Monday, August 03 2015
Communities that want to attract freight facilities should examine themselves as corporate site selectors do before engaging in a full-scale business recruitment process. If a community is going to successfully compete in attracting a freight facility, it is to its advantage to understand what needs a company is seeking to satisfy and what kind of criteria they will use to select a site. What are the key things a planner, economic development strategist, or elected official should know to develop potential or develop competitive advantage for a good freight facility project?
Freight facilities will only consider locations that fulfill the primary objective of moving goods in the most efficient manner from point of origin to destination. This trumps most other considerations. Companies and carriers rarely base location decisions on personal relationships, government incentives, or regional promotions. These factors are only a consideration after a location meets the required criteria for the business to be successful. Local officials can make their communities more attractive to freight facilities by providing a hospitable climate through appropriate zoning, compatible land use, transportation infrastructure, and community support. When companies evaluate sites, some criteria are far more important than others. The ability to access key markets, availability of efficient transportation, sufficient qualified labor, and total costs are considered key criteria. Proximity and/or access to markets is the most important driving factor that determines the region or community in which a freight facility will locate.
Freight location decisions rarely respond to a “build it and they will come” approach by the public sector, yet it is also true that having the necessary support infrastructure in place can be a great incentive if the location is a good one and other factors are positive. This chapter will broadly describe how companies decide where to place freight facilities – beginning with the early planning stages up through final site selection.
Site Selection: The Big Picture
As noted above, location planning is methodical and iterative. Factors will vary in importance throughout the process. For example, access location screening is methodical and iterative.... Freight Facility Location Selection: A Guide for Public Officials 31 to specific markets, costs, and population trends may drive the early stages. A secondary screening may involve examining highway and rail networks to determine areas with service advantages. The third screening may evaluate total costs of operation for the final candidate sites. The final stage may then involve more site-specific issues such as specific facilities and the labor available in a particular community.
Stages of Site Selection
Planning and Strategy
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:
Once the company selects a planning time frame, the sales, operations, and/or supply chain staff can forecast or project the remaining strategic considerations
Network modeling and analysis, time to market, and overall logistics costs are prime factors driving freight facility location decisions. As a result, the first stage for locating a freight facility is to examine the interplay between location and freight costs. Transportation is a large consideration at this point in the analysis. Companies use computerized network modeling programs or equivalent methodology to estimate total shipping cost and time to market for a range of scenarios. These approaches use customer or store locations, sourcing points, freight loads, fuel costs, facility operating costs, and transportation modal choices to develop 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, customer change, sourcing, operations costs, and fuel costs. Linkages and infrastructure in any modeling must be compared against real-world data to reflect actual conditions, which network models sometimes have difficulty incorporating. Congestion and traffic on roadways may compromise what appears to be an ideal network, as may policies that promote passenger traffic take precedence over freight on rail networks. Companies often need to make off-line corrections, as network models do not always incorporate on-the ground issues. The network models do not identify final sites, but only show recommended areas where freight facility nodes would yield the best performance. Companies typically use this information as a starting point and attempt to find sites within a reasonable radius of these recommendations. This radius may be larger (50 miles) or smaller (10 miles or less) depending on the nature of the network or facilities under consideration. In this process, non-transportation factors such as workforce, regulatory environment, utilities, and the cost of real estate become important factors in the location search. The location planning team will typically construct either a grid or a weighting and ranking model that uses demographic, socioeconomic, workforce, tax, regulatory, utility, and other data to determine how each candidate community matches the company’s goals relative to the other communities under consideration. The location planning team, in addition to collecting available data from various public and private sources, may also submit a request for information to individual community economic development agencies if the team needs more specialized information. Communities prepared with available information or a means to readily provide requested information may find themselves in a better position to compete for a facility. The planning team typically constructs an evaluation matrix or model based on this data. By applying the evaluation criteria developed in the strategic planning phase, the team can objectively test how well each of the candidate communities or sites matches the company’s needs. The team may test a variety of alternative scenarios to reflect changing priorities. The team also examines how the community or site location impacts operating and cost considerations as compared to the network model’s ideal location. Communities that score well for the team’s identified priorities and that can also adapt to alternative scenarios make the “short list” for further analysis. Once a community or region is placed on the short list, the location planning team will further evaluate specific sites or facilities within the area. At this stage, the location team may seek the assistance of local government or economic development officials to explore possible sites, find out about permitting and regulatory requirements, and learn more about transportation and utility infrastructure. This communication will allow a better understanding of the actual operating environment in the community and can also serve to begin the negotiation process for land, facilities, and public assistance or incentives where appropriate. At the same time, the company will enter into discussions with land or facility owners on selected properties to ascertain:
This information, along with the financial analysis described below, allows the planning team to further refine the location recommendations.
Incentives, negotiations, and final selection
Content excerpted from Steele, C. W., et al. NCFRP Report 13: Freight Facility Location Selection: A Guide for Public Officials. Transportation Research Board of the National Academies, Washington, D.C., 2011, Chapter 4.