The Leader Magazine

MAR 2017

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28 MARCH 2017 F E A T U R E A R T I C L E Jay Biggins is the executive managing director and Michelle Comerford is the industrial and supply chain practice leader of Biggins Lacy Shapiro & Company, a leading location economics consulting fi rm. Regulatory environment Manufacturers today are also strongly weighing the regulatory environment, or "business climate," in location decisions. This factor is generally a refl ection of the business friendliness of a particular location – and can vary by state and community. At the federal level, the new administration has expressed a desire to lower taxes and scale back unnecessary regulations on business in order to make the U.S. more attractive for investment. Many states have also been active in efforts to improve their business climate. For example, Indiana is currently in the process of gradually lowering its corporate income tax rate from 8.5% in 2014 to 4.9% by 2022, putting it on course to be one of the lowest rates in the country. Kentucky recently passed statewide right-to-work legislation, making it the 27th state in the U.S. to become RTW, a key location driver for many manufacturers today. In contrast, states such as California are sending a different message by raising minimum-wage rates above federal levels, imposing more health care rules, and implementing more regulations on companies, making it more diffi cult to do business and less appealing to invest in manufacturing. Community features The attractiveness of a community, the quality of its schools, and the amenities it offers its residents also infl uence a manufacturer's location decision, especially if a company is considering relocating management and/or staff to operate the new plant. These factors are key for skilled-talent attraction and retention and help offset any "risks" associated with future labor attraction. A foreign direct investment (FDI) manufacturing operation may also consider community culture and diversity, particularly related to the culture of where the company is based. For example, a Japanese-owned manufacturer may consider the presence of other Japanese companies, as well as local restaurants, places of worship, and other cultural resources, particularly if it intends to bring in employees from Japan to help run the new operation. The "X" and other factors Every manufacturing company is a little different, so each brings a unique perspective to a location-selection process. Although cost and operational requirements are typically key location drivers, there also exists an "X Factor" that represents some other unique location criteria for a particular project. Whether it is the location of an executive's summer (or winter) home, the presence of a particular type of recreational activity, or the "feeling" that the management team got when they toured a particular location, this factor, although hard to defi ne, can tip the scales in the fi nal decision on a location. There is no one silver bullet. Companies consider and weigh all kinds of location and operating factors that go far beyond site and building characteristics. What is for certain is that location plays a key role in today's advanced manufacturing plant – both in respect to its supply chain network and the supporting resources a location offers to help an operation thrive.

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