State of Kansas Location Elimination Discussion   Kristian D. Bjorson Managing Director Supply Chain & Logistics Solutions...
Comments from JLL Industrial Market Report - Fall 2008 <ul><li>Downside risks remain rampant with expectations for the eco...
My Recommendations (Future Expectations for KS) <ul><li>Take an  integrated  (state, regional and local) team approach – p...
Integrated  Approach  Supply chain strategy Business and economic incentives Real estate advisory Capital markets Project ...
Optimize.  Monitor.  Improve.  Network Strategy We objectively evaluate cost and service related trade-offs of various sup...
Simple Supply Chain Cost Allocation Simple Supply Chain Cost Allocation Transportation Inventory  Workforce Real Estate / ...
FUNCTIONAL ORGANIZATION OBJECTIVE FOCUS CUSTOMER SERVICE INVENTORY COST SALES & MARKETING DISTRIBUTION MANUFACTURING FINAN...
Efficient.  Smart.  Effective.  Location Selection Minimize the impulsive nature of real estate decisions by first  priori...
Location Selection – Overview Simple Supply Chain Cost Allocation <ul><li>Definition  </li></ul><ul><li>Integrated evaluat...
Location Elimination  – Sample Regional Projects Simple Supply Chain Cost Allocation <ul><li>PRESENT (Project ABC) – Count...
High Level Screen – County Level Simple Supply Chain Cost Allocation Project ABC: Population 2007 50,000 to 10,000,000 Kep...
High Level Screen <ul><li>Screen Center </li></ul><ul><ul><li>Kansas City, MO-KS </li></ul></ul><ul><li>Stretched Geograph...
Location Selection Criteria and Weighting Rounded  Averages As % of Total Labor 31% 100% Population 2007 8% 2% Immigrant P...
Location Selection Criteria and Weighting Rounded  Averages As % of Total Operating Issues & Costs 41% 100% Outbound Trans...
<ul><ul><li>Threshold Criteria:  4,525 Cities Across 13 States </li></ul></ul><ul><ul><li>Class I Rail Service (Cut if < 2...
Workforce Analysis Project T – Workforce Availability / Training: ALABAMA Education Interview: Number of Annual Welding Gr...
Thank You… <ul><li>Kristian D. Bjorson </li></ul><ul><li>Managing Director </li></ul><ul><li>Industrial /  Supply Chain & ...
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State of Kansas Location Elimination Discussion

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State of Kansas Location Elimination Discussion

  1. 1. State of Kansas Location Elimination Discussion Kristian D. Bjorson Managing Director Supply Chain & Logistics Solutions September 25, 2008 Location
  2. 2. Comments from JLL Industrial Market Report - Fall 2008 <ul><li>Downside risks remain rampant with expectations for the economy to “ bump along the bottom ” during the next 3-4 quarters </li></ul><ul><li>Do not expect a housing market correction to end until mid-2009, with price recovery in 2010 at the earliest </li></ul><ul><li>Overall positive industrial net absorption in first half of 2008 </li></ul><ul><li>Scarcity of large deals due to reluctance to commit with uncertain near-term business outlook </li></ul><ul><li>Challenging financing environment for new construction (especially speculative) and uncertain demand will limit any overbuilding, expect significant constraints on debt availability </li></ul><ul><li>With large amounts of short-term debt maturing in 2009-2010 , expect acceleration in transaction – recapitalization activity from motivated sellers and institutional-foreign investors with excessive equity for real estate investments </li></ul><ul><li>High transportation costs will continue for the near future due to fuel prices, environmental issues / new regulations on trucks and shortage / security requirements on drivers </li></ul><ul><li>Continued but slowed import growth, significant railroad investments ($10B since 2000 with another $12B upgrades planned), improved railroad operating efficiencies and cost-effectiveness will drive the need rail over long-haul trucking </li></ul><ul><li>Even in difficult economic times, users will focus on the optimal location strategies to maximize service at the lowest possible total fixed and variable operating costs </li></ul>
