2024
BCI Capability deck
Manufacturing Footprint Optimization,
Location & Site Selection
Qi JIANG
Head of Great China
E Qi.Jiang@BCIGlobal.com
M +86 186 21 800 585
Contents
 Manufacturing Footprint Optimization approach
 Location Strategy & Site Selection approach
 BCI Global, 2023
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1
Manufacturing Footprint Optimization
Drivers for Reviewing Value Chain Footprint
Key Drivers
Internal
Business growth
Margin pressures
Key Challenges
Labor quality and
availability
Product phase in/out
M&A activities
COGS/Total Cost to Serve
Typical Trade-Offs
Relocate or Automate
Economies of Scale versus Customer
Proximity
Industry
New competitors
Make or Buy
New mfg technologies
Customer requirements
Agility/Flexibility
Sustainability
External
Market shifts
Geopolitics
Sustainable Footprint or Not
Uncertainty/Risk
Mitigation
New labor pools
Regulatory changes
Carbon Footprint
Expand at current or relocate to new lowcost location
Cost vs Quality vs Risk
Natural disasters
Source: BCI
 BCI Global, 2023
2
Asia Manufacturing Context
Will China’s key advantages remain or not?
Low Total
Input Cost
Manufacturing
Clusters
Rising
Wages
Growing
Chinese
Market
Integrated
Supply Base
Inputs
Increased
productivity
Emerging
Alternatives
Macro Drivers
Trade
disputes
IP protection
Political
environment
Policy Support
Overcapacity
China’s Manufacturing
Competitiveness
Regulatory
environment
Strong Infra-structure
(incl. Belt and Road)
Emerging
LCCs
Nearshoring and
Reshoring
Supporting Factors
Undermining Factors
Source: TBA/Adjusted BCI
 BCI Global, 2023
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BCI Vision: Supply chain strategy should follow business strategy,
and must be driven by clear customer requirements
 Number of sites and locations
 Capacities, products,
technologies and
competencies per individual
site
 Links between sites and
supply market, sales market
and other sites
 Level of automation
 BCI Global, 2023
4
Typical questions to be answered through manufacturing footprint
analysis in Asia
 We have xx plants in Asia, how to determine the optimal number and locations of sites in the future?
 How to mitigate the risk of being too dependent on China as our single manufacturing base in the region?
 What impact will the introduction of new manufacturing technologies have on our optimal footprint?
 Which product should we manufacture at which location(s)?
 What are promising alternative production locations in Asia?
 What level and types of incentives are available when we do a new investment in Vietnam? Malaysia? Thailand? India?
 How can we reduce the level of risk in our manufacturing footprint (geopolitical, natural disaster, economic/financial)?
 How do we transform from today’s situation to the optimal future footprint (investments, dispositions, change
management, etc.)
 BCI Global, 2023
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End-to-End Proven Project Structure – Key Building Blocks
AS-IS Analysis and Strategic Inputs
A



AS-IS mapping and analysis
Business strategic inputs
Projections: volume growth, product introductions, etc.
Footprint Scenario Development

B 

Impact of external developments
Industry benchmarking
Definition of relevant scenarios
Footprint Scenario Assessment
C




Detailed analysis of scenarios (strategic/focused footprint)
Qualitative and Risk analysis
Preferred scenario detailing
Recommendations & Roadmap development
(1)
(2)
(3)
(4)
what products do we produce…
with what technology…
for what market…
where?
Footprint Transition Program

D 
Transition program (e.g. site selection, site closures, tech transfer)
Detailed transition planning per project
 BCI Global, 2023
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A
AS-IS Analysis and Strategic Inputs
Objective: detailed mapping of the current footprint from a cost, qualitative and risk perspective
 BCI Global, 2023
Mapping the current footprint
Analyzing the cost structure per plant
Qualitative assessment of the footprint
Assessing the risk profile of current sites
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A
AS-IS Analysis and Strategic Inputs
Objective:gathering business strategic inputs that will have an impact on the company’s future optimal footprint
Volume projections
 Volume growth/decline per
market
 Volume/decline per product
group
Product portfolio
developments
 New products planned
 Products phase-out
New production
technologies
 Automation
 3D
 New materials
 BCI Global, 2023
Company strategy
Customer
requirements
External factors
 M&A
 Financial objectives
 Risk management




