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North American Pharmaceutical-Biotech Industry Expects 30% Jump in 2007 For New Facilities
From Manufacturing News
The Pharmaceutical-Biotech Industry currently expects 80 new facilities to complete construction over the next twelve months according to the on-line database, Industrial Info Resource's Pharmaceutical Tracker. The new sites represent a whopping $3.7 billion total investment value. The projects include the construction of manufacturing plants, research laboratories and drug distribution centers. Activity for 2007 represents a 30% increase over 2006 and the 62 plants scheduled to be completed this year. The popularity of the industry and the high-paying jobs it provides has remained strong, and as discussed in the newly released 2007 Pharmaceutical-Biotech Industry Forecast, the site selection process has become much more competitive. Cities and towns from across both the U.S. and Canada seek to land these projects. Looking beyond the initial investment, officials hope the new construction attracts other investments from the life science sector. The Mid-Atlantic region currently lays claim to the largest number of new sites, with eleven plants expected to be finished next year. The region has long been a popular choice for all sectors of the industry, as it counts Maryland, North Carolina and Virginia among its states. In a three-way tie for second place, the Great Lakes, Midwest and West Coast regions are forecast to finish construction on ten new sites each.
http://www.themanufacturer.com/
Incentives Help Attract Major Projects, But Not the Total Answer
From The Manufacturer
When the State of Alabama offered a $253 million incentive package to attract Mercedes-Benz to Tuscaloosa County in 1993, other states said that Alabama was crazy to open its purse strings so wide.
But when the project grew from 1,500 jobs 1997 to more than 4,000 workers with an economic impact of $1.5 billion, opinions have changed. Honda and Hyundai soon followed, employing 6,000 more Alabamans. A Toyota engine plant in Huntsville has nearly tripled employment from initial projections. The state also has attracted defense contractors such as Boeing, which builds rockets in Decatur, and a proposed Northrop Grumman/ EADS North America aircraft tanker assembly plant in Mobile that the state has set aside $250 million to support. The director of the Alabama Development Office maintains that incentives are “one arrow in the quiver” of what any state can offer a manufacturer, it's true that many manufacturers allow states and regional entities to compete for their business. But the ultimate factor may well be that intangible combination of incentives, workers, quality of life, land, training and relationships that will be unique to each manufacturer and will vary widely from company to company.
Ohio, which has suffered from relocation of many industries to lower-cost states or countries, has restructured incentives to keep and attract manufacturers. Ohio restructured its incentive programs, dropping the personal property tax for manufacturers to reduce the tax consequences of investment and repealing the profits tax, which was shifted to the retail sector. Voters in November also approved $500 million in infrastructure improvements, which will be coupled with $1.2 billion in budgeted funds over the next decade to develop job-ready sites for manufacturers and fund R&D and new product efforts. The state has notched several wins recently, including the expansion of Whirlpool in the state following its acquisition of Maytag which will retain 6,100 jobs and create another 1,100 by expanding laundry manufacturing facilities in Clyde and Marion with a $53 million company investment. Ohio beat out 11 other states for a new facility for Clopay Building Products, which is expected to create 400 jobs and retain 155 positions. Overall, Ohio ranks third in the nation in manufacturing, and was the source of 5.7 percent of American production in 2004. Manufacturing is the single-largest sector of Ohio's economy with 20.2 percent of total output, employing more than 811,000 workers.
http://www.themanufacturer.com/
Why Give Subsidies? Let Me Count the Reasons
From The Seattle Post-Intelligencer
All economic development projects involve subsidies. The only questions are: How much should the public subsidize these projects; why do certain projects get a bigger subsidy than others, and, why is the public we subsidizing any of them to begin with? There are lots of answers -- or maybe justifications is the better term -- to the "why" question. Among the favorites are:
1. Because we've got the money: Or at least we pretend we do. No climate is so favorable to producing a bumper crop of subsidies as that in which fiscal surpluses appear abundant.
