Site selection

From Wikipedia, the free encyclopedia

Site selection indicates the practice of new facility location, both for business and government. Site selection involves measuring the needs of a new project against the merits of potential locations. The practice came of age during the 20th century, as governments and corporate operations expanded to new geographies on a national and international scale.

History

The theoretical approach to questions related to site localization has its roots – histori-cally speaking – in the analysis of agricultural production units. One of the first com-prehensive scientific publications in this field is a book by Johann Heinrich von Thünen from the first half of the 19th century.[1]

The site structure model developed in this publication shows the direct dependence of the achievable yield at a certain location and its intensity of utilization. This theoretical approach is still valid today. In his book, Thünen frequently mentions Adam Smith’s analysis of the nature and the causes of the wealth of nations from the 18th century and often refers to his findings.

The issue of the correct location for industrial production soon followed the develop-ment of industrial production processes. In Germany, the theory of industrial locations was introduced by Alfred Weber (1868–1958). As early as 1909, he published the first text on this issue. It is true that Wilhelm Roscher (1817–1894) and Albert Schäffele (1831–1903) had dealt with this in the context of their publications on location-related issues. However, before Weber there was no theory of industrial location. Weber ana-lyzed location factors and dynamics to “ … unravel the clew of reasons for orientation we are faced with everywhere in the real world”. He did this in the context of developing his theory independently of the economic system in which locations are embedded. However, in his discussion of location aspects he only takes labor and transport costs into consideration.

Site selection was formalized in the 1940s and 1950s through a number of important U.S. government projects. Determining the correct location for projects important to national security, including Los Alamos National Laboratory, the Hanford Site, and the United States Air Force Academy, required a thorough evaluation process. The site selection process developed for these projects was refined and later became standard practice in the private sector. As the U.S. economy and population expanded in the post-war years, so did corporate operations. Large companies began using a formal site selection process to identify ideal locations for new corporate campuses and, in particular, manufacturing operations.

Theodor Sabathil’s 1969 dissertation is considered to be the first in-depth study in the German-speaking area of international site selection. In his dissertation, Sabathil largely focused on country selection, which is part of the site selection process. In this context, Sabathil compiled a comprehensive catalogue of site factors and a theoretical approach to site selection; the latter does not go into great detail. Neither does Sabathil take any legal, natural, or cultural site factors into consideration. However, he discusses in par-ticular company-specific framework conditions and psychological factors.[2]

The dissertation submitted in 1980 by Peter Tesch constitutes another milestone in the further development of international site theory in Germany. Tesch combines theories of international trade and investment with site theories. He is the first to include country-specific framework conditions in his analysis. The main basis for his comments on the various types of internationalization are “location-specific competitive advantages.” In this context, Tesch developed a catalogue of criteria for international site decisions grouped into three categories:

  • site factors affecting all company activities
  • availability and costs of the site factors impacting on the production factors
  • turnover-related site factors.

Tesch showed that every country has its own political, cultural, economic, and legal framework conditions, and thus may offer location advantages for a company with a presence there. Such competitive advantages result from the interaction between site re-quirements on the one hand and site conditions on the other. The site requirements re-sult from the production requirements (e.g. production and sales processes), the available resources, and the corporate philosophy. The site conditions, by contrast, result from the typical resources available in the country, from economic factors, and from logistics costs. The degree to which site requirements and site conditions match indicates the site quality. Tesch extends the previously nationally oriented site selection theory with the interna-tional component, analyzing in particular the country-specific aspects of the different groups of site factors. His work is outstanding in particular because most other studies focus on specific individual countries or on individual site factors. A weakness in the study is its focus on the assumption that competitive advantages arise only from site-specific framework conditions.[3]

Thomas Goette’s 1994 study tries to classify important international site factors and to structure the process of international site selection. Goette distinguishes between economic site conditions (sales potential, competitive conditions, infrastructure and transportation costs, labor, monetary conditions), political site conditions (tax legislation, environmental protection, institutional market entry bar-riers, support of business, political risks), cultural site conditions (differences in lan-guage, mentality, religion, and the lack of acceptancy of foreign companies), and geo-graphical site conditions (climate, topography). This study again demonstrates that an attempt to cover all aspects will result in loss of quality as all factors were not or could not be taken into consideration. Goette breaks down the site selection process into five phases:

  • concept phase
  • country pre-selection
  • macro-analysis
  • micro-analysis
  • decision.

Although this is a rather roughly hewn system, it is still often used in practice, particu-larly with smaller site projects. Goette also theorizes that, in particular, industrial site decisions within companies are usually once-off and division-related decision-making processes. Based on this, Goette assumes a relatively low learning curve, and hence little potential for improvement for subsequent projects.[4]

In 2011/2013, Thomas Glatte developed an furthermore enhanced model for industrial site selections from that consists of ten stages.[5]

These are:

  • Stage 1: establishment of project organization
  • Stage 2: project definition
  • Stage 3: definition of regional scope
  • Stage 4: regional screening
  • Stage 5: longlisting
  • Stage 6: shortlisting
  • Stage 7: site visits
  • Stage 8: selection of preferred site options
  • Stage 9: definition of preferred site
  • Stage 10: decision

