Baking & Snack - September 2014 - 31

SPECIAL REPORT
Site Selection

Conducting an in-depth analysis of current and long-term growth strategies - and all
related costs - will guide how and where a company should expand its operations.
by Mike Pierce and Frank Spano
In recent years, the baking industry has been experiencing significant consolidation. This activity places competitive pressures on bakers to diversify their product
portfolios with new products and expand into new markets. As businesses strive to be more responsive to their
customers, logistics becomes increasingly more important to their growth strategy.
Coinciding with these activities is increased investment in plants and equipment as baking and snack
companies renovate and enlarge their facilities to better
meet customer demand. With an improving economy,
more bakery construction projects are underway, and
various indicators have shown that market growth is expected to continue.
The construction activity from 2013 and to-date
in 2014 far outpaces the activity in 2009 and 2010.
Hot topics at the 2013 International Baking Industry
Exposition concentrated on justifying facility capital
investments for current and future products with an
emphasis on operational flexibility and expanding capacity; responding to food safety regulations, particularly the Food Safety Modernization Act (FSMA), and
preparing for customer audits.
With all of this activity, bakeries are faced with needing to improve facilities and enhance production to remain competitive and pursue new growth opportunities
- and the changes must be made quickly.
The necessary capital investments fall into three main

categories: site, building and equipment. Each of these
investment areas has a critical impact on the efficacy
of the overall investment, both immediately and longterm, so it is important to understand how to achieve
the optimum balance.

Analyzing all costs
Changing demographics and shifting consumer tastes
and preferences all affect bakery product development
and production. Bakeries must consider their shortand long-term growth strategies to determine whether
increasing production capacity at existing facilities is
sufficient to meet demand, or if building a new bakery facility - potentially at a new location - is more
appropriate.
Before you move forward with a change in production or facility plans, are you confident that your chosen path will meet your needs? If you decide to build in
a new location, are you 100% certain that the site will
suit your current goals? How about your goals five years
from now? The answers to these questions can be determined by performing a comprehensive logistics study,
where the cost-benefit of developing your current site is
weighed against expanding operations on a new site.
If a new facility is the answer, then attention must focus on where it will go. Transportation is a significant
consideration as these costs greatly affect bakery operating costs. Consider what impact new products will have

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Baking & Snack - September 2014

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