  3. 3. My Recommendations (Future Expectations for KS) <ul><li>Take an integrated (state, regional and local) team approach – personalities, skill sets, etc. </li></ul><ul><li>Deliver “ no brainer ” sites (>80 acres) </li></ul><ul><ul><li>Shovel Ready – Fully entitled, platted, subdivided, annexed, approved development guidelines, preliminary planning and engineering, utilities infrastructure analysis, topographic survey, soil boring exploration, storm water detention studies, wetland delineation report, environmental site assessment, archeological survey and </li></ul></ul><ul><ul><li>REALogistics SM Ready – logistics advantage index, distribution climate study, workforce profile, operating costs analysis, taxes-incentives information </li></ul></ul><ul><li>Understand the scale of the supply chain costs associated with inventory and transportation </li></ul><ul><li>Focus on your ability to reduce costs related to workforce, real estate and taxation </li></ul><ul><li>Deepen relationships with existing industrial employers to be workforce references </li></ul><ul><li>Target specific industries and users with a strategic game plan and passion </li></ul><ul><li>Be aggressive and prepared to make a play as there is often only one shot at opportunity </li></ul><ul><li>Remember location selection is a systematic process of elimination where as real estate is an impulsive decision </li></ul>
  4. 4. Integrated Approach Supply chain strategy Business and economic incentives Real estate advisory Capital markets Project development services Integrated facilities management Integrated
  5. 5. Optimize. Monitor. Improve. Network Strategy We objectively evaluate cost and service related trade-offs of various supply chain networks. Our experts utilize sophisticated, leading-edge network optimizing tools. Alternative supply chain scenarios are identified and tested for sensitivity to changes in cost, service, capacity, and workforce constraints. We provide fact-based recommendations from our analysis on how best to service your clients at the lowest landed cost. Inventory Optimization Inventory management tools map the flow, positioning and true carrying costs of inventory. Our team leverages technologies and works closely with our clients to develop process improvements, accurate lead time forecasting models and service level analyses. We serve as an objective advisor, providing information on the optimal balance between service and inventory levels to maximize efficiency without sacrificing service. Transportation Management We identify and drive savings to the largest cost component in the supply chain through both tactical cost reductions and strategic operating improvements. Our experts utilize strategic transportation planning software and proactive improvement techniques to identify areas of opportunity for savings by modal allocation, lane efficiency, available capacity, and alternative transportation. Optimize.
  6. 6. Simple Supply Chain Cost Allocation Simple Supply Chain Cost Allocation Transportation Inventory Workforce Real Estate / Taxation Revenue – Customer Service Simple
  7. 7. FUNCTIONAL ORGANIZATION OBJECTIVE FOCUS CUSTOMER SERVICE INVENTORY COST SALES & MARKETING DISTRIBUTION MANUFACTURING FINANCE High Availability Fast Response Low Cost Minimum Handling Large Lot Sizes Long-Lead Time Low Investment C O M P A N Y F O C U S Major Impacts Know Your Audience – Functional Objectives Know
  8. 8. Efficient. Smart. Effective. Location Selection Minimize the impulsive nature of real estate decisions by first prioritizing the operating considerations across the supply chain. We employ a proven multi-tiered elimination process for location selection which provides a practical and analytical perspective on supply chain, workforce, business climate, and operating costs. To maximize the value of location selection, we make the right decision with thoughtful logistics analytics and make it better with integrated business and economic incentives negotiations . Workforce Analysis Mitigate risks and maximize savings through the quantification of workforce sustainability, productivity and cost. We assist you in developing your key workforce evaluation criteria to benchmark against best-in-class locations. Prospective locations are tested through competitive labor interviews, predictive economic-psychographic analytics, future wage progressions, workforce availability, and historical organized labor activity . Logistics Outsourcing Our experience with transportation and third-party logistics service providers brings unique market insight and sound decision making to your organization’s outsourcing process. We analyze supply chain operations and procedures along with your requirements to make objective evaluations and, if applicable, selections of outsourcing candidates. Through informed negotiation , we help you to maximize savings and implement successful partnerships. Smart.