Furthermore, Glatte evaluated and proposed specific methods for each of the aforementioned stages and provided a comprehensive list of criterias for industrial site selections projects.[6]

Notable projects

United States Air Force Academy

The United States Air Force was created in 1947 as an independent service branch and legislation was passed to create a United States Air Force Academy. Selecting the best location for the academy was deemed critical by Congress and the Air Force Academy Site Selection Board was established to manage the task. The board evaluated more than 580 locations in 22 states before selecting the current Colorado Springs site.[7]

Hanford Site

Site selection for the Hanford nuclear production facility was important for different reasons. Nuclear material and nuclear weapon production required land suitable for large-scale manufacturing, but also remote and secure from natural disasters. The Army Corp of Engineers selected 586 acres in Southwest Washington in 1942.[8]

BMW automotive manufacturing

In 1992, BMW announced the company would invest over $620 million to develop a new manufacturing facility in Spartanburg, South Carolina.[9] The factory was the first by a European car manufacturer in the United States since Volkswagen had closed its Pennsylvania facility in 1992. [10] BMW spent three years evaluating over 250 sites before selecting South Carolina.

BASF and Sinopec integrated petrochemical site

In 1994, BASF established a first joint venture with Sinopec Yangzi Petrochemical Corporation (YPC) in Nanjing, People's Republic of China. This was the nucleus for one of the largest foreign investments in the chemical industry in China which is continuously expanded since its establishment.[11]

Process

The site selection process includes a detailed evaluation of project needs which are then measured against the merits of potential locations. The process typically includes selecting and evaluating communities, real estate site analysis and acquisition, and may include negotiating tax incentives. [12]

According to the U.S. General Services Administration, site selection considerations should begin early in the capital development process and play a significant role in pre-planning discussions.[13] The process includes the following steps:

  1. Define project criteria
  2. Evaluate communities
  3. Create short list of communities based upon project criteria
  4. Identify real estate sites within each finalist community
  5. Real estate analysis
  6. Negotiate tax incentives
  7. Site acquisition

Detailed site selection typically requires nine months for federal projects[14] and four to six months for private sector projects.[15] The National Environmental Protection Act may extend the site selection timeline for federal agencies, depending on the level of environmental analysis required.[16]

Current use

Formal site selection is widely employed today. The U.S. federal government and all federal agencies require new facility development to follow internal site selection procedures. While not as widespread, many state governments and state government agencies have followed suit and published their own site selection guides.[17] Without requirements for use, site selection for private business is still widely used, but less so than in federal agencies. In private industry, site selection consultants[18] are hired for complicated projects including manufacturing facilities, corporate headquarters, and research and development operations. For both government and business, the work can be performed by internal staff or an external advisors. Many large corporations with ongoing new facility needs employ internal site selection teams.[19]

See also

References

  1. ↑ von Thünen, Johann Heinrich (1826). Der isolierte Staat in Beziehung auf Landwirtschaft und Nationalökonomie (The Isolated State in Relation to Agriculture and National Economics). 
  2. ↑ Sabathil, Theodor (1969). Location Problems of International Industrial Enterprises. 
  3. ↑ Tesch, Peter (1980). The Determining Causes of International Trade and Direct Investment. 
  4. ↑ Goette, Thomas (1994). Site Policy of International Corporations. 
  5. ↑ Glatte, Thomas (2011). Internationale Produktionsstandortsuche im immobilienwirtschaftlichen Kontext. Expert Verlag. ISBN 978-3-8169-3086-0. Retrieved March 1, 2011. 
  6. ↑ Glatte, Thomas (2013). "International Production Site Selection". [] (Expert Verlag): 139 – 154. ISBN 978-3-8169-3216-1. Retrieved October 1, 2013. 
  7. ↑ "Air Force Academy". National Park Service. Retrieved 23 September 2011. 
  8. ↑ "Hanford Overview". Department of Energy. Retrieved 23 September 2011. 
  9. ↑ "BMW downplays wages in site selection". Los Angeles Times. Retrieved 23 September 2011. 
  10. ↑ "BMW expected to build plant in South Carolina". Los Angeles Times. Retrieved 23 September 2011. 
  11. ↑ Glatte, Thomas (2004). "How BASF Navigates China - How to establish and manage Chinese industrial assets". Site Selection Magazine. Vol. 49, No. 4. 
  12. ↑ "Site Selection Process". Greyhill Advisors. Retrieved 23 September 2011. 
  13. ↑ "Site Selection Guide Introduction". GSA. Retrieved 23 September 2011. 
  14. ↑ "GSA Site Selection Process Overview". GSA. Retrieved 23 September 2011. 
  15. ↑ "Corporate Site Selection". Greyhill Advisors. Retrieved 23 September 2011. 
  16. ↑ "NEPA Activities in Site Selection". GSA. Retrieved 23 September 2011. 
  17. ↑ "School Site Selection and Approval Guide". California Department of Education. Retrieved 29 September 2011. 
  18. ↑ "Site Selection Consutlants". Greyhill Advisors. Retrieved 4 November 2011. 
  19. ↑ "Dell Case Study". Greater Oklahoma Chamber of Commerce. Retrieved 23 September 2011. 
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