SITE SELECTION
Black Swans: The Evolution of Site Selection DENNIS MESEROLL Co-Founder and Executive Director, Tractus Asia Limited @dmeseroll THE COVID-19 PANDEMIC is a black
swan event whose magnitude and consequences will be felt for generations. It is already having repercussions in how corporations evaluate their supply chains, accelerating a trend toward more diverse regionalized manufacturing. This trend has evolved from a series of black swan events, many in Asia. In 2011, the Tohoku tsunami closed manufacturers of strategic electronics materials, creating a ripple effect in electronics supply chains. Later that year, floods in Thailand shut 50% of the world’s hard disk drive capacity, impacting the global computer sector. The COVID-19 pandemic, combined with the U.S.-China trade war, is the latest and most far-reaching. Each of these events, unexpected and consequential, has caused risk mitigation to rise to the surface as a driver of manufacturing site location. Gone are the days when unique world-scale plants would be considered sufficient to supply global demand. While there are scale effects to putting all manufacturing eggs in one basket
(plant or country), these benefits will be discounted more heavily against the risks of manufacturing concentration. Risk and scenario analysis will take a much more prominent role in site selection. In addition to political and natural disaster risk, companies will more heavily weigh regulatory, trade, supply chain disruption, pandemics, and other risks. The pandemic has also accelerated companies’ adoption of virtual workforces. Shared services, call centers, and other service companies are finding they can operate effectively with a larger contingent of virtual workers than they once thought. When the world is your virtual labor pool, the decisions on where to locate take on an entirely new dimension. COVID-19 is fundamentally changing the way companies and individuals consider risk in their decision-making, but some things won’t change. The value in using a data-driven, objective, and disciplined process and utilizing independent experienced location advisers will become even more important to evaluate location strategies and site locations.
When the world is your virtual labor pool, the decisions on where to locate take on an entirely new dimension. 53