Leadtimes
Quality
Customization
Flexibility
 IP/legal risks
 Regulatory issues
 Changes in investment climates
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B
Footprint Scenario Development
Step 1
Step 2
Step 3
Current Context Scenarios
Drastic Scenarios
Bandwidth Scenarios
Extended
Baseline
AS – IS
Analyses
Current
plans,
programs in
operations
Current
Market /
business
development
Optimal
Clean
Sheet
Constrained
Clean
Sheet
1
Constrained
Clean
Sheet
2
 Besides AS-IS data, a lot of additional data
is required for running greenfield scenarios:
 Location data
 Flow data
 Cost data
Process
Baseline
Optimized
Baseline
 Extension of AS-IS mapping
 Team discussion
 Modeling
Outputs
Key inputs
Objective: defining a set of relevant footprint scenarios to be analyzed in detail
 Where will the current set-up bring us?
 What does the ideal world look like?
 Where/when will the current set-up “break”?  Where are the boundaries of optimization?
 BCI Global, 2023
 Modeling
 Team discussion
Learnings
from step 1
and 2
External
benchmarking
Team
Experiance
and ideas
 Scenario workshops
 Iterative process
 Supportive modeling
 What is the overall optimal set-up taking all
aspects including change costs,
complexities and risks into account?
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B
Footprint Scenario Development
Scenarios consist of several building blocks
Footprint configuration
options
Location options
Make or Buy options
 BCI Global, 2023
Physical structure of the footprint
 Centralized versus decentralized
 Global versus regional versus local
 Hybrid structures
 Manufacturing footprint versus distribution footprint
Different candidate locations included in the modelling
 Current locations
 Alternative locations
Make or Buy options
 At site level
 At specific product level
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Assessment of scenarios
Costs
End to end cost impacts (OPEX/CAPEX)
OPEX
 Sourcing
 Manufacturing
 Distribution
 Inventory
 Duties and Taxes
Conditions
Customers
Impact on customers
(service, quality, leadtime)
+




Proximity/ time to market(s)
Flexibility
Product quality
Service quality
+
Facilitators
(risks, managerial efforts, change management,
etc.)
 Footprint alignment with company’s
business strategy
 Management complexity of future
footprint
 Footprint and location risks
 Complexity and risks of transition
process from current to new footprint
CAPEX
 Production technology
 Real estate
 Other
TRANSITION COSTS
 PMO
 Severance packages
 Supplier terminations
 Physical transitions
 Risk mitigation (e.g. periodic dual
operations)
 Training
Optimal Footprint
 BCI Global, 2023
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Beyond Quantitative Modelling… Examples of Strategic
Considerations taken into account in the BCI Approach
Links with current
footprint
Critical value chain
factors
Impact on sales /
competitors
Timing
 BCI Global, 2023
 Synergies with existing own operations
 Dependencies on own operations
 Network risks (“too many eggs in one basket”)
 Proximity to critical suppliers
 Proximity to critical customers / markets
 Potential impact on revenues in certain markets
 Potential impact on own profile versus competitors
 Time required to transition from current to future state
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Example: Scenario Assessment Results – summary (illustrative only)
 BCI Global, 2023
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D
Footprint Transition Program
Objective: to define the transition from current to optimal future footprint into concrete change projects including
phasing over time
 Short-term optimizations (“low-hanging fruits”)
 Site-Product Allocation
 Timing of different actions as part of the transition process
Example of Footprint Program
Type
Region: Americas
Region: APAC
Region: Europe
Expand sites
New sites
Consolidated sites
Closed sites
 BCI Global, 2023
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2 Location Strategy & Site Selection
Site Selection Process: narrowing down from long list to site level
Stage A
Start up:
Definition investment profile and location requirements
Stage B
Quick scan:
Limiting the search area to target areas
Stage C
In-depth assessment selected target areas
Stage D
Identification of sites and fieldwork
Kick-off and
listing of locations
for review
Quick scan:
±20 locations*
Detailed analysis
of top ±10 locations*
Fieldwork to top
3-5 locations*
Stage E
Negotiations
Stage F
Final choice
 BCI Global, 2023
Final location
*
Indicative number
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Location criteria are driven by Cost, Quality and Risk factors
In our site selection approach we use cost, quality and risk criteria to develop a complete assessment of
regions & locations
Cost criteria
+
Quality criteria
Such as:
Such as:











Labor costs
Occupancy costs
Start up
(-/-) Incentives
Total inflated 5 year cost
 BCI Global, 2023
Labor availability & quality
Language skills
Labor regulations
Business climate
Infrastructure & accessibility
Market access & positioning
Flexibility & timing
Weighted quality score
(1 = poor, 5 = excellent)
+
Risk criteria
Such as:




