Start early, do your homework, and determine what you can live with or without when searching for a new facility’s location. Leave no stone unturned in uncovering workforce assistance programs, tax and utility incentives, and potential operating costs.
You’ve heard the saying a million times, but in the planning stages, manufacturing facility success often comes down to three things—location, location, location.
During a facility site selection, processors must understand the big picture that comes with a location decision from real estate, labor, utility, and tax perspectives, according to Cathy Scangarella, chief business development officer at Choose New Jersey. For those processors who choose New Jersey, Scangarella says the state is located in one of the most concentrated and affluent consumer markets in the world, reaching 33% of the U.S. population within a day’s drive. Businesses located in the Garden State also benefit from a highly educated workforce, she adds.
According to Mary Lesa Pegg, food processing industry recruiter for the Economic Development Partnership of North Carolina, the top priorities of food and beverage processors during the site selection process are water and sewer availability, as well as existing buildings, because most clients want faster speed to market and the availability of labor.
While state and local economic development groups can help processors determine all of the criteria, food industry engineering firms can also assist with the decision on where to locate a new processing facility. And often, these engineering firms can provide a deeper dive into a site’s attributes.
As the U.S. labor crunch continues, Mary Frances Stotler, senior partner and project manager with Dennis Group, concurs that a qualified workforce is top of mind with most food and beverage manufacturers. “One of the requests is typically associated with workforce—the availability of workforce from a numbers standpoint, but more so workforce quality,” she states. “Where I really see that [workforce quality] playing a big part is with the increased automation in the food industry. Food and beverage processors want to make sure they have a robust enough labor pool with electrical, instrumentation, and mechanical experience to be able to operate and maintain sophisticated, high-speed bottling operations or highly automated process and packaging operations.”
Food and beverage manufacturers also have a sharp focus on their budget and the project’s timeline. Stotler says understanding total operational costs, ensuring the distribution arena is favorable in terms of raw materials and finished goods, and determining whether there is a business-friendly operating climate from a tax regulatory perspective are essential.
With some projects taking two to three years from initial planning to first saleable products, there are ways to shave some time off the schedule. But planning timelines can vary significantly, says Talbert. “We work with some companies that begin planning several years in advance while other projects develop more quickly,” he states. “We advise companies to start the site selection planning process at least six months in advance of groundbreaking when possible, but that’s not always realistic. Companies need to consider that construction can take 12 to 18 months for a greenfield project depending on the scale and complexity, and design-engineering should be performed in parallel with the site selection process to condense development timelines.”
Pegg believes processors must first determine their likely return on investment in a new facility and justify the spending before beginning the site selection process. She says that advance work can take six to 18 months or longer. “Each project is unique. But for the processor wanting a greenfield site or build-to-suit facility, it typically takes 18 to 24 months from the initial site search to first saleable product.”
According to an October 2020 report from the National Association for Business Economics, disruptions from COVID-19 have dramatically altered the way manufacturers think about operations, supply chain management, and workforce issues. The report, “In Recovery Mode: Manufacturers Try to Bounce Back After COVID-19 Disruptions,” states that a more advanced manufacturing sector requires a highly skilled workforce that can effectively adapt to new technologies. The pandemic has highlighted the need to focus on work-life balance and increased employee flexibility, but it has also reinforced challenges with talent attraction and retention.
In order to get assistance with workforce issues, Stotler says food and beverage processors must ask for help upfront during the site selection process. “There’s a ton of workforce training and support programs, grants, etc. available as incentives that, unless you know to ask for them, they aren’t offered.”
Many processors may only conduct a site search once every 10 years, Stotler says, “This is not their area of expertise. They can miss out on a lot of incentives and available support because they don’t know what to ask for.” Dennis Group and other food industry engineering firms understand incentive packages and what to request from states and municipalities.
Stotler also says that community colleges are required to gear a certain percentage of courses toward high-priority employment. “Processors can work with a community college to tailor a curriculum program or train operators specifically for their operation. PLC programming or specific maintenance techniques can be specifically geared for processors,” she adds. “This opportunity is widespread throughout the U.S.”
Choose New Jersey connects firms and organizations that help build a company’s workforce, says Scangarella. “We also pair businesses with the New Jersey Department of Labor and Workforce Development, which has a number of assistance programs which can cover the costs of recruitment and training.”
Some key programs include:
- NJ Incumbent Worker Training Grants and Skills4Jersey program to upskill workforces
- Opportunity Partnership to identify training providers
- Employer Partnership that reimburses employers for new employee start wages
- Targeted Recruitment Services to find the right applicantsWorkFirst New Jersey to help defray training costs
- New Jersey Career Connections to link New Jersey businesses and jobseekers
Additionally, Scangarella reports that New Jersey Governor Phil Murphy recently announced an additional $14 million in funding for the Coronavirus Aid Relief and Economic Security (CARES) Act to develop workforce development programs. “This will help businesses impacted by COVID-19 replenish their workforce and help jobless residents learn new skills that lead to successful reemployment,” Scangarella states.
North Carolina provides a workforce development network with the flexibility to customize any aspect of the workforce development process, explains Pegg. The Tarheel State works with businesses to develop a customized plan and provides an array of services to recruit, screen, and train their workforces. The network consists of an established set of organizations and partners that assist food processors with future employment needs. “One of those partners is our state’s 58-campus community college system, the third-largest system in the U.S., and a pioneer and national model in customized workforce training,” she says.
