Manufacturers today must make strategic decisions in a landscape accounting for:
  • Materials - Rising costs and supply constraints 
  • Production Capacity - reduced profitability
  • Labor - Increasing costs globally, skills gap
  • Outsourcing:  Separation of designers and makers has slowed innovation
  • Barriers for Sharing Data and Information: Technology, skills, incentives, security, trust, IP, standards
The most innovative manufacturers will take advantage of new opportunities to advance their digital strategy. 

Over the last few decades many manufacturers have pursued outsourcing strategies. In many cases financial benefit to their investors (public and private) was the key driver. Many are now starting to see the limits to the benefit of outsourcing. Specifically, moving production overseas might no longer save money and re-shoring facilities is occurring more frequently. In some cases, near shoring in Mexico is an option. As manufacturers look to re-shore, they face an inventory of facilities that may not be up to their standards.

McGowan was SIOR's representing member on the SIOR/IAMC Industrial Facility Flexibility Research committee. This group worked to evaluate the state of industrial real estate relative to the flexibility and reuse potential of warehouse, distribution center, research, laboratory, chemicals and gases manufacturing, heavy and light manufacturing, and regulated manufacturing (which includes pharmaceuticals and food). Of the challenges to flexibility, the project evaluated those due to work process, infrastructure (including HR and technology) and the facility itself, among others.

As labor costs rise and margins are near their peak, siting a manufacturing in a tax advantageous, business friendly location is of vital importance. While rent is important, transportation costs are far and away the largest driver.

Sample cost model of a manufacturer where rent is only 4.3% of total cost versus 50% for transportation. Locating near intermodals due to the shortage of truck drivers is a key consideration for flexibility.

According to Tim Feemster, FQL Logistics, an Alliance Partner of McGowan, the Top 10 Site Selection Criteria for Manufacturers are:
  • Labor costs & availability
  • Transportation costs – both inbound and outbound
  • Supply Chain interruption risk
  • Logistics infrastructure – highways, intermodal, rail, FTZ
  • Utility rates
  • Taxes & incentives
  • Business climate- is there love
  •  Rent /lease terms/ownership
  • CAM charges
  • Access to public transportation
  • Sales
  • Leasing
  • Available facility marketing
  • Free Trade Zone Evaluations
  • Tenant Representation
  • Valuation
  •  Sale Leaseback
  • Built-to-suit
  • Development
  • Financing

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