2. Because everyone else does it: The maternal admonition of "if all your friends were jumping off a cliff, would you?" does not seem to work in the realm of economic development. Even though everyone insists that tax abatements and new roads and water and sewer lines to industrial parks really don't sway the location decision, no one is turning down those goodies either. Unilateral disarmament in the incentives race may be good economic principle; it may also take a locale right off the short list for location and investment decisions.
3. Because we think there's some economic benefit to offering subsidies: The corollary to the above justification is that offering subsidies provides an economic payoff someday, somewhere. We may lose money on the port, but think of all the trucking and warehousing jobs created in the region. Economic development may cost us now but think of the extra jobs and tax revenue to be generated by attracting companies.
4. Because you believe there's political advantage in it: This one is both obvious and not as simple as it first appears. Nothing gladdens the heart of a politico campaigning for re-election like being able to claim that he or she "fought" for new jobs in the local community, never mind the price of the fight.
5. Because we want to, damn it: This is the least used and yet most intellectually honest of the arguments.
6. Then the trick becomes finding enough people who agree with the notion (as well as enough people from the private sector to kick in some bucks and trim the hit to the public's wallet). Of course, someone could use none of those arguments and instead propose to build something without tapping the public treasury.
But as long as we're handing out money, who are they to be so impolite, or radical, as to turn us down?
http://seattlepi.nwsource.com/
Chinese Logistics: It's Upgrade Time
From Business Week
Getting cheap goods out has never seemed too much of a problem for the Chinese. The country has cemented its position as one of the central pillars of global trade by exporting staggering quantities of cheap manufactured goods, and is arguably now second to none as the economic hub of Asia.
Logistics provider FedEx Express certainly thinks so, judging by its plans to establish a US$150 million Asia Pacific hub in Guangzhou.
China now accounts for 8% of global exports and recently overtook Japan as the world's third-largest country in terms of foreign trade volumes. Exports have more than doubled over the last five years and are expected to double again by 2010, accounting for 11% of the global total. Rampant growth in logistics revenue points to an industry in good health. According to the China Federation of Logistics and Purchasing (CFLP), logistics industry revenue grew 20% in 2002, 27% in 2003, 30% in 2004 and 33% in 2005. Viewed through a different lens, though, the picture changes. As volumes expand, cracks are being exposed.
The industry is still dogged by inefficiency, with CFLP figures showing that logistics costs accounted for 21.6% of GDP in 2004. Given that logistics costs come to 9% of US GDP and 11% of Japanese GDP, it could be argued that China wastes around one-tenth of its total GDP through logistical inefficiencies.
The sector is also stretched to the breaking point. The total handling capacity of China's coastal ports is already over one billion tons, and capacity is increasing quickly. But China cannot expand port facilities quickly enough to meet rising demand. In 2005, the turnover capacity of coastal ports was officially 2.52 billion tons, but 3.38 billion tons were actually handled. Internally, logistics networks are even more stretched, creating problems as retailers and manufacturers look beyond the largest Chinese cities to those in the tier two and tier three categories. Paradoxically, it is more difficult for manufacturers and retailers sourcing in China to reach inland markets than export to the rest of the world.
http://www.businessweek.com/
The Meaning of Megasites
From Business Facilities
The automobile sector continues to be America's largest manufacturing industry, ultimately responsible for one out of every 10 jobs in the U.S. according to the Alliance of Automobile Manufacturers. With so many jobs on the line, it's no surprise that economic developers (mainly in the Southeastern U.S.) have been rushing to make sure their communities are considered for the next big automotive manufacturing project. One way they've been doing this is by certifying large-scale "megasites" in their communities. A megasite is a large parcel of land at least 1,000 acres ready for heavy industrial development, according to McCallum Sweeney Consulting, a firm instrumental in several high-profile automotive expansions and relocations over the last decade. According to the firm for a megasite to certified and attractive for a large auto project, it must have three other attributes:
1. Be optioned by the economic development organization as a single parcel ready for sale
2. Be fully served, or ready to be served, by utilities
3. Be developable and free of all easements and right of way issues
Toyota, which has more than doubled the number of its plants in the U.S. at a cost of more than $5 billion, is the prime example of an automotive company that is attacted by certified megasites. It has plants in West Virginia, Indiana, Alabama, Texas, Tennessee, California, Baja Mexico, and Ontario, Canada. Toyota looks for around a 1,500-acre range in terms of size for a new plant. Its sites must have access to two providers of rail service and easy highway access, as well as sufficient utilities such as water, sewer, natural gas, and high-powered electricity.
