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Does your international company consider an expansion into the US

Written by: Jack Greene

Article Overview: Perhaps your company will not invest $4.1 billion in a new plant in Alabama as ThyssenKrupp AG will, nor negotiate an incentive package worth $811 million. But if your company considers an expansion into the US, read on. It is possible to quantify in advance what your operating costs are likely to be, and find which facility location will optimize costs, access to qualified labor, customer service, and shipping. Even in this economy.

Does your international company consider an expansion into the US


Perhaps your company will not invest $4.1 billion in a new plant in Alabama as ThyssenKrupp AG will, nor negotiate an incentive package worth $811 million. But if your company considers an expansion into the US, read on. It is possible to quantify in advance what your operating costs are likely to be, and find which facility location will optimize costs, access to qualified labor, customer service, and shipping. Even in this economy.

Expansion into the US? Characteristics of Companies that can Benefit

An international company, large or small, can benefit from manufacturing in North America primarily if there is a strong market for their products. As your company evaluates the world economy for the months to come, you will have to predict how your products will be attractive in the US market, and the relative cost to produce them there compared to production elsewhere and shipping.

It is possible to quantify in advance the location-sensitive factors which affect product and operating cost, in locations that a company wants to consider. Jackson Productivity Research Inc. performs this service for clients, in accordance with the criteria discussed below.

In almost any endeavor, qualified labor resources are needed. Any new facility will be successful only if it can hire or train qualified people. This requirement must be central to any consideration of another facility and subsequent site search.

Typically a company chooses a new location to offer physical proximity to suppliers, or customers. Then it compares the location-sensitive costs for the process in various areas. JPR can assist in this equation by defining in advance where in North America operational cost is likely to most favorable for client products and process.

If a good market is available, a company with several of the following characteristics will find that a manufacturing facility in North America may be justified.

A. Adequate size to make such an investment practical. Sales of at least $100 million annually, or potential to expand by some 100 or more jobs.

B. Logistics favor production in North America. For instance, duties or transportation costs are high; there are import quotas; customer service requires rapid delivery or reaction to problems; new products are introduced frequently; shipping causes product damage or obsolescence.

C. Company strategy would be reinforced by a North American facility. The company has a desire to integrate vertically, or to locate inventories near the market, or to link inventory control with customers for JIT. Foreign exchange exposure can be minimized by manufacturing and selling in the same currency.

D. Major costs can be avoided at the existing facility by adding a facility elsewhere. More manufacturing capacity is needed, and space to do so is limited or costly; a significant upgrade of facility is needed; utilities are scarce or expensive.

E. Environmental problems related to manufacturing are not serious; emissions and discharges from the process are not toxic, or if they are, equipment to reclaim, recycle, or treat is readily available; water usage is not excessive.

F. The process is able to be recreated in another location. The process may be technical and complex, but not overwhelmingly so; it is in control and well documented now. Upstream or downstream steps in the process already occur in North America; perhaps synergies would be created with another North American facility, of the company's, a vendor, or a customer.


Each company is different, each community is different.

Several objective and subjective factors affect the decision to add a new facility.

Each company is different, with different objectives, costs, markets, preferences, operating characteristics, logistics. Management defines these factors and new site criteria, then JPR can locate the U. S. site that fits best. We are able to determine many site-sensitive costs quickly without travel, and inexpensively, so that the client can predict if there may be a payback. We also define the most important criteria, and identify potential show-stoppers.

Costs for land, construction, utilities, labor, taxes, transportation, and administration vary by location, but JPR can quantify and compare those costs in advance, and compare to relocation incentives offered by states or communities.

"States like Alabama have clamoured to attract foreign investors" according to the Forbes article on ThyssenKrupp. The major incentives are reserved for the major investments, I can assure you. But smaller companies will also be welcomed not only by states, but also by communities and suppliers.

In the news are reports of foreign-made product recalls, and lawsuits, because of inappropriate material use; in recent history were massive Asian shutdowns for health or political reasons. Don't let a short-term cost saving destroy your long term business.

A primary reason for a site choice is Quality of Life, which appeals to employees as well as executives. Favorable QOL is in the eye of the beholder, but a community's living characteristics can be evaluated just as well as its business structure.

It is very important to maintain confidentiality, especially during the evaluation stage. A company has the most leverage with property costs and incentives before it identifies itself.

Success in international site search is easier with experienced, objective, confidential assistance in the destination country. Jackson Productivity Research Inc. does not work for communities or states, to avoid conflict of interest. Our objective is to find the most satisfactory solution for our corporate clients.

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Article Tags: inshoring, move facilities, move to US, offshoring



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