Financial risk
Political risk
Legal risks
Risk of natural disasters
Total risk score
(low-medium-high)
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Listing of Cost requirements for a manufacturing plant
Cost Category
One-time capital costs
1 Land / Site
1.1 Land costs
1.2 Building costs
In USD / Euro
In USD / Euro
Annual operating costs
2 Labor
2.1 Total employers’ costs manufacturing operator/working hours
In USD / Euro
2.2 Total employers’ costs skilled engineer/working hours
In USD / Euro
2.3 Total employers’ costs production plant manager/working hours In USD / Euro
3 Distribution
3.1 Outbound transportation costs to customers
3.2 Inbound transportation costs from suppliers
In USD / Euro
In USD / Euro
4 Utility costs
4.1 Annual utility costs (electricity, gas, water)
In USD / Euro
5 Taxes
5.1 Corporate income tax/tax deductions
In USD / Euro
6 Incentives (-/-)
6.1 Investment grants
6.2 Employment incentives
6.3 Training grants
In USD / Euro
In USD / Euro
In USD / Euro
Total
In USD / Euro
Costs are calculated in USD/Euro and forecasted for the next 5-10 years (including inflation, expected
wages increase, etc.)
 BCI Global, 2023
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Listing of Quality requirements
Quality Category
A Talent/ Labor
…%
A1
A2
A3
A4
A5
A6
Manufacturing base
Talent pool depth
Competing employers
New/expanding employers
Population trends
Cost of living
…%
…%
…%
…%
…%
…%
B Labor regulations
…%
B1
B2
Unionization degree
Hiring/firing regulations
…%
…%
C Proximity to markets/
accessibility
…%
C1
C2
C3
C4
Proximity to markets
Highways
Railway connections
Airport connections
…%
…%
…%
…%
D Sites/buildings
…%
D1
D2
D3
Building availability
Site availability
Geographical considerations
…%
…%
…%
E Supplier availability
…%
E1
Local suppliers
…%
F Utilities
…%
F1
F2
F3
Electric power capacity/reliability
Natural gas availability
Telecommunications
…%
…%
…%
G Ease of implementation
…%
G1
G2
G3
Business climate ranking
Fast track construction
Ease of permitting
…%
…%
…%
100%
The quality requirements will be assessed using scores between 1 (poor) to 5 (excellent)
All data and scores will be made available to ensure transparency of the assessment process
 BCI Global, 2023
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Listing of Risk requirements
Risk Category
A
Political Risks
…%
A1
A2
Government stability/ democracy
Geopolitical conflicts
…%
…%
B
Economic Risks
…%
B1
B2
Development economy
Inflation
…%
…%
C
Financial Risks
…%
C1
C2
C3
Financial risk rating
Currency convertibility
Exchange rate stability
…%
…%
…%
D
Legal Risks
…%
D1
D2
D3
Patent infringements
Permits
Data protection
…%
…%
…%
E
Transparency Risks
…%
E1
E2
Corruption
Bureaucracy
…%
…%
F
Security Risks
…%
F1
F2
Religious & ethnic tensions
Terrorism
…%
…%
G
Natural Disaster Risks
…%
G1
G2
G3
G4
G5
Climatic catastrophes
Hydrological catastrophes
Meteorological events
Geophysical events
Health hazards/ pandemics
…%
…%
…%
…%
…%
100%
 BCI Global, 2023
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Cost-Quality-Risk matrix of 10 locations
Example: Project specific site selection results for a production plant in perspective: cost-quality-risk
assessment
Index Total costs in million USD/Euro for first 5 years (all operating costs -/- investment incentives)

80
Location E
90
Location D
Location B
Location F
100
Location H
Location G
Location J
Location I
Location C
Location A
110
120

2.5
 BCI Global, 2023
Low risk
Medium risk
High risk
3
3.5
4
4.5
Weighted quality scores
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Incentives assessment and negotiations
BCI has extensive experience with assessing
incentive opportunities, and negotiating and
securing incentives and grants for:
BCI added value in Incentives assessments and
negotiations:





New (greenfield) manufacturing, distribution and office
locations
Expansions of existing manufacturing, distribution and
office locations
Retaining existing office and manufacturing locations and
operations, i.e. safe-guarding jobs
Incentives can include tax grants, CAPEX grants, job &
training incentives, real estate deals, etc.
 BCI Global, 2023


Direct high level contacts with relevant authorities in many
regions in Asia
Extensive experience in the actual negotiation of incentive
packages for our clients
Databases with detailed overview of incentives at national,
regional and local levels
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Thank you for your time
www.bciglobal.com
 BCI Global, 2023
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