Site Selection
Expanding into new markets and setting up operations in foreign environments is one of the most challenging entrepreneurial tasks. In addition to issues directly related to the evaluation and selection of the final location, logistic and supply chain considerations also have to be analyzed and implemented into the overall strategy.
These decisions have to be based on reliable information.
When choosing the right location companies should take into consideration the advantages and amenities a site has to offer on a long term basis and, bearing in mind changing conditions, retain the best prospects of success while at the same time keeping risk and uncertainty as low as possible. The starting point for a review of possible location alternatives is a thorough evaluation of the present corporate situation and the motives causing the companies’ management or owners to consider investing in a new facility.
These motives should correlate with the overall corporate strategy. Based on the initial project plan the list of success critical location criteria will be developed. This will show differentiation between must factors that have to be fulfilled by the new location and want factors which are less critical and which will be carefully evaluated by the project team. The location criteria to be evaluated will change from industry sector to industry sector. Based on our experience, a well established methodology and in close cooperation with the client the project specific criteria list will be developed.
Typical questions to be answered are:
• Verification of the need for action and action alternatives for the company
• Determination of the location strategy/internationalization strategy
• Confirmation of correlation with corporate strategy
• Deduction of success critical location criteria from corporate strategy
• Developing logistic/supply chain concepts
• Developing list of potential locations (domestic vs. international)
• Quantitative analysis: net present value (NPV) and cash flow considerations
• Static vs. dynamic evaluation of alternative locations
• Cost evaluation of relocation and back sourcing/back shoring
• Evaluation of modernization potentials at present location
Supply Chain Analysis
The purpose of supply chain management is to improve trust and collaboration among supply chain partners, thus improving inventory visibility and improving inventory velocity. In a cross-functional approach the movement of raw materials into the organization, the internal processing of materials into finished goods, and then the movement of finished goods from the plant to the end-consumer is analyzed. The purpose is to reduce the ownership of raw materials sources and distribution channels. In this context functions are increasingly being outsourced to other organizations that can perform these activities better or more cost effectively. The effect could be to increase the number of organizations involved in satisfying customer demand, while reducing management control of daily logistics operations. By analyzing the external and internal suppliers' and distributors' structure, a detailed supply chain management concept will be developed, leading - once implemented - to less control and more supply chain partners involved in the production and distribution processes. Supply chain activities can be grouped into strategic, tactical, and operational levels of activities: strategic network optimization, including the number, location, and size of warehouses, distribution centers and facilities. Tactical activities include sourcing contracts and other purchasing decisions. Operational aspects include production and distribution planning, include; all nodes in the supply chain, production scheduling for each manufacturing facility in the supply chain and demand planning and forecasting, coordinating the demand forecast of all customers and sharing the forecast with all suppliers. The careful analysis of the supply chains has a direct effect on the evaluation on site location projects and should therefore be implemented in such projects.
Michael Krüger
PlanB Consulting GmbH
Beerenstraße 48
14163 Berlin
Germany
mkrueger@planb-consulting.de