Austin Consulting helps companies qualify the workforce based on their specific needs and provides assurances that the labor market is conducive based on the volume and skill requirements and other factors. “Each operation requires a specific workforce profile based on the capacity, production processes, and the role of automation,” says Talbert. “If considering a broad geography, we often start with a high-level evaluation of labor markets in coordination with other evaluation factors and drill down into more detail as the evaluation becomes more market- and/or site-specific.”
Workforce development initiatives focused on technology, automation, and maintenance are incredibly important, Talbert says. Locations that have strong programs and resources allocated to these initiatives make a site more attractive.
Not to be overlooked are community addiction issues. Chris Jarc, manager of the project management group at Hixson, points to one client who is concerned about labor issues because of a meth problem near one of his facilities. “He’s very sensitive to it, and he doesn’t want to put a facility where meth, cocaine, or whatever drugs are prevalent,” Jarc explains.
Making the Match
Austin Consulting works with companies to understand the role that freight, labor, and other factors play in the site selection process based on the specific project requirements. “Many projects are driven by a long-term view of the business, so companies need to consider the degree of certainty and predictability in the project assumptions and their business case,” says Talbert. “We advise companies to avoid over-focusing on the short-term impacts of the decision, particularly for plants that involve high capital costs and fixed assets that cannot be easily shifted.”
According to Talbert, Austin starts the site selection process by working with companies to identify the most significant cost and operational factors of the new location and usually begins with a high-level assessment of major factors that are going to differentiate one location from another. “From a supply chain perspective, we consider the balance of freight costs (inbound vs. outbound) that can vary significantly based on the raw material inputs, mode of transport, and finished product.”
Armed with the target location and must-have criteria, Dennis Group creates a request for proposal (RFP) and distributes it to local brokers and economic developers and then has them submit parcels for consideration. It also looks at regulations that may drive up the construction costs, union atmosphere, whether a construction trade premium exists, tapping fees, and water and sewer impact fees, for example.
According to Steve Guyer, manager of the civil engineering group at Hixson, topography of the site is an important factor to consider. For example, a hilly site would cause construction costs to skyrocket. Jarc says it is crucial to look into whether there are utilities in the road, where the nearest electric is located, if the municipality will take the plant’s waste, and what the waste requirements are. He says other environmental issues that can cause headaches include maintaining wetlands and stormwater management.
Some locations still have sanitary sewers, says Guyer, but can they take the discharge from a manufacturing plant? “If a locality has to upgrade their whole sewer treatment plant, sometimes you can’t wait for that because it could be years later than when you want to get your plant up and running.”
Other considerations include if the site’s roadways can handle the trucks per day required on-site at the plant. Guyer says processors don’t want to pay for building new roads. And, if a facility knows eight trucks will arrive every 15 minutes, no one wants them blocking traffic, says Jarc.
Going Greenfield vs. Brownfield
Typically, the same criteria mentioned above go for greenfield as well as brownfield projects. Stotler says processors that require a quicker speed to market gravitate toward brownfield.
But processors should not assume there is an existing building in a favorable location, according to Talbert. “Many companies start the process assuming they will find a brownfield option that fits their needs, only to discover the limitations of adaptable buildings and the constraints they place on the site selection process.”
While there are a lot of brownfield sites available, there are always compromises with them, agrees Stotler. “You sacrifice layout efficiency when you go with a brownfield, certainly,” she says. “But if a processor already has a production commitment to a customer, they’re willing to sacrifice layout efficiency for speed to market,” she adds.
Hixson worked with a non-dairy producer in Dallas to refurbish a dairy plant. “It made sense for a lot of reasons,” Jarc says. “One, it had a lot of building infrastructure in place. Two, from a distribution standpoint, it was right in the middle of where their customers are.”
But the decision to go greenfield vs. brownfield often depends on the size of the project. “When we’re looking at 400,000- to 500,000-sq-ft facilities, it’s tough to find a workable brownfield,” Stotler says. “You might find facilities of those sizes, but usually, they are not former food facilities. And that can be problematic when moving into former heavy manufacturing operation, where there were metals or any kind of contaminants.”
Jarc says he has seen situations where the client wants to buy a 100,000-sq-ft space, and the building looks great, but the site’s a mess. “You may have to repave the whole site because it’s such a mess. Sometimes, we’ve had to add stormwater retention when it wasn’t there before.”
He says that a lot of codes and standards have changed over the past few decades, and municipalities will demand you bring a site up to code. “That could cost you a ton of money,” Jarc says. Still, he has seen some brownfield sites that do not require a lot of refurbishment.
Finding the Right Balance
Food processors must understand the realistic cost comparisons and net benefits each state has to offer before they begin site selection, states Scangarella. “It is critical to create a full analysis of available talent pools, weigh the benefits of the location, and factor in all costs of operation.”
Pegg knows every project has specific needs and challenges, but the main things she thinks companies should consider at the outset include their utility demands, must-have priorities, and building and site programming/layout. “It is extremely rare for companies to find exactly what they are looking for. So, knowing what they can and cannot live without is important before starting the process.”
Talbert says processors should not underestimate the degree of variability in location costs across the U.S. “Many companies make this mistake, particularly international companies that are less familiar with the U.S. market,” he states. Talbert thinks processors should start planning early, even if the project details are still being defined. “Many companies wait too late to begin planning and end up feeling pressure to shortcut the process or greatly limit their options based on the overriding need to move quickly.”
Stotler concurs. “Take the time to conduct proper due diligence. This is a facility that you are going to be operating for the next 40, 50, 60 years. I know of a beverage plant where they truck off 60,000 gallons of wastewater every day because they bought a site where the municipal treatment works didn’t have the ability to take their wastewater.”
Don’t forget that there is no perfect site, Stotler adds. “It’s all about finding the best balance of first cost, operating costs, and speed to market.”