Facility Expansion: Navigating the Construction Process

In the past two years, there has been a huge influx of interest in manufacturing expansion opportunities in South Carolina – not only for existing industries but also for new companies that do not have operations in the state. It seems that every day there is a new announcement coming from the SC Department of Commerce about a company expanding their operations and investing in the state.

Facility expansion is a complex process with numerous decision points that impact both short-term and long-term costs and potentially the future viability of the company. In order to educate OpExChange member companies on the entire construction process, THS Constructors, Inc. put together a panel of experts to share their knowledge of the expansion process. THS Constructors is one of the Southeast’s leading design-build, project management, and general contracting companies. They have completed several expansion projects for OpExChange companies, reducing both short-term and long-term costs and identifying potential pitfalls early in the process.

The Expert Panel

The intention of the panel discussion was to create an interactive dialogue with the companies in attendance. Shane Whatley, Senior Vice President with THS Constructors, emceed the discussion and began with conversation starter questions particular to the expertise of each panel member. This then blossomed into an interactive dialogue with the OpExChange participants. The experts on the panel covered a broad spectrum of topics affecting expansion and construction of operations in South Carolina. Shane included representatives on the panel from THS Constructors, Parker Poe Consulting, Colliers International, MAU, and Koops Automation. Topics covered site research and selection, industrial real estate trends, pre-construction planning and construction, and the impact that automation and robotics decisions may have on expansion. There was candid discussion on how to identify state and local incentives.

Site Selection and Real Estate Trends

Azad Khan, Principal for Parker Poe Consulting started the discussion on the multiple variables that affect site selection. Azad emphasized a common theme that resonated with each of the panelists – upfront planning. There are so many variables that affect cost such as permit fees, land costs, and utility outlays. Before the search for real estate begins, begin the planning portion. Create a planning decision matrix that outlines all these variables affecting both initial and long-term costs. A panel member shared a horror story where one company selected and purchased a site only to discover that there would be a $500K utility impact fee. The local municipality did not have capacity to handle the additional waste stream generated from the expansion. Azad recommends involving your site selection folk early in the process.

According to the next panelist, Dillon Swayngim, Vice President of Colliers International, industrial real estate trends are in the realm of “Stranger Things” – It is in the upside-down world. Both the capital and debt-to-equity markets are upside-down, and the Fed just hiked the prime rate by seventy-five basis points. Leasing demand, however, is incredibly strong with 40% being industrial and e-commerce with the balance being manufacturing. Much of this is precipitated by a push for reshoring and onshoring. Class “A” vacancy is exceedingly difficult to find. Some of the OpExChange distribution members in attendance echoed this concern. Some companies are now having to spend $60K to $100K per day in container fees.

Dillon added that a new trend in real estate searches is to include a labor study as part of the due-diligence package. With the recent woes of labor shortages, the demographics and workforce parameters have become an increasingly important variable to consider.

Staffing and Retention

Emily Heflin, Regional Business Development Manager with MAU Workforce Solutions kicked-off the labor discussion on staffing and retention. She emphasized that the recruiting game has changed dramatically in the last few years. It is no longer “post and pray” for applicants. The process is very data-driven and strategic.

Emily pointed out that the candidate experience is huge. If the hiring process is long and complicated, you are losing candidates before you even start. Know your process and capacity. How many employees can you onboard at one time? What is your training capacity? Have a marketing strategy to tell your story and get the word out.

With MAU, they performed an extensive survey with over 2,400 responses. The top three factors for candidates were:  1) Flexibility, 2) Work-Life Balance, 3) Consistency. Emily added that employees do not want the twelve-hour swing shift anymore – this takes away from their time with family. Employers need to be willing to change their workforce paradigm and “think outside the box” to be more flexible and address the work-life balance. She shared one example where a manufacturer is hiring teachers during their summer break.

MAU has a “touch program” that employs a standard cadence with new hires. Questions such as “Do you know what is expected of you?,” “Do you know your supervisor’s name?”, and “Does your supervisor know your name?”  Emily definitely recommends working with a workforce partner that is expert and has a good track record with this type of process.

The career-ladder program at one OpExChange company was discussed in the session. This program provides visibility into both vertical and horizontal career path opportunities. During a recent plant visit, they reported that their employees enjoy having choices and seeing a defined path on how to exercise those options.

Automation

Koops Automation joined the OpExChange in July 2022. Their facility in Greenville County manufactures custom automation solutions utilizing robotics, conveyor and vision systems, and multiple other automation solutions. Tim Patt, the Regional Sales Lead at Koops, shared that involving automation decisions early in the expansion project is wise. Location and type of automation could change the footprint of the expansion project and staffing requirements.

Automation can greatly improve productivity, safety, and quality to operations. Tim added that a key to implementing automation is understanding your current process. Not all operations are suited for automation. High volume, multi-shift production typically lends itself well to this. Historically, the vast majority of automation projects were in the automotive sector. Tim says this is changing recently, and they are seeing more warehouse and distribution, medical, and food industries implementing automation.

Automation does not always result in reducing jobs. An example was shared of an OpExChange member, Stanley Black and Decker, who actually created over 700 South Carolina jobs by onshoring product and removing labor content from the assembly and machining process.

Incentives and Assets

Julius Weathers is a business development executive with THS Constructors and has experience both with the SC Department of Commerce and with county economic development. He kicked off this discussion by sharing that both the state and county governments have many resources to help identify incentives for expanding operations. Everyone in South Carolina wants to improve the economy and increase jobs for the state. Julius shared that the jobs formula that goes into determining incentives