EVALUATING YOUR CURRENT MANUFACTURING SPACE TO BUILD VALUE
by Bob France
About 20 years ago, Harvard Business Review published an article on “Managing Real Estate to Build Value.” It asked one basic question: Can we reduce the amount of space we’re using? It said five factors provide a snapshot of a company’s real estate situation:
Amount: Can we reduce the amount of space we’re using?
Price: Can we reduce the price we’re paying for space?
Grade: Can we do business as effectively in a different type and class of facility?
Area: Can we do business in another submarket in the region?
Risk: Can we reduce the environmental and financial risks of occupying this real estate?
Many of the basic real estate situations remain the same, but we need to ask these questions every few years for three reasons:
- Technology is changing rapidly, especially in the manufacturing space.
- Manufacturing tools, standards and requirements demand constant upgrades to meet market demand and changing client needs.
- The advancement of artificial intelligence and robotics are changing the manufacturing landscape.
Managers may think it’s too expensive to relocate a manufacturing facility, make upgrades, make operations energy efficient, or to create a more friendly and conducive environment for the labor force. The reality may be totally different. Your total cost of ownership or leasing real estate may be too expensive. You may find a much cheaper alternative. Your operating system may be too old and inefficient. With efficiency increases comes new clientele, and most importantly, money to your bottom line and an increased market value of your business should a sale be in your long-term plans. A government program, such as Mass Save, may subsidize your energy efficiency program.
Another factor to look at is integration of robotics in manufacturing. Per recent reports, more than 10 million UK workers are at high risk of being replaced by robots within 15 years, as the automation of routine tasks gathers pace in a new age of integrated robotics. The United States could also see more than half its current workforce replaced by robotics by the year 2030. With increased globalization and market trends, this will likely create thinner margins with more competition in an expanding competitive environment and marketplace.
Evaluate your manufacturing space needs, be ready for the future and use your real estate effectively.