Saturday, August 18, 2012

Ask the Facilities Guy: Site Selection for Clean Manufacturing Facilities

Question: I expect to be involved in either selecting a site for new construction or a building for renovation in order to expand our manufacturing operations. Can you give me some advice?
Answer: Locating a new clean manufacturing facility requires unique considerations in the manufacturing world. While supply chain, end customer geographies, logistics, labor force and financial incentives are some of the major drivers, the facilities engineer is becoming an increasingly important player on the site location team.
Let’s step back and take a quick overview of just a few of the high level factors driving facility location decisions, before we drill down to specifics more directly aligned with facilities engineers.
Financial incentives: As the saying goes, “it’s all about the money.” Communities, states, and countries are playing hardball on the economic development field, devising complex economic development and tax incentive programs to score coveted manufacturing jobs. And the jobs that are part of the clean manufacturing sector are a prize catch. The competition hasn’t been regional for a long time, it’s global. This has forced localities to become more sophisticated and aggressive in their offerings. Companies are looking for—and getting— comprehensive packages that include not only a wide variety of longer term tax incentives, but also infrastructure improvements, training programs, expedited regulatory approvals, and other concessions. Maryland recently made news with its $100 million tax incentive program, designed to stimulate knowledge based economic development, including biotech and nanotech investments. The state anticipates it will attract an additional $70 million in VC funding.
Educational resources: Technology based companies evolve quickly and their employees need to be able to procure the education they need to stay ahead of the curve. Tech companies also rely increasingly on partnerships with educational institutions, in areas such as R+D, new product development, and spinning out new businesses. There’s a reason the most vibrant technology clusters co-locate where the most hallowed halls of higher education reside.
Available and qualified labor force: Today’s clean manufacturing jobs require a well educated and flexible workforce. Generally even today’s entry level positions require a higher competency in math and science than in the past. And while automation has reduced the total number of employees historically required on the production line, they need to be more technically savvy.
Predictable future: Investing in a new clean manufacturing plant is a significant—and ideally long term—investment. Stability and predictability on political, regulatory, and economic fronts—including tax rates, incentive programs, and training opportunities—are important to taking home the gold.
Global market: Where are key and growing markets located and where are they expected to be located in the future? What impact does shipping have on costs?
At the end of the day, the facilities professional is responsible for bringing a greenfield or renovated facility online, overseeing the design and engineering, regulatory permitting, construction, tool installation, qualifications, ramp-up, operations and, over the longer term, changes in process and product lines, as well as maintenance. Ultimately, you’ll “own” the facility, so due diligence when selecting a site or building for renovation is a wise investment.
Project definition: As odd as it may sound, it can be amazing to watch companies skip developing a thorough project definition, scope, and schedule before taking another step. The facilities engineer is an important part of that effort. If you haven’t been included, knock on some doors and state your case. Progressive companies view their facilities engineer as a strategic thinker, not a short order cook serving up a brick and mortar menu.
Part of the project definition includes the business case for the new or renovated expansion. The business case informs not only the “go/no go” decision, but the scope. Are you looking to increase yields? Can that be accomplished by retooling within an existing footprint? Is it possible to outsource the manufacture of some product lines in order to make room for higher margin products where you want in-house manufacturing control? Is the objective to increase sales, provide for new product lines, or accommodate future growth?
Consultant team: Carefully construct your expert team—based on anticipated project parameters. It’s your lifeline to success. Invest up front to ensure your company has the expertise required. A few items to consider:
  • How will you handle the site or property search? Commercial realtors, economic development officials, government agencies, internal personnel?
  • Will you manage the project or look to a turn-key developer?
  • Greenfield construction or renovate an existing building?
  • Own or lease?
  • Located domestically or offshore?
  • Are the proposed sites or candidate buildings for renovation environmentally “clean”?
  • Custom build or modular cleanrooms?
  • What facility characteristics are driven by the company’s defined manufacturing processes and the likelihood of shifting process requirements in the near term?
  • How will you handle energy engineering? LEED certified, registered, or simply built to LEED standards (or not)?
  • How about regulatory permitting, construction delivery method, or process engineering? Tool hook-up?
Make sure you have experts onboard to advise you or handle these issues—and more.
Your consultant team is best structured when it also includes experts internal to your organization, especially those who understand your manufacturing processes and operations. Don’t forget logistics, finance, legal, communications, and government affairs.
Build a team capable of anticipating any contingency. As issues arise through the life of the project, you aren’t caught needing to bring new players up-to-speed.
When looking at candidate sites or existing buildings, keep these primary considerations in mind:
  • Adequacy of roadway infrastructure: This is no time to select a site where “You can’t get there from here” as the old saying goes. Make sure the surrounding road system can handle both the quantity and types of traffic you anticipate, whether generated by employees, suppliers, or shippers. This article assumes you’ve already selected the general geographic location based on sound business analysis.
  • Utilities: Electricity, water, sewer. Cleanrooms can place a heavy demand on utilities. Are the utilities adequate, or can they economically be brought up to par?
  • Prior contamination of site, soils and existing buildings: Make sure you have a certified “clean” site, undertake responsible due diligence to take your company out of the CERCLA liability chain.
  • Wetlands and other environmentally sensitive habitats or site features: Woe is the day when an endangered species is discovered on site when you’re already committed.
  • Soils, ledge, topography: Can the site physically and economically support the development footprint, with room for future expansion?
  • All those zoning and other regulations requiring compliance: Spend the time sorting it all out.
  • Existing buildings: During this economic downturn, a lot of “bargain buildings” are available for sale. Run through the items listed above when analyzing existing real estate. Then add a few more items to the list: Asbestos? PCBs? Lead paint? Underground storage tanks? Universal and hazardous wastes? This is no time to be “penny wise and pound foolish.”
  • Make sure existing buildings can support your operations and future growth plans. Is the roof able to support the required mechanical systems? Are you erroneously assuming the building can be expanded up, sideways or down? Will the cost of renovation exceed the cost to build new? Consider the “opportunity costs” if the organization is required to compromise operationally.
It’s an uncertain world out there. Bringing your expertise—and the collective knowledge of a well constructed team—to bear on developing new or renovated facilities will go a long way to ensuring success.

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