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What Is The Best Location For My Factory?

Despite the doom and gloom news that’s so prevalent these days, it’s important to remember a few simple truths while planning your factory or manufacturing location: 1) The novel coronavirus is not a civilization-ending event, 2) The vast majority of those infected will recover, and 3) This will end.

With that perspective in mind, small and medium-sized businesses (SMBs) should be planning ahead. Because when business gets back to normal – and it will – by some estimates as early as the third quarter of this year with a 19 percent surge in GDP, there will likely be an explosive uptick in demand. Once the post-COVID fear ends, people will want to drink, to party, to shop, to go out to eat, to fly, and to cruise. Marriage vows will be exchanged, and babies will be born – much like what occurred in the decades post-World War II.

Don’t be surprised if historians start calling it a new 1950s with “more, newer, better,” again being the watchwords of the day.

But to sustain a 1950s-like postwar consumerism business will need to stay ahead of the curve instead of flattening it. The question is, how. What should companies consider when envisioning the post-COVID economy? 

Protection Through Planning

To be sure, factory relocation will be essential. That’s especially true if a said plant was located in China. Our previous blog discussed these trends in a broad sense. Now we want to drill deeper as to the specifics of that relocation:

Track infection rates – While it is true that most countries on Earth have at least one case of COVID-19, many countries report low infection rates. With the world’s developed economies grinding to a halt, international travel is down about 40 percent. The data suggests that, going forward, global transmission rates will begin to fall. Businesses should continue monitoring infection rates and select factory relocation partially based on this data.

Know the effectiveness of local social distancing and compliance – In addition to the international spread, community spread is just as concerning. Until anti-virals and a vaccine are developed, aggressive social distancing is the best tool to blunt transmission. Before relocating your factory, research the country’s social distancing protocols and get a sense of national compliance. Already in the US, disparities in how states respond to the crisis is causing a variety of infection rates and mortality outcomes. Nations operate the same way.

Health system surge capacity – How prepared a health system is for a crisis is a critical determinant in choosing to relocate your business. COVID-19 is not the only threat that health systems face. Ideally, companies should select countries that are politically and socially stable, with the surge capacity to absorb and meet the challenges of many crises.

Incentives for relocation – Countries that fare better will no doubt value this outcome. As such, many may enact policies to entice factory relocation, including property tax discounts, trade agreements, and construction cost sharing, among other perks. Deregulation may also temporarily occur as related to environmental laws, zoning, and hours of operation. Research which countries are making these offers or if states/municipalities within these countries are offering such relocation benefits.

Consider export assistance – Even if your factory doesn’t relocate but has customers overseas, the Small Business Administration (SBA) can help. For instance, Export Express provides capital for businesses that require financing up to $500,000. Companies can apply for a line of credit or term note before finalizing an export sale or while seeking opportunities overseas. Also, the International Trade loan program assists small businesses as they retool or expand to compete to meet the evolving business landscape. The SBA can also help exporting companies grow their sales to new markets or to return to the U.S.

The World (is still) Your Oyster

With 195 nations on Earth, it bears repeating that despite how serious the coronavirus threat is, there are dozens of countries (and localities within those countries) less severely impacted. And of those places, many will be eager for your business once the crisis is over.

Acting on these early business overtures is of paramount importance to maximize the incentives offered. Already in the opening months of the coronavirus pandemic, some 57 percent of business owners predict a moderate to high impact on their company’s revenue and/or supply chain. These concerns will continue to mount.

Only through proper planning will your small or medium-sized business have the factory protections it needs to prosper in these uncertain times.

And perhaps, once we achieve victory and the world recovers from this global crisis, the words of 1950s American consumerism may ring clear. “What you buy and how you buy it is very vital in your new life —and to our whole American way of living.

 

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