In early 2020,Camso Manufacturing USA, Ltd will open a state-of-the-art manufacturing facility in a 139,000-square-foot former regional military grocery distribution facility in Junction City. Located immediately south of Exit 295 on I-70, the former distribution center is currently in the process of being refurbished and re-tooled and will employ up to 55 employees at full production. The location was selected after a months-long search process and highlights the importance of location strategy as a component of operations management to companies of all sizes. It also emphasizes the potential strengths of the Flint Hills region to external businesses pursuing expansion.
Any time a company decides to open a new location, whether it’s a restaurant, retail location, warehouse, manufacturing facility, or a traditional commercial office setting, they are attempting to maximize the benefit of the location to the company. Location often has the power and ability to make or break a company’s business strategy. In addition, a company’s presence can have a powerful economic impact upon the local community.
FedEx and Amazon
In 1973, when FedEx moved their operations hub from Little Rock to Memphis, it was for three specific and strategic reasons:
- Memphis was located in the general “middle” of the U.S.
- The Memphis airport had very few hours of bad weather closures.
- Memphis provided FedEx with generous tax incentives.
As FedEx continued to grow over the next decade, they constructed their “SuperHub” facility to the north of the airport. Last year, FedEx announced an additional $1 billion expansion/renovation over the next five years which will continue to fuel their $62 billion/year business.
Additionally, Amazon’s recent “HQ2” search has highlighted the many incentives that local government entities are willing to offer in order to entice businesses to their region. Although there is ongoing public debate in some regions about the size and justification of these incentives, it’s clear they are a motivating factor in the decision-making process for corporations seeking new locations.
Location decisions can greatly affect both fixed and variable costs for companies. They also impact the overall risk and profit of a company. As the economy continues to grow nationally and globally, transportation economics continue to be a driving factor in location decisions. Just as rivers and ports were an important element in selecting business locations centuries ago, airports, rail hubs, and interstate highways play a major role in decisions in the 21st century.
Camso and Junction City
Last June, Camso announced they would be locating a manufacturing plant in Junction City. Camso, subsequently acquired by French tire-maker Michelin for $1.45 billion, is a Canadian-based, world-leading specialist in the design, manufacturing, and distribution of off-road rubber tracks and tires for agricultural, construction material handling and powersport equipment.
The facility in Junction City will manufacture rubber tracks primarily for agricultural equipment, including John Deere, Kinze, and AGCO. The demand for rubber tracks (versus tires) in the agricultural industry has grown in recent years due to a variety of benefits, including reduced soil compaction, increased seed placement, better water infiltration, increased traction, and improved fuel efficiency. Because of this, Camso affectionately refers to themselves as the “Road Free Company” as all of their products are used in the off-road vehicle industry..
Camso decided to expand and add another plant when their existing manufacturing location in Emporia, Kan., had 165 employees that were overwhelmed working three shifts a day, seven days a week. Like FedEx, Camso researched multiple locations before selecting Junction City.
Chris Uher, an employee at the Emporia location since 2003, was promoted to be the plant manager of the new location and has recently relocated to the Manhattan area to supervise the retrofit process. He was part of the location search committee and shared some of the criteria that led to the selection of the Junction City location. As with FedEx and Memphis, he cited Kansas’ location in the “center of the country” as an important factor in their transportation strategy. The building’s location at 2925 Industrial St. provides close proximity to I-70 for trucks that deliver raw materials and move finished goods to their next destination, whether it be other Camso facilities or final product distribution.
The location’s proximity to Kansas State’s and Fort Riley’s talent base were also key factors in the decision. After the site was selected, the internal project name was dubbed “Team Wildcat” in recognition of the K-State mascot. Three current engineers on the project are K-State graduates, and when the facility opens, they expect to hire newly-graduated students from a variety of majors, including engineering and finance. Internship opportunities are anticipated as well.
John Lawrence, human resources and health/safety manager for the new facility, anticipates that access to transitioning soldiers at Fort Riley will be valuable too. Lawrence can speak from experience in this area because, after serving 34 years in the military, he decided to retire and do something new. When he started the interview process with Camso, he was impressed by the longevity of employees.
“The plant manager at Emporia had been with the company for 17 years. He started as a production associate and grew with the company. When you have people who stay with a corporation—especially a manufacturing one—for that long, it makes you wonder what they are doing right! That intrigued me.”
As Lawrence searches for employees for the new facility, he’s been given the directive “hire to retire” because Camso is confident the region will provide employees who are well-trained and highly aligned with the company’s four core values: empowerment, commitment, teamwork and integrity. The starting wage for frontline workers will be $16.50/hour, with six-month raises based on performance. After two years and additional training, workers will reach $21/hour. Positions offer health, dental, vision and 401K plans.
As with Amazon and FedEx, local government entities ensured Camso had additional financial reasons to select Junction City. These initiatives were spearheaded by Mickey Fornaro-Dean, the head of Junction City’s Chamber of Commerce. Between sales tax exemption on purchase equipment, property tax exemptions, grant awards (based on meeting employment targets), waived permit fees, and upgrade commitments to water lines and the road surface along old Highway 40, Junction City provided incentives that were attractive to Camso. The selected property also featured additional acreage to facilitate future growth, something that was also important to the Camso search committee.
Dean, director of economic development/president of operations for the Junction City Area Chamber of Commerce, said, “Economic development projects such as this are very competitive, and to be able to showcase to
As the Flint Hills region and related government entities continue to emphasize their existing unique geographical strengths and ensure they’re competitive in key success factors with other nearby regions, they should expect to see additional companies like Camso explore expansion within their borders. Where they are non-competitive, they should seek to understand the costs and benefits associated with becoming more competitive.
Existing Manhattan companies and business owners seeking to expand should include the key success factors above as part of their location strategy decision-making process. As business owners align their available options with their business’s needs and strategies, they can position themselves for the greatest likelihood of success. Taking the time to determine the best location is always a good investment.
Key Success Factors
1. Corporate desires
2. Attractiveness of region (culture, taxes, climate, etc.)
3. Labor availability, costs, attitudes towards unions
4. Cost and availability of utilities
5. Environmental regulations of state and town
6. Government incentives and fiscal policies
7. Proximity to raw materials and customers
8. Land/construction costs
When selecting a specific site within a community, the following key success factors can be used:
1. Site size and cost
2. Air, rail, highway, and waterway systems
3. Zoning restrictions
4. Proximity of services/supplies needed
5. Environmental impact issues
6. Customer density and demographics
Brandon W. Savage provides fractional COO and management strategy consulting to companies throughout the Flint Hills area. He is also an instructor of strategy, ethics and operations at the K-State College of Business Administration and received his MBA from the Wharton School of the University of Pennsylvania. He and his wife, Cheryl, live in Manhattan with their eight children. Find him at www.thecxpro.com
Photography by: Josh Hicks