The Leader Magazine

MAR 2017

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MARCH 2017 27 F E A T U R E A R T I C L E Access to suppliers As new production processes are being established in the U.S., there is an increasing need for suppliers with parts and materials to support them. Depending on the type of product, manufacturers might seek to locate near a specifi c concentration of suppliers. For example, an operation that requires a particular plastic part may seek out nearby plastic- injection molders as part of its location decision. Looking ahead, this factor may change for some manufacturing operations as new technologies such as 3D printing, or additive manufacturing, allow companies to design and produce their own custom parts in-house. Access to customer markets As companies diversify their customer base, fi nding a location that is central to multiple customer markets is key. For example, MACA Plastics, a supplier of components for both automotive and medical industries, recently announced a new operation in Maysville, Kentucky, that provides a balanced proximity to both the Midwest and Southeast markets where those industries are concentrated. For now, trucks and vans continue to be the preferred mode of travel, so road access and highway infrastructure continue to be primary location criteria. Depending on the product, rail access may also be required for railcar or intermodal shipments that might rely on rail for part or all of a shipment, particularly to replace long-haul segments of travel. It will be important to watch how this location factor may evolve with new technologies such as driverless trucks and drones. Incentives and taxes The business-tax environment, state or local, is also an important location driver. During the location-evaluation process, a company (or consultant to the company) will "model" its operating costs, including state and local taxes, in each candidate location. As tax structures vary by state and local community, this can be a diffi cult proposition, but critical, nonetheless. An increased investment in automated equipment for today's manufacturing operation also increases the value of personal property, which may or may not be tax-exempt. Some states have taken steps to help become more competitive for manufacturing investment by not penalizing companies for investing in advanced technology and equipment that help the company compete. In Ohio, for example, all production machinery and equipment is exempt from personal property tax. Some of these types of exemptions are considered "incentives" in the site-selection process. Other states have enacted tax abatements or credits as well, which help to encourage manufacturing investment in a particular area, with the premise that a capital investment will create jobs (both directly at the plant and indirectly with area suppliers, vendors, and support services). These tax incentives, along with other types of incentives related to site development, workforce training funds, infrastructure grants, etc., are all key inputs in the location decision-making process, particularly once a company has narrowed in on location options that meet all other requirements.

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