Siting -- Little Things That Mean A Lot

Energy crunch boosts business for site-selection industry.

Sometimes it takes a crisis to reorder priorities. The power crunch afflicting California is forcing executives to question the criteria used to determine a factory's location. Some are shifting priorities. Others are realizing that real-estate research is better left to specialists in site selection. A varied lot, site selection consultants find homes for factories, sales offices, and other facilities. Their work requires a delicate balance of priorities. Competing needs can include pinpointing a good labor force and a good place for a CEO to land his helicopter. Once dominated by a few influential organizations, the industry is growing with real-estate firms, trade associations, and mom-and-pop shops determined to help manufacturers make the best choice. Jacksonville lured 41 projects last year worth some $260 million, and more than half of them came from site-selection consultants. "Their numbers increase measurably every year," acknowledges Jerry Mallot, an executive vice president at the Jacksonville Chamber of Commerce. Bob Pfannkuch, president of Torrance, Calif.-based Panasonic Disc Services Corp., which puts Double Jeopardy, The Sixth Sense, and other movies on DVDs, is mulling over priorities. He's frustrated by changes to California's labor laws and more recently by the power crisis. "Shutting down our production lines would have a serious financial impact, so we have to talk to the power company every day," he complains. When Panasonic opened this factory, located about 10 minutes from the Los Angeles airport, in 1997, it was one of the first to produce DVDs. Proximity to Hollywood meant vendors from movie studios, uncertain about the usability of what was then an experimental technology, could drive to the factory to see how DVDs worked. Just as important, an expert in digital technology crucial to the factory's start-up lived nearby. He lacked a driver's license and needed to be able to walk to work. Now that Hollywood has adopted DVD technology, start-up glitches are over and being located in Los Angeles is less important. If the company needs to expand production, it can look elsewhere first. "California is not very business friendly," Pfannkuch points out. "Government and businesses here are just more adversarial than they are in other places." Friendliness to business is important, but so is friendliness to other cultures. Site-selection consultants say South Carolina has scared off companies due to its decision to allow the Confederate flag to fly on the Statehouse grounds. Ditto for states with a reputation or legislation that prevents corporations from offering benefits to same-sex partners. There are other good reasons to use siting consultants. Shari Barnett, a senior manager in PricewaterhouseCoopers' (PwC) business-location-strategies group and a 15-year veteran in economic development, studies weather patterns and looks at power grids to help manufacturers relying on one grid find ways to locate near another so that all plants don't go dark in a storm or power crunch. Finding a site has become more complex since Felix Fantus, the granddaddy of site selection, opened his company in 1919. In the early years Fantus Consulting, now a unit of Deloitte & Touche LLP (whose director of location strategies, James A. Schriner, is an IndustryWeek contributing editor), focused on negotiating financial incentives for manufacturers. By the time Barnett entered the business in the mid-1980s, Arthur Andersen, PwC, and other large consulting firms were establishing practices. Even the National Assn. of Manufacturers conducts free research for members. "Large companies have a real estate department, but at small and medium-sized companies it's left to the CEO or CFO. There are so many different requirements it becomes extremely labor intensive," says Ellen Davis, executive director, NAM site-selection network. Weld Royal is a former senior editor for IndustryWeek. She is based in New York.

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