Wouter Schuitemaker, Managing Director, EMEA, was featured in a recent article in The Procurement magazine, a global publication serving executives within the dynamic industry of procurement, particularly focusing on challenges facing today’s corporate world. Titled, “Leveraging in the Corporate Real Estate team for Risk Mitigation”, this article discusses four key factors of site decisions and their impacts on risk mitigation.
The full article is below.
Leveraging the Corporate Real Estate team for Risk Mitigation
February – March 2016
By Wouter Schuitemaker
Choosing a site for future operations – whether it is a manufacturing plant, a office facility, or a logistics hub – is no easy task to undergo. Today, commercial demands require the location to be in proximity to a network of stakeholders, customers, and resources, while also meeting all the requirements of running a successful business. Companies must consider and analyze a list of factors in their site selection process to effectively mitigate any future operational risks. In the following article, we’re going to focus on four of the key factors in making the final site decision an their impact onrisk mitigation. The factors include the following: Infrastructure, Labour Force, Logistics and Supply Chain, and Taxes and Regulatory Environment.
Infrastructure is critical in any site decision, no matter what the industry may be. When undergoing a site location analysis, one of the immediate tasks is to review the existing infrastructure at the site. Infrastructure, which ultimately drives much of the decision process, can vary greatly between site under consideration.
They may be a requirement for a reliable grid base of electricity, to a certain speed of broadband. Infrastructure considerations in Europe span a wide range of issues such as electricity development, roads and bridges, access to proper communication channels, sewage and water systems, and transportation modes, among many more. Companies must examine the sophistication of these systems in their site selection assessment and ensure the existing systems are sufficient to meet their business needs. Developed infrastructure systems will tremendously mitigate the risk of operational failures in the future.
Over recent years, the labour force has become one of the key drivers in locations strategies for multinational corporations. Labour dynamics are changing much faster than ever before due to greater mobility, increasing wages in previously low cost jurisdictions and improved skill levels. Therefore, it’s essential for executives and business leaders to ensure the necessary skills are available at the right cost. However, companies no longer look for the lowest cost labour in order to get the job done. Skills and education are playing an increasingly pivotal role in selecting the right labour for business operations, which in turn, demands that decision makers have better access to dependable forecasting. A prevalent challenge in Europe is the mismatch between the roles to be filled and the skill level of applicants relative to the job. A recent study conducted by the International Labour Organisation (ILO) shows that 25%-45% of workers in Europe are either over or under qualified for their job, revealing a substantial mismatch between the supply and demand of labour. According to the study, which reviews twenty-four European countries, several factors are directly causing this trend, including an imbalance in policies and practices on a gender basis. As a business leader in the European market it is essential to have a detailed understanding of such factors in the regional labour market via labour analytics studies to enhance planning and mitigate the risk of workforce challenges in the future.
LOGISTICS AND SUPPLY CHAIN
Logistics and Supply Chain is a consistent leading factor in choosing a location. Executives are conducting network optimization studies to ensure a robust network of partners exist in regions under consideration. At the same time, government leaders throughout Europe are placing an additional focus on investing in seaports and airports to directly support companies entering their markets. Furthermore, governments are establishing strategic partnerships and alliances to ease tariffs and fee charges at the borders. Continued investment in roads, bridges, railway systems, harbours and ports, and airports is important to assure companies it makes sense to invest in their respective locations. As a procurement manager it’s crucial to analyze the logistical dynamics of the locations you are reviewing. By partnering with experts in such analyses, business leaders can gain access to the latest technologies and methodologies. Over the last decade the pace of change means logistics solutions quickly become outdated, and in the digital age new tools and methodologies are emerging. Logistics management is a discipline that is continuously expanding but also evolving as it grows in importance. A robust supply chain and logistics study will minimize the risk of facing complications once operations begin and forecast any future challenges. It will also help to guarantee a dependable network of partners and supplies that meet your unique business needs are in place.
TAX AND REGULATORY ENVIRONMENT
In Europe, each nation has a unique tax system and regulatory environment that businesses have to understand in order to comply. When doing a comprehensive site review, companies must therefore place significant emphasis on understanding the tax policies and also appreciate the legislative environment in each prospective location. In Europe, corporate tax rates range from as low as 9% to over 50%. As a business that enters a new country, examining tax rates in the prospective locality could greatly influence your ultimate site decision. In addition, government policies and regulations can differ greatly across the region, which can have a huge operational impact. By working with site selection experts, businesses can ensure full understanding of the systems and policies in place and make decisions based on the relative perceived impact of each factor weighed up against key business drivers. Business hurdles associated with legal requirements during establishment of the business will also be reduced as will any future risks that may be faced.
As business leaders making location decisions know, a site decision is increasingly a far more involved and complex process than the simple identification of an appropriate site and cost effective labour force. Companies must undertake a comprehensive must undertake a comprehensive analysis to determine not only the best location for the business now, but also forecast changes in the regulatory environment, future investments and improvements in infrastructure in different jurisdictions, and trends associated with ever-changing labour markets. Whilst the site selection process has more often than not been treated as a static process, with costs today factored into analyses, changes in all of the areas discussed above ha potentially huge operational implications. However, with the support of a complete and proven site selection process, the corporate real estate team will not only help the business mitigate significant risks going forward, but also help to reduce cost for their organization by forseeing longer term shifts in factors often outside the control of the business.