Prime real estate Oct 1, 2007 12:00 PM
, By Mark Del Franco
JobZone
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Boden, the British apparel cataloger, was nearing annual sales of $100 million in the United States. But it had to ship every order from its Leicester, England warehouse, and that didn't exactly spell good service.
So Boden, which has been mailing into the U.S. for five years, decided to set up a stateside facility. And in January, the company will open a distribution/call center in Scranton, PA.
Why Scranton? “Most of our customers are concentrated in the Northeast so we started to concentrate on that area,” explains Ben Dreyer, Boden's director of operations.
But there was much more to it than that. Boden considered several things in its due diligence:
The labor market. “We weren't going for a highly automated DC/call center, so we need to be able to get good quality staff,” Dreyer says. “My horror as an operations person would be to have center and not fill it with good people.” (The company now uses a Miami contact center).
Property. Boden was able to lease a 60,000-sq. ft. distribution facility on favorable terms.
Accessibility. The Scranton facility is 2-1/2 hours from the Newark, NJ, international airport, which has direct flights to London. “If we have a problem at our facility, I want to be able to get there,” Dreyer says.
Exit strategy. Dreyer wanted to be sure that the firm could get out of the building if it had to. “We wanted something we could expand. We were asking, ‘Can you have a break in the lease — or can we expand the existing building?’”
Scranton scored high on all these points. And the clincher for Dreyer was that the town just felt right. “The Scranton/Wilkes-Barre area felt more like home and had a greater sense of community feel than anything we looked at,” he says. “And that was an important factor for us.”
Dreyer concedes that round-trip travel from the U.K. slowed things down the beginning. But it took less than three months to choose the building once the company decided on Scranton.
What can U.S. firms learn from this experience?
Plenty. For starters, it pays to take everything into account when looking for a site.
Companies often make the wrong choice when they base it on a single variable, says Stephen Harris, president of JAM Management Services, a consultancy that helps businesses with relocation.
So what if land is available? That doesn't mean the area has adequate transportation and a labor force. And those aren't the only things to consider.
“In a privately held company, the primary driver for where to put your building could be as simple as the distance from the owner's driveway,” Harris says. “I've designed a center that landed where it did because the return address was the most appropriate sounding of three less expensive alternatives. Or it could have just as much to do with the skiing or the fishing nearby.”
“Don't laugh,” adds Randy Strang, a vice president with UPS Supply Chain Solutions, a fulfillment services provider. “We get that scenario more times than you think.”
Some firms maintain their legacy sites, and they pay the penalty in higher phone and transportation costs. In contrast, relocation can result in a clean slate.
“It provides the company an opportunity to step back and ask, ‘Is this the best place for my business?’” Strang says.
How do you determine the ideal location? The first step is to solicit a list of factors from each stakeholder in the company. There could be hundreds.
Don't expect everyone to agree. Operations will want to be located where in-bound shipping rates are lower. Human resources will look for a skilled and affordable labor pool. And the finance team will focus on whether to rent or buy an existing building or construct a new one.
Things get even more complex when the headquarters are being combined with the distribution center. “A whole range of considerations for the attraction and retention of quality executive officers comes into play,” Harris says.
Suppose your new site is in North Dakota. How quickly will you convince a seasoned operations executive to relocate there?
Labor and inventory comprise 18% to 25% of a distribution center's operating costs. And they're not easy to calculate, given the intangibles.
