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How To Sink A New DC

By Art van Bodegraven | 04/21/2017 | 1:05 PM

In distribution, particularly serving the omnichannel segment, there is an explosion of purpose-built distribution centers. In a timely confluence, Industry Week recently published a list of what not to do, what to avoid in siting a new manufacturing facility.

Truth is that almost any facility ought to follow the same guidance, whether a factory, a headquarters, a distribution center, or whatever. The key points are these, with my own takes on IW's input …

Confidentiality. Tell no one with a prospective stake as an outside provider of goods or services. You don't want to dilute, skew, or unduly influence a pristine process that should consider your organization first by a great margin.

Document any and all commitments. Those with an interest in attracting your building, or helping with the build-out and go-live, will say almost anything to snare a "yes" vote. They seem to take cues from pre-owned–vehicle sales people—whatever it takes to seal the deal, whether real or hoped for, can be preached as Gospel to the eager-to-be-pleased prospect. Get it—get it all—in writing. Judge Judy ain't going to be entertaining oral representations in making a down-the-road settlement decision.

Stay out, despite other factors, of high-cost areas. The people who work there need to be able to afford to live in the area. And, a big chunk of cost relates to infrastructure, the access and transit adequacy (and life span) that your goods and people will traverse every single day.

Don't forget, or skimp on, environmental due diligence. Once you've done the financial due diligence, it's time to look at factors such as groundwater, hazardous waste, cleanup, soil content, flood plains, water management, species protection, and the like. The phrase "Come hell or high water" takes on new meaning.

Do not settle on a single prospective site selection until final negotiations have been concluded. Even then, have a Plan "B" and an alternate selection in your back pocket. Locked in is locked in, and the partner in a shotgun marriage does not get prettier as time—and the possibility of escape—pass.

Go big or go home. Too small a facility is a potential crippler. You will grow, and you will find uses for "excess"space. Space is relatively cheap insurance for a fututre that welcomes growth and change with style and ease.

Understand the reality of cost incentives: the value, the potential to use them, conditions and limitations, and interdependencies that may or may not be either acceptable, or questionable, over the long term.

Never make a location decision based solely on perceived incentive value. The gravy train will show up empty some day, and the attractiveness of a location is incredibly complex—way beyond a cash incentive or tax break.

Make sure that the general area contains, or can quickly attract, the right number of skilled and talented executives and associates. And, decide how to manage building an engaged workforce in an area in which labor unions dominate groups of workers.

Spend whatever time it takes to build alignment among stakeholders on the parameters for a location search—must-haves, deal breakers, nice-to-gets, philosophies regarding size and incentives, etc. A failure to do so means doing it all over when you think you're finished, and can fray internal relationships—and permanently damage your credibility.

Happy hunting!




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About Art van Bodegraven

Art van Bodegraven

Art van Bodegraven (1939 - 2017) was Managing Principal of the van Bodegraven Associates consultancy and Founding Principal of Discovery Executive Services, which develops and delivers supply chain educational programs. He was formerly Chair of the Supply Chain Group AG, Partner at The Progress Group LLC, Development Executive at CSCMP, Practice Leader with S4 Consulting, and a Managing Director in Coopers & Lybrand's consulting practice. Concentrating in supply chain management and logistics for over 20 years in his 50+ year business career, he has led ground-breaking strategic, operational, and educational projects for leading US and global clients. Art was principal co-author of DC Velocity's Basic Training monthly column for a decade, and was the principal co-author, with Ken Ackerman, of Fundamentals of Supply Chain Management, the definitive primer in the field. His popular blog, The Art of Art, has been a staple of DC Velocity's web site since its inception.


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