, managing the project.

In doing so, I will bring in my GIS specialist, my tax accountant, provided that he or she has a personality, and my trusted logistics and transportation guru. I think you know who that might be.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a site selection and economic development consulting firm based in Plano, Texas.

If your company needs an optimal location for future operations anywhere in North America, we can help. If your community needs to improve its competitive standing, we can help. All requests for information are considered confidential.

Telephone: 972-767-9518. Email: dbarber@barberadvisors.com  Visit our website at http://www.barberadvisors.com

© Unauthorized use of this blog is strictly prohibited. Excerpts and links may be used, but only if expressed permission has been granted.

Roadstead, the Squealer, and Captain Phillips

NORFOLK, Va. – Everything looks better from the water.

This is especially so when you are in a safe harbor, and on an evening cruise aboard a yacht in Hampton Roads.

As a barefooted passenger, I took lots of photos of all sorts of grey ominous looking ships of the U.S. Navy as we motored past the Norfolk Naval Shipyard.

The impressive armada included an array of destroyers, cruisers, amphibious vessels and some ships that I did not know what they were or did, but was gratified to know that they were there.

Someone pointed out the USS George H.W. Bush (CVN-77), the 10th and final Nimitz -class supercarrier. Only minutes earlier, we had passed the USS Wisconsin, a decommissioned battleship now berthed for public tour.

At one point during our harbor tour while passing the naval yard, I asked one of my hosts: “Is it OK that I am taking these photographs?”

I was assured that I would not be thrown in the brig for espionage, and was told that it wasn’t too long ago (pre 9/11 and the USS Cole) when you could motor up right alongside the bulkhead of one these imposing warships. Now floating barriers and security boats keep unwanted intruders at bay.

A Motley Crew

Fourteen other site selection consultants were aboard the yacht. Among them were the moose-deprived Ron Ruberg of New Jersey (See May 26 blog “No Place for the Faint of Heart”; Phoenix-based Russ Ullinger with Foote Consulting Group, dressed like an accidental tourist; and Dallas-based Tim Feemster, a serious expert on transportation and logistics who can be pretty funny at times.

And transportation and logistics were why we were here – to learn more about the importance of the Port of Virginia and how it should figure into our calculations when working a site search project.

During a working breakfast earlier that morning, Mike Lehmkuhler, vice president of business attraction with the Virginia Economic Development Partnership, and Darryl Gosnell, president and CEO of the Hampton Roads Economic Development Alliance, gave us informative briefings on the port and the surrounding region, which, like the body of water, is also called Hampton Roads. More on that later.

After breakfast, we were to shuttled 22 miles from the port to the CenterPoint Intermodal Center in Suffolk. The fairly new logistics park is home to two distribution centers – a 336,960-foot Ace Hardware warehouse, which came online last year, and a 350,000-square foot warehouse operated by the Navy Exchange Service Command.

A prepared shovel-ready pad sits on a 24-acre site adjacent to the Ace Hardware facility, designed for a 350,000-square-foot building. CenterPoint believes it can build up to 5.8 million square feet of industrial facilities on the 648 useable acres within the park, which fronts 12,000 linear feet of CSX main line.

Right across U.S. 58, Target operates a 1.8 million square foot distribution center.

When I was in Detroit a few weeks ago, I thought it strange to see a city of 700,000 people within 130 square miles. Complete city blocks had been obliterated, reverting back to a prairie/rural appearance.

Suffolk is 450 square miles with about 86,000 residents. With expansive fields of peanuts, cotton and soybeans, there are places where you would have no idea you were within a city limits or that a city was even nearby.

The Squealer

From Suffolk, we headed north to the Shirley T. Holland Intermodal Park, owned by the county Isle of Wight. But despite the name, we were not on an island. I didn’t ask.

Lisa Perry, the local economic developer, gave us a rundown on the 1,500-acre  park, where Green Mountain Coffee Roasters operates a new roasting, grinding and packaging facility that will eventually employ 800 people. The park is served by Norfolk Southern, which owns an adjacent 1,700-acre site that the railroad would like to see go toward a future automotive assembly plant or steel mill.

But I must say that my most memorable moment at Isle of Wight was being served a donut that was dripping with maple syrup and bacon bits. It was called “the Squealer” and it may have been the best thing that I have ever eaten.

It turns out the donut shop that produces this secret weapon is owned and operated by Amy Ring, business development manager at the Isle of Wight’s Department of Economic Development. That is so diabolically clever.

Advanced Cargo Facilities

A working lunch would follow at the 573-acre APMT Virginia cargo terminal in Portsmouth, probably the most technologically advanced marine cargo facility in the nation with 4,000 linear feet of berth and 3.3 miles of on-site rail with links to NS and CSX.

The lunch was good, and the facilities briefing topnotch, but I couldn’t get my mind off the Squealer.

Later that afternoon, we were taken to the top of an office tower at the 648-acre Norfolk International Terminals (NIT), the Port of Virginia’s largest terminal and home to 14 of the biggest, most efficient cranes in the world. With a reach stretching 245 feet, the cranes can offload ships loaded 27 containers wide.

