By Michelle Comerford
The supply chain and operational disruptions triggered by the Covid pandemic and geopolitical concerns have forced many companies to rethink their global manufacturing footprints, prompting an increased demand for new facilities both in the U.S. and abroad. More than ever, a carefully managed and thorough site selection process is critical in operational and facility planning because it significantly impacts the upfront investment costs and future operating costs and mitigates overall risk for the facility in the long term.
Selecting a location requires orchestrating a daunting range of internal and external resources, data points, and information. A solution to this challenge is for companies to hire a professional site selection consultant to assist in location strategies advising and decision-making. The site selector functions as a specialized management consultant, serving as the company’s advocate and advisor, and assisting a company in formulating its site selection process, data gathering, and location analysis.
Companies should be aware of the many benefits that come with working with a site selection consultant, and here are five reasons you and your team can benefit.
1. It saves money. A company incurs the cost of having internal staff analyze and negotiate incentives or hiring an outside consultant. While relying on an internal team typically results in a lower hourly fee, it also requires a higher number of hours as internal staff often lack established processes, contacts, and familiarity with data sources.
One of our clients at BLS & Co. is MycoWorks, a biotech materials “start-up” company, and our firm worked closely with and acted as an extension of their team to guide the site selection process from beginning to end. The company, which was looking to ramp up commercial scale production with an internal team already stretched with responsibilities, ultimately selected Union, SC for its first commercial scale manufacturing facility, which is currently under construction and set to begin production by Q1 2024.
2. It shapes the incentive negotiations. Securing incentives is often a complex and rigorous process, with many legal, financial, and political nuances that can vary based on the type and scale of a project and the jurisdictions involved. An experienced site selection consultant drives greater incentive value by simply knowing what possibilities exist. They use previous knowledge to find new applications for existing incentives, assist in the passage of new legislation when appropriate, and negotiate based on best practices drawn from other regions of the country. They understand that incentive packages need to be carefully constructed to allow the company the greatest possible flexibility for future hiring and investment and push for the most favorable outcome for clients. Site selection consultants help create incentive strategies and solutions that create value for clients and lasting benefits for their communities.
BLS & Co. recently served as an incentives advisor to Eli Lilly and Company on a $3.7B investment in Lebanon, Indiana (see sidebar), which is part of the state’s cutting-edge “Innovation Development District” program aimed at attracting life sciences and tech companies. The new manufacturing facility was a catalyst for Indiana to create this new program, and BLS & Co. helped advise the state on parameters that allow for investor company growth as additional jobs and investments are potentially added in the future.
3. It provides validation. Providing the necessary data and independent analysis to their Boards of Directors and other stakeholders validates a company’s decision.
BLS & Co. was recently engaged by Diamond Pet Food to provide overall site selection and incentives negotiation services for a new 700,000-square-foot pet food manufacturing operation. The project search area focused on five states across the Midwest. As part of a phased process, BLS & Co. managed the property search and screening based on specifications developed with the client, prioritizing site conditions, utility infrastructure and an accelerated timeline, as well as labor market conditions. The data collected, analyzed and presented by BLS & Co. to the client team allowed the company to make an informed location decision with their board and stakeholders to obtain agreement on the two finalist sites, with which BLS & Co. then completed detailed incentives negotiations.
4. It maintains confidentiality. Companies often prefer to keep their location search confidential to avoid potential concerns among their existing workforces and/or as a matter of market intelligence and competitive advantage. Outside consultants can effectively interact with economic development and real estate professionals without disclosing the company’s identity.
As a matter of good business practice, BLS & Co. holds client names confidential, instead employing a project “codename” to communicate with state and local entities until the appropriate time. Clients typically desire or even require this for a variety of internal and external reasons until they are ready to move forward with more detailed negotiation of incentive offerings on a shortlist of sites.
5. It gives a leg up on the competition. Consultants specializing in site selection and incentives negotiation bring a palpable sense of gravity to a project. Real estate and economic development professionals often seem more inclined to sharpen their pencils when professional consultants are involved because they know the company is taking the project seriously.
Lilly Makes Record-Breaking
Investment In Indiana
In April, Eli Lilly and Company announced an additional $1.6 billion investment and the creation of 200 new jobs at its two new manufacturing sites within LEAP Innovation Park in Boone County, IN. This brings the company’s total commitment to $3.7 billion and up to 700 new jobs. Lilly also committed $15 million over five years to the Ivy Tech Foundation to fund up to 1,000 scholarships for individuals interested in pursuing careers in pharmaceutical manufacturing.
Lilly’s commitments within LEAP Innovation Park represent the largest manufacturing investment at a single location in the company’s history. The up to 200 additional jobs represent positions for highly skilled workers, such as engineers, operating personnel and lab technicians, who will utilize advanced technology to create innovative medicines.
“Through these new facilities, Hoosiers will make life-changing medicines that patients around the world need to address serious health challenges, including diabetes and cancer,” said Lilly’s Chair and CEO Dave Ricks. “We’re investing at record levels in our home state to help our communities and economy thrive and enhance educational opportunities for more students. We look forward to doing our part to make Indiana an even better place to work and live, while fostering cutting-edge innovation in our state.”
Lilly has introduced 19 new medicines since 2014 and plans to introduce several additional potential medicines in 2023. These new facilities will expand the company’s manufacturing network for active pharmaceutical ingredients, support increased demand for existing Lilly products and play a key role in bringing the next generation of therapeutic modalities, including genetic medicines, to patients globally.
“Lilly has played a critical role in shaping Indiana’s economy over the past 145-plus years, and today’s groundbreaking makes it clear – the company will be at the forefront of driving Hoosier innovation and job creation forward for generations to come,” said Governor Eric Holcomb. “As a state, we are proud to partner with Lilly in accelerating Indiana’s talent pipeline and career opportunities while leveraging the state’s manufacturing excellence to develop life-changing and life-saving solutions for people across the world.”
Over the past three years, Lilly has invested $6.4 billion in U.S.-based manufacturing sites to deliver medicines to patients worldwide. As the company prepares for future growth expected from potential new medicines to treat obesity, Alzheimer’s disease and autoimmune conditions, it anticipates further expansion of its global manufacturing footprint to ensure a sufficient supply of medicine.
It’s a win-win situation. Site selection consultants with economic development backgrounds and knowledge of how projects benefit communities can assist companies in structuring location packages that provide maximum return to the client and tangible benefits to the community.
Deciding where to locate a manufacturing operation is a complex decision involving many considerations. Companies can minimize risks and reap the rewards by hiring a qualified site selection consultant to assist with this important decision-making process.
Comerford is the Industrial & Supply Chain Practice Leader at Biggins Lacy Shapiro & Co. (BLS & Co.), one of the largest specialty site selection and incentives advisory firms in North America. She develops corporate location strategies and executes site selection projects for BLS & Co.’s manufacturing and distribution clients. Based in Cleveland, OH, Comerford has worked across a range of industries during her 20-year career. She is an expert in transportation/logistics cost analysis and has advised numerous clients on site selection decisions with an emphasis on supply chain network optimization, inbound and outbound transportation costs, and customer service requirements, among other operating factors.