  9. 9. Location Selection – Overview Simple Supply Chain Cost Allocation <ul><li>Definition </li></ul><ul><li>Integrated evaluation process comparing transportation, labor, operating expenses, taxes, incentives and real estate </li></ul><ul><li>Application </li></ul><ul><li>Complex, multi-market location searches </li></ul><ul><li>Value </li></ul><ul><li>Clearly identify and define operating environment advantages to accelerate elimination process. </li></ul><ul><li>Result </li></ul><ul><ul><li>Reduced selection timeline and resource appliance </li></ul></ul><ul><ul><li>Increased project focus and definition </li></ul></ul><ul><ul><li>Detailed total operating cost comparison of primary and secondary locations </li></ul></ul><ul><li>Process (Areas of Study): </li></ul><ul><ul><li>Supply Chain (Logistics / Transportation) </li></ul></ul><ul><ul><li>Distribution / Operation </li></ul></ul><ul><ul><li>Workforce </li></ul></ul><ul><ul><li>Taxes and Incentives </li></ul></ul><ul><ul><li>Real Estate </li></ul></ul>Selection
  10. 10. Location Elimination – Sample Regional Projects Simple Supply Chain Cost Allocation <ul><li>PRESENT (Project ABC) – County Level </li></ul><ul><li>The target geography encompasses five (5) states focused on three (3) primary regions: </li></ul><ul><ul><li>Kansas City, KS to Salina, KS </li></ul></ul><ul><ul><li>Des Moines, IA to Lincoln, NE </li></ul></ul><ul><ul><li>Denver, CO to Cheyenne, W </li></ul></ul><ul><li>PAST (Retail Distribution) – MSA Level </li></ul><ul><li>The target geography encompasses five (5) states and (11) Metropolitan Statistical Areas: </li></ul><ul><ul><li>Kansas City, MO-KS (Centeroid) with a 250 Mile Radius </li></ul></ul><ul><li>PAST (Project T) – City Level </li></ul><ul><li>The target geography encompasses thirteen (13) states: </li></ul><ul><ul><li>VA, NC, SC, GA, TN, AL, AR, MS, TX, OK, KS, NE, IA </li></ul></ul>Elimination
  11. 11. High Level Screen – County Level Simple Supply Chain Cost Allocation Project ABC: Population 2007 50,000 to 10,000,000 Kept 20, Cut 40 Workforce 2007 25,000 to 1,000,000 employees Kept 22, Cut 38 Unemployment May 2008 2.7% to 12.0% Kept 55, Cut 5 Real Estate Availability 1 to 5 Kept 47, Cut 13 Wage (Forklift Median) $10.00 to $13.50 Kept 60, Cut 0
  12. 12. High Level Screen <ul><li>Screen Center </li></ul><ul><ul><li>Kansas City, MO-KS </li></ul></ul><ul><li>Stretched Geography Under Consideration w/n 250 Mile Radius: </li></ul><ul><ul><li>Eleven (11) Metropolitan Statistical Areas (MSA)s across five (5) states </li></ul></ul><ul><li>Threshold Criteria </li></ul><ul><ul><li>Population Center </li></ul></ul><ul><ul><li>Proximity to Current - Future Sales Demand </li></ul></ul><ul><ul><li>Major Transportation Lanes - Multiple Interstates </li></ul></ul>Short-listed Kansas City, MO-KS; Topeka, KS; Wichita, KS; Oklahoma City, OK and Tulsa, OK <ul><ul><li>Kept 5, Cut 6 MSAs </li></ul></ul><ul><ul><li>Eliminated Lincoln, NE; Omaha, NE; Des Moines, IA; Cedar Rapids, IA; St. Louis, MO and Springfield, MO </li></ul></ul>High Level Screen – MSA Level
