When a manufacturer is growing and needs room to expand, most companies look first at reorganizing their plant to make it more efficient. That’s why today’s plants are designed for as much flexibility as possible. I’ve been in numerous facilities where everything that can be on wheels is on wheels, so work stations can readily be rearranged. The next option that most manufacturers look at is expanding their current footprint, either with an addition or the purchase or lease of another facility nearby.
But when does it make sense to use an expansion as a growth strategy in and of itself? There are a number of drivers for these kinds of decisions:
- Access to customers. We typically see this play out as Tier 1 or Tier 2 suppliers look to shadow their OEMs throughout the country or world. A second type of market access driver is to reach other business-to-business markets or consumer markets. In many industries, manufacturers are finding it more effective to be closer to their end users than to their supply chain.
- Access to labor. The availability and productivity of talent has become the primary factor in many location decisions for headquarters, R&D centers, and technology-based operations. If you’ve been reading my blogs, you know that I believe that manufacturing is essentially converging with IT. I believe manufacturing will be the next type of operation that will be driven by talent concerns. We’re already seeing flagship companies such as Kohler Co. in Wisconsin move some of its highly skilled jobs to a metro center such as Milwaukee. On relocation projects today, even in manufacturing, labor is one of the most important considerations.
- Cost savings. Competition is fierce. What would happen if you changed your cost structure by expanding to a different region of the country, with different transportation infrastructure, supply chain, labor, utility, taxes, incentives, and occupancy costs? These are the main operational costs on which new locations are compared. Could your business benefit by looking at this kind of geographic growth?
AS I SEE IT, manufacturers that are in a position to expand should look at all their options, not just follow the conventional wisdom. Just the exercise of considering a geographic expansion will open up your eyes to a whole new set of strategic options that can elevate your business to the next level.
Considering an expansion, or interested in exploring if expanding makes sense for your company? Ady Advantage’s strategic consulting services for manufacturers can help you determine if expansion would be a good option, and if so, identify potential locations for additional facilities. We have extensive experience in site selection and bring the site selector’s perspective to every engagement. Contact Janet Ady for more information at 608-663-9218.