Editor's Note: This is an updated version of an article published in May 2017.
Relocating a manufacturing business, or choosing to expand your facility into a new city, can be a challenging decision. Several reasons may prompt manufacturing plant relocation, including increased rent and labor costs, business growth, availability of raw material, and lack of resources. However, the issues during the moving process are fairly universal.
From internal factors that will affect your company processes, to external factors like taxes and property costs that could impact your bottom line, there are many things you must plan for in advance. There are also other considerations that might arise such as rising costs of the project or losing employees due to relocation.
To ensure you make the right decision for your facility, make a list to weigh the pros and cons. The following are some of the key factors to consider before making the big move.
Operating Costs & Impact on Processes
While most companies have pre-determined budgets and funding set aside for relocation or expansion, there are other unexpected operating costs that could show up during the process.
For example, if you are relocating a manufacturing business, there may be a period where you will have operating costs for both locations. Can your facility afford these costs?
Further, have you considered how the new space will affect production or the way your facility operates? Will these changes trickle down to employees who will have to learn a new system? These are factors that can cause significant changes in your company processes, culture, and operations, and you will want to be prepared for any backlash culturally or financially.
Perhaps the most trying internal aspect of manufacturing plant relocation is the shakeup that occurs in the employee pool. Whether due to the costs of relocating a family, attachment to the current location, or an inability to bring existing staff along, employee factors in relocation can cause significant disruption.
Management changes or the loss of key people in specific departments can lead to troubles not only with direction and communication but with knowledge base and efficiency. When relocating a manufacturing business, look at your ability to compensate your team appropriately if they choose to move with the company, and have a transition plan in place for those who can’t or won’t. It’s also important to consider that training the new staff will incur additional expenses.
Rezoning & Other Project Delays
When choosing a new location, everyone thinks through items like taxes, available workforce, and standard of living. However, sometimes complications can occur that go beyond this initial research.
For example, you may have found a perfect area for your facility but further research indicates it would need to be rezoned. You put in the necessary paperwork for the property to be rezoned, but — depending on the city — this process may not go as quickly as you like and could result in costly delays. This will ultimately impact your business, both through operations and costs of prolonging the project. Thoroughly research the new city in advance to identify any potential issues that could delay your move.
Utility & Resource Costs
Another unexpected factor you might encounter is the cost and availability of utilities in the new location. Increased utility costs or lack of competition may impact your manufacturing business. While differences in taxes may be a boon to your operating costs, utility issues may cancel out any substantial change. It’s critical to do your due diligence when researching a new city, as a lack of available resources can impact whether your move is affordable or not in the long term.
Suppliers & Distributors
When considering relocating a manufacturing business, an often overlooked external factor is how your move impacts partnerships like suppliers, distributors, and other vendors. If you move, it may no longer be feasible or optimal for you to work with all of the same partners. It also may cost more to do business with the same groups.
Set Your Manufacturing Business Up for Success
No matter what relocation decisions you make, it is essential to note that your facility will face issues financially, culturally, or otherwise. It may take some time before your manufacturing plant begins to feel like it is operating normally, and some aspects may never return to the way they were. Keeping this in mind can help you manage some of the common problems with relocation and alleviate associated business pains so that you can set yourself up for a successful move and positive future.