  13. 13. Location Selection Criteria and Weighting Rounded Averages As % of Total Labor 31% 100% Population 2007 8% 2% Immigrant Population (foreign born) 5% 2% Population Growth – 5 Year Growth 6% 2% Population 20-34 Year Olds 7% 2% Population Growth 20-34 Year Olds 5% 2% Arts, Culture, and Leisure 1% 0% Median Age 2% 1% Unemployment November 2007 12% 4% Point Change in Unemployment 2006-2007 5% 2% Private Sector Unionization 18% 6% Right to Work State 8% 2% Employment at Will Exceptions 6% 2% HS Diploma 6% 2% Some College, AA Degree, or Bachelors 5% 2% Occupation in Transportation 2% 1% Full-time Undergraduate College Enrollment 4% 1% Rounded Averages As % of Total Distribution Climate 28% 100% Customer Service (AWD to Stores) 6% 2% Air Cargo Airport Capacity 5% 1% FedEx Freight/Ground/Shipping Centers 16% 4% Foreign Trade Zones 7% 2% Total Companies with 100+ Employees 2% 1% Companies SIC 4200 with 20+ Employees 8% 2% Employment in SIC 4200 2% 1% Employment Growth in Transportation 2007-2012 4% 1% White Collar Employment 6% 2% Median Household Income 6% 2% Growth in Median Household Income 4% 1% Cost of Living Index 12% 3% Crime Rate / 100,000 People 12% 3% Median Home Price 2% 1% Quality of Life Rating (100 is best) 8% 2%
  14. 14. Location Selection Criteria and Weighting Rounded Averages As % of Total Operating Issues & Costs 41% 100% Outbound Transportation Costs 7% 3% Inbound Transportation Costs 5% 2% Warehouse Supervisor Hourly Wage (8Yrs. Exp.) 7% 3% Forklift Operator Hourly Wage (2 Yrs. Exp.) 11% 5% Warehouse Laborer Hourly Wage 12% 5% Worker’s Compensation Rates (per $100 payroll) 10% 4% Land Availability (>50 acre sites with industrial zoning) 10% 4% Existing building Availability (400K SF expandable to 900K SF) 5% 2% Land Costs ($/Acre) 14% 6% NNN Rental Rates ($/SF) 4% 2% Real Estate Taxes ($/SF) 7% 3% Utility Rates per ($/kWh) 8% 3%
  15. 15. <ul><ul><li>Threshold Criteria: 4,525 Cities Across 13 States </li></ul></ul><ul><ul><li>Class I Rail Service (Cut if < 2 Class I Rail Lines) </li></ul></ul><ul><ul><li>Proximity to Major City Pop. (Cut if < 200,000 in 30 mile Radius or < 500,000 in 50 mile Radius) </li></ul></ul><ul><ul><li>Proximity to Interstate (Cut if > 15 miles away”) </li></ul></ul><ul><ul><li>Target Population of 25,000 (Cut if < 18,000) </li></ul></ul><ul><ul><li>Natural Disaster Ranking (Cut if countywide insurance claims > $100M) </li></ul></ul><ul><ul><li>Metal Fabrication to Manufacturing Workforce (Cut if < .50%) </li></ul></ul><ul><ul><li>Metal Fabrication Wage (Cut if > $33,500) </li></ul></ul><ul><ul><li>Kept 13, Cut 4,512 </li></ul></ul>High Level Screen – City Level
  16. 16. Workforce Analysis Project T – Workforce Availability / Training: ALABAMA Education Interview: Number of Annual Welding Graduates: 370 Students Number of Welding Programs: 7 Blind Ad Response: Number of Applicants: 2,865 Applicants Survey (Responses & State Database) OTHER STATE Education Interview: Number of Annual Welding Graduates: 180 Students Number of Welding Programs: 5 Blind Ad Response: Number of Applicants: 357 Applicants (Responses, Trade School Graduates, & Recently Displaced)
  17. 17. Thank You… <ul><li>Kristian D. Bjorson </li></ul><ul><li>Managing Director </li></ul><ul><li>Industrial / Supply Chain & Logistics Solutions </li></ul><ul><li>Jones Lang LaSalle Americas, Inc. </li></ul><ul><li>200 East Randolph Street, 47 th Floor </li></ul><ul><li>Chicago, IL 60601 </li></ul><ul><li>[email_address] </li></ul><ul><li>Direct +1 312 228 3611 mobile +1 312 282 0511 </li></ul><ul><li>www.us.joneslanglasalle.com </li></ul>

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