There are 12 new on-dock rail lines here at NIT, doubling the capacity of the rail yard.

It was only during our harbor evening cruise that I finally got over that killer donut.  While everything does look better from the water, I was able to gain a bit more understanding of the harbor and port facilities when I saw it from the vantage point of a boat.

The cranes at NIT, standing like towering sentinels at the wharf, were even more impressive when viewed from the channel.

A Place of Firsts

But I really wanted to see the spot where the Battle of Hampton Roads took place March 8-9, 1862, between the first American ironclad warships, the USS Monitor and the CSS Virginia (ex-USS Merrimack). Russ Held, senior vice president of business development with the Virginia Port Authority, pointed out the general area.

I believe my in-depth knowledgeable consultant response was, “Wow.”

Hampton Roads is steeped with history, maybe more so than any place in America. It’s here where the makings of a nation would begin with the first permanent English settlement at Jamestown.

In case you haven’t figured out by now, virtually all the place names are of English origin.  Hampton refers to the third earl of Southhampton, who was a founder of the Virginia Company of London.

More interesting to me than some lace-wearing royal is the fact that the word “Roads” (short for roadstead) meant “a place less sheltered than a harbor where ships may ride at anchor.”

And for more than 400 years, ships have been riding at anchor in Hampton Roads, known as the world’s largest natural harbor. It is also the northernmost major East Coast port of the U.S. which is ice-free year round. And with a 50-foot-deep channel, it is one of the deepest harbors on the East Coast. Only Baltimore can match it in that regard.

Because of all these natural attributes, Hampton Roads became an early focal point for the U.S. Navy and commercial shipping. The Gosport Shipyard, renamed the Northfolk Naval Shipyard during the Civil War, was founded here in 1767.

It was here where the keel of USS Chesapeake, one of the first six frigates authorized by Congress, was laid in 1799. And it was here where Drydock Number One, the first functional dry dock in the Americas, was built and used in 1833.

Today, the Navy drydocks nuclear aircraft carriers here and old Drydock Number One is still in use.

I could go on and on about the history of this region and many more firsts, but the purpose of this blog (and my consulting business) is to lean forward into the future, which is precisely why I came here.

An Economic Engine

The Port of Virginia is aptly named. It includes not only four port facilities within the Hampton Roads harbor, but the Port of Richmond farther up the James River and an inland port at Front Royal more than 200 miles away. As such, the Port of Virginia is an economic engine for the entire state, resulting in 343,000 port and port-related jobs statewide and $41 billion in business revenues.

Outgoing Gov. Bob McDonnell spoke about this during our first night in Norfolk. His elevator speech was as good as I have ever heard from a governor. Actually, it was a bit longer than elevator speech but not by much. The point is that he wore the mantel of the state’s top economic development spokesman quite well, which is not always the case with governors.

The Port of Virginia facilities within Hampton Roads are within a day’s drive of two-thirds of the U.S. population and ranks as the third busiest port on the East Coast behind New York/New Jersey and Savannah in terms of TEU count.

 “Twenty-Foot Equivalent Unit” a standard linear industry measurement used in measuring container traffic flows.  One 20-foot long container equals one TEU while one 40-foot container equals two TEUs. One 40-foot container can hold 1,512 cases of beer. I wonder how many Squealers could fit into one.

The Port of Virginia handled more than 2.1 million TEUs in 2012 – more than 1.1 million dedicated to export and nearly 974,000 in import. The total TEU count to date this year is up over 2012. In short, the port is bustling with activity.

Captain Phillips

Finally, there is this soon-to-be-released movie Captain Phillips. I had the pleasure to meet John Reinhart, president and CEO of Norfolk-based Maersk Line Limited, which owned the container ship Maersk Alabama, which was hijacked by Somali pirates in 2009.

Parts of the movie, starring Tom Hanks as the ship’s captain, Richard Phillips, were filmed in Norfolk. I asked Reinhart if he knew beforehand that Seal Team Six, also based in Norfolk, would be sent in to bring a resolution to the situation

Reinhart said he could not confirm that, but did say that he was able to meet the Navy Seal marksmen who ended the standoff.

To which I believe my in-depth knowledgeable consultant response was again, “Wow.”

I have posted some photographs from my trip to Hampton Roads on Instagram: http://instagram.com/barberbusinessadvisors

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a site selection and economic development consulting firm based in Plano, Texas.

If your company needs an optimal location for future operations anywhere in North America, we can help. If your community needs to improve its competitive standing, we can help. All requests for information are considered confidential.

Telephone: 972-767-9518. Email: dbarber@barberadvisors.com  Visit our website at http://www.barberadvisors.com

© Unauthorized use of this blog is strictly prohibited. Excerpts and links may be used, but only if expressed permission has been granted.

 

Why Companies Should Outsource Site Selection

 

His writings contributed to the philosophical and practical foundations of today’s modern corporation.

