broker, consider the venture from your client’s point of view. The
responsibility for assessing and describing necessities of a facility
often fall to facility managers. A manager who is adept at daily
operations now has the challenge of assessing the company’s supply chain, defining a solution, writing a business case, and then
implementing the plan. The manager must now take on these new
challenges at the expense of his/her area of proficiency—running
the daily operation. This is not only a time-management problem
but a skills problem.
Building a business case can be especially challenging.
Omitting key benefits or transition costs results in a risky venture
that could spell disaster for a company. Many managers who are
inexperienced in this area take a conservative approach by underestimating benefits or overstating costs. This produces an undesirable business case with an unacceptable return on investment, so
the problem goes unsolved.
Even when the new facility is properly sited and designed, the
move itself can be daunting. Opening a new facility and closing
an old one are expensive operations requiring dual operations and
hands-on management of both. Daily operations must be maintained and each delay can decrease cash flow, reduce sales and
possibly market share. Inventories must be managed at the old
and the new facilities and the transfer of inventories must be balanced with normal receipts and issues. Staff must be transferred
or hired and trained. The new facility must be prepared and the
old facility closed. Quite often the management team is no longer
focused on the company’s mission, something they do well, but
on the move, something they have never done before. As a result,
daily operations suffer and the move is mismanaged.
“The supply chain is a
complex network of
interrelated functions ...
Accomplish all of those
objectives and you succeed.
Do all but one and you fail.”
share the blame. If the move from the old facility is mismanaged,
you will share the blame. It’s in your interest as much as your client’s to have the new facility fit the client’s supply chain and the
transition be executed within the budget and with minimal interruption to on-going operations.
This may be the time to bring in an experienced team to assist
with developing the business case and managing the move to the
new facility, allowing the company’s management team to stay
focused on their core competencies. True, the transition team adds
to the overhead cost, but the right team will more than offset the
cost by reducing transition costs on both ends. Additionally, the
cost of an experienced augmentation team will be significantly
less than a mismanaged move.
Commercial real estate brokers may consider offering this
management augmentation as an additional service to their clients. This will provide the broker with an advantage in a competitive market. The service would include some or all of the
The Broker’s Interest
The commercial broker will naturally respond to the clients’
stated desires. If the client misunderstands the problem or misstates
the requirements, you will
1. Developing a viable business plan that considers all
costs and all benefits.
2. Locating the new facility to minimize the sum of inbound and out-bound freight costs, and dual operating
costs, facility costs, and government incentives.
3. Designing the facility to balance labor costs and automation costs.
4. Sizing the facility to balance current requirements and
5. Managing the implementation of the business plan to
allow the company’s management team to focus on
what it does best, managing daily operations.
The commercial real estate broker and client share the success, and possible failure, of establishing or moving to a
new facility. An investment in the planning and execution
of these moves will reduce the risk of an unsuccessful transition and pay dividends in repeat business and referrals.