Baking & Snack - September 2014 - 32

SITE SELECTION

on the current supply chain and logistics network. If new
ingredients are needed, where are they coming from and
how will they get to the bakery? In addition, consider
whether new or existing products will be targeted and
distributed to new markets. If so, what supply chain and
distribution channel changes are necessary?
Further, there is increasing demand for frozen and
par-baked products. These products can be denser and
may have a higher per-truckload capacity, so their overall transportation costs are often lower. With rising fuel
costs, the reduced number of truckloads can have a significant impact on potential new site location and logistics decisions.

Knowing your goals
Performing a logistics analysis can prove beneficial for
truly understanding the trade-offs with expanding a facility. While construction costs may be lower when expanding existing facilities versus retrofitting or building
on a new site, the associated risks include missed growth
opportunities, reduced market share and increased logistics costs, among others.
Long-term cost savings, along with potential realization of incentive packages for relocation, may outweigh
the additional upfront cost needed to develop operations
on a new site. It is well worth the time to evaluate your
options to make the most appropriate decision.
To start, bakers need to define their current and
five-year goals with regard to market saturation and
demand. What is the size of the geographic area trying
to be reached? What is the optimal location for new facilities to ensure market coverage and distribution needs
for product freshness? How long will it take to implement capacity and market increases, and what are the
Bakers and snack producers should define short- and long-term goals and
conduct proper analysis to understand how to best expand their operation.
Austin Co

32 Baking & Snack September 2014 / www.bakingandsnack.com

relative costs? By first understanding what is trying to be
accomplished, the baker can determine the best solution
to meet its goals.

Evaluate financial incentives
While considering growth strategies, a key factor is the
incentive package available for capital investment that
creates new jobs. Competition between business-friendly states and local governments vying for the bakery's
business, jobs and tax revenue can encourage bigger incentive packages, which may move the needle in favor
of developing a new site. Whether drawing competition
to stay at the current site or expand at a new site, a competitive incentives package can assist with costs related
to new construction.
Additional transportation-related factors to review
include access to highways and rail, tolls and future
community development plans. All capacity growth
strategies, whether staying at the current site or expanding to a new site, must address future community development plans that could significantly, and detrimentally,
impact the long-term viability of the investment.
Other site selection factors should be considered if
the bakery chooses to develop on a new site, but in these
early stages, a logistics and incentives analysis can be
critical in determining what should happen next.
A bakery may choose to perform a logistics study
themselves or use the expertise of a third-party consulting firm. A third-party firm is typically better equipped
to reduce initial and operating costs through managed
competition and incentive negotiations. Either way, taking the time upfront to thoroughly review logistics and
operating cost considerations can greatly benefit the
success of your next bakery project.
Editor's Note: Mike Pierce is president of The Austin Co.,
Cleveland, OH. Frank Spano is the managing director of
the company's Austin Consulting division.

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