The drumbeat of offshore outsourcing is echoing loudly across the U.S., prompting many regions to take action.
Cities such as Charleston, S.C., Fargo, N.D., Amarillo, TX, and Casper, WY, are dangling tax incentives, educational grants and lifestyle advantages in front of manufacturers as a way to attract new business that will stimulate local economies and put more people back to work.
Economic development is not a new phenomenon. But according to Development Counsellors International (DCI), a 35-year-old, New York-based community development consulting firm, there are six trends that define the new way regions are trying to build out business: infrastructure improvements, super-targeting niche industries, expansion opportunities, accountability incentives, local networking and courting smaller entrepreneurial companies.
"There're a tremendous number of entrepreneurial manufacturing companies with a small amount of people, which makes it hard for them to outsource," said Ted Levine, chairman and founder of DCI. As a result, many of DCI's clients are experiencing a rejuvenated business climate.
There's also an influx of international companies coming to the U.S., and many are willing to set up shop in smaller cities, which are courting them aggressively. Charleston, S.C., for example, recently announced that Holset Turbochargers, headquartered in England, and Albert Weber Manufacturing, a German maker of high-end automotive components, are both embarking on multi-million dollar expansion efforts in the area. Since 1995, the total amount of new capital investment in the Charleston area has reached $3.51 billion, with over 17,000 new jobs created.
"In the last 10 years, about 30% of our qualified leads came from European companies," with some from Canada and Australia as well, said David Ginn, president and CEO of the Charleston Regional Development Alliance. Part of the attraction, he said, is the port. It is one of the busiest container ports along the Southeast and Gulf Coasts, directly serving more than 150 countries. In fact, in the wake of Hurricane Katrina, the South Carolina State Port Authority reported that several ocean carriers were offering Charleston as an alternative port into the region to offload containers.
Charleston just spent nine months identifying target industries, narrowing its marketing efforts to aerospace, automotive and bioscience.
Casper, with its rich oil and gas resources, is now targeting ancillary oil businesses. "Casper accommodates a booming oil and gas industry, which I believe opens the gate for a variety of businesses related to the energy industry," said Steve Elledge, regional director of the Wyoming Business Council.
There is no corporate or personal state income tax, he added, and the area is investing in new training facilities -- such as the McMurry Training Center for oil field training.
Amarillo, on the other hand, which in the past was fueled by oil and gas, as well as agriculture, is shifting its emphasis toward one of its biggest manufacturers, Bell Helicopter, which is investing in new facilities to accommodate the assembly of the upgraded U.S. marine fleet, as well as production of its V-22 tilt rotor.
Out of the 1,200 cities that responded to Bell's RFP, Amarillo was picked because "they made an offer we couldn't turn down," said Roger Williams, site leader at Bell's Military Aircraft Assembly Center. Williams said 184 acres of land were made available, with easy access to Interstates and south Texas, the state's big rail hub, which also has an airport able to easily transport fuselages.
In the state of North Dakota, from Bismarck to Grand Forks to Fargo, aerospace is a major focus -- with the University of North Dakota supporting an aerospace training program. But there're also a few technology startups, such as Alien Technology, a maker of RFID tags and readers, which recently expanded into Fargo.
In North Dakota, as in many other states, taxes are low and incentives are big. But sometimes it's the things that you can't put a price on that make all of the difference. "The key strength is the employee work ethic in North Dakota," said Blake Reed, business development manager at Jamestown-based Goodrich Corp.
Indeed, the decision of where to locate a new manufacturing facility isn't always based on numbers, said Steve Weitzner, president of Silverlode Consulting Corp. Incentives vary state by state, ranging from tax credits to low-interest loans to hiring and recruiting assistance. "Most site selections are not based on incentives," he said. Rather, emphasis is placed on location to a customer, labor force availability, the cost of labor and even on where the CEO's spouse wants to live -- which Weitzner has seen happen. "Quality of life becomes an important factor," he said.
This article was repurposed from the October 2005 issue of Managing Automation magazine.