http://www.businessfacilities.com/
Putting the Location Decision into a Business Context
From Grubb & Ellis Co./Linda G. Tresslar
The view of the best location for a business, or for one of its various functions, can vary widely depending upon the seat in which one sits. A CEO is likely to focus on macro factors that significantly impact the corporate bottom line. All the individuals involved with operating cost structure and market positioning over an extended period of time usually provide their prism for view of a location's suitability. A corporate real estate executive charged with keeping real estate and facility costs down may focus more intently on the costs tied directly to a specific location and the terms of the real estate deal. And real estate services providers often evaluate a site or location based on the economic efficiency of a deal. None of these views is wrong, but each is typically incomplete. A process that focuses a company on incorporating all of these considerations in a strategic business context will deliver the best location for conducting a specific business function(s). Strategic context is essential to success.
Business location implies a much broader, more encompassing view of place. A “business” location -- versus a “site” location -- incorporates both quantitative and qualitative factors associated with a specific business, and it must be evaluated in the context of its ability to help achieve overall business goals. Depending upon the actual business functions that will occur at a specific location, the appropriate weighting of the various attributes typically becomes an exercise of assembling all of the essential business factors and considering them in the context of meeting overall business goals.
The ultimate decision of which site will best fill a company's specific requirements must be the result of first considering the best place for the company to perform a specific function. Unless the strategic context for why the company chooses to be there in the first place is incorporated into the site selection process, the final decision cannot effectively satisfy the location attributes that will lead to business success. Understanding this view, a company will find itself in a position to approach site selection from the business location perspective first; then the best physical site for the job will follow.
http://www.area-development.com/
Proximity Puts Virginia Ahead
From Development Alliance
Virginia has been one of the prime beneficiaries of the homeland security industry, which has developed largely in response to the 9-11 terrorist attacks. In the five- plus years subsequent to the attacks, the state has welcomed nearly $1.6 billion in development and created more than 40,000 jobs that can be directly attributed to the defense and homeland security industries. Keith Boswell, who oversees security industry recruiting for the Virginia Economic Development Partnership, says that while investment is spread around the state, significant clusters have developed in three areas: Northern Virginia, Hampton Roads and Richmond. Virginia Commonwealth University in Richmond created what are considered the first undergraduate majors in homeland security and emergency planning in 2004, hiring former U.S. Dept. of Homeland Security official William Parrish to develop the program.
http://www.developmentalliance.com/
Nike, NCR and Extended Supply Chains
From ProLogis
ProLogis, the global owner, manager and developer of distribution facilities features detailed insights and commentary from supply-chain executives at two Fortune 500 companies in the latest edition of the ProLogis Supply Chain Review--John Mascaritolo, director of global logistics at NCR Corp., a global technology company; and Maithili Shenoy, director of supply chain strategy and development at Nike Corporation. The report is derived from a panel discussion at the 2006 Supply Chain World Conference.
"Both Nike and NCR are among the world's best companies at managing supply chains efficiently and effectively in a global environment," said Leonard Sahling, ProLogis first vice president of global research. "John Mascaritolo and Maithili Shenoy each have a unique vantage on the world of logistics today, and on the trade-offs and challenges corporations face as they source products and deliver them to customers."
Specific issues discussed in the report include:
1. Unforeseen logistics costs that result from shipping delays, missed delivery dates and slow inventory turns
2. The challenges of moving product in developing countries with inadequate transportation infrastructure;
3. Complex foreign trade processes, including volatile duty rates and taxes, frequent regulatory changes and product reclassifications;
4. A compression in cost advantages associated with offshore manufacturing
5. Building speed, responsiveness and adaptability into supply chains in the face of growing product proliferation.
http://www.prologisresearch.com/challenges
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