And yet Peter Drucker, the historic business consultant, said it was his lack of knowledge that served him so well in helping companies find their way. This quote from him has always stuck with me.

“My greatest strength as a consultant is to be ignorant and ask a few questions.”

Now I can truly identify with that statement. The only difference is that I ask a lot of questions, having been a former newspaper reporter.

It is Drucker’s views on the need for companies to outsource certain business functions that serves as the basis for my consultancy, which specializes in site selection/location analysis for companies. I also do economic development consulting for communities, essentially trying to help them become more competitive for corporate investment.

While advising General Electric in the 1980s, Drucker had a huge influential effect on CEO Jack Welch. Drucker’s advice was simple and to the point:

“Make sure your back room is their front room. In other words, don’t you do guard services at your plant. Get someone who specializes in guard services to do them for you. Get rid of in-house printing, in-house conference services, any business that isn’t at the core of your focus.”

Core of Your Focus

Ducker believed that any time-consuming function that is not at the core of company’s focus amounts to a distraction.

By its very nature, corporate site selection is a very specialized exercise in data gathering, analysis, and culling. I suggest that 95 percent of companies should not attempt to do it, as they do not have the knowledge and experience of collecting the needed information, much less analyzing and culling.

And the reason is simple — site selection/location analysis is not, nor should be, a core focus for the overwhelming majority of companies. Rather, they should concentrate on what they do, their core business, and outsource the site selection process to to a specialist, dare I say me.

Our role at Barber Business Advisors is to to gather, analyze and provide information and recommendations to our client companies based on their specific wants and needs. Near the end of the site selection process, we take the client companies to visit the finalist communities, because ultimately it is the client’s decision.

Because of our experience at determining optimal locations for future operations, we know and understand the multitude of factors that go into determining costs and opportunities. In essence, site selection is a risk analysis process.

And it’s by our experience and knowledge  that we are able to save a company time, money, and to some degree from itself. Choosing the wrong location can be a very costly error with long-term ramifications.

Naturally, I have a bias, but I believe that because most companies don’t know what they don’t know,  they will not choose the best locations if they undertake a site search on their own. That’s because they are inexperienced and lack the specialized knowledge to do it right

To the prospective company CEO, I would respectfully offer this:

“I would advise that you continue to concentrate on what you do best, and allow us to perform the site selection process for you.  You see, this is our core business. This is what we do. Rest assured, the final decision will be yours,  but we can save you time and money in the long run. We can save you from yourself if you let us. Trust me, a wrong location will come back to haunt you.”

The truth is that corporate site selection is part art and part science. Most CEOs/CFOs might make a stab at it once in their entire career, whereas we do it on a fairly regular basis. Who do you think would be better at this?

Beyond Dirt

I’m not convinced that many if not most real estate brokers, ever so consumed with chasing the deal, will ever understand that site selection should be a process and goes far beyond considering a tract of land or an empty building.

We have nothing against real estate brokers. Most are conscientious and want to serve their clients to best of their abilities. But their abilities are often limited to real estate alone, whereas true site selection transcends real estate in that there are many other business factors to be considered on any given project.

They include labor availability and skill sets (quantity and quality of the labor force) logistics and transportation, utility infrastructure, energy costs, taxes, permitting, regulatory climate, presence of organized labor, quality of life, and on and on.

Most real estate brokers, not all, have scant knowledge or interest in applying these factors to a site search. For them, it’s about a building or a site and ultimately a deal in which a commission is paid.

Employing Special Operators

On any given project, BBA will typically bring in certain well-qualified and trusted consultants with specialized knowledge and expertise.

I have my GIS specialist. I know my logistics-transportation expert. We even know tax accountants who have a sense of humor. These are trusted allies, people who we have worked with, who bring specialized knowledge and value to a site selection project and the client benefits in a big way as a result.

Essentially BBA runs special ops teams, employing experts in their fields to perform certain analytic functions. In short, we took Drucker’s advice to outsource to trusted subcontractors who have specialized knowledge key in determining optimal locations in the site selection project.

People are the Solution

In his 1954 book The Practice of Management, Drucker came up with this concept of management by objectives, also known as management by results. It is a process of defining and agreeing upon objectives within an organization so that everyone essentially knows what they need to do.

“Management by objective works – if you know the objectives. Ninety percent of the time you don’t,” he said.

Most importantly, Drucker believed that employees are assets and paramount to making a business work. He saw knowledgeable workers as being the essential ingredients of the modern economy.

We also subscribe to that belief that people do make the difference, that they are the solution. It is why we employ knowledgeable experts on every project and look for knowledgeable workers when surveying and analyzing communities on behalf of our clients.

In the movie, The Outlaw Josey Wales, the protagonist tells a bounty hunter “a man’s got to know his own limitations,” thereby backing him down. I would suggest the same for companies that attempt do site selection on their own.

I’ll see you down the road

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. He can be reached at dbarber@barberadvisors.com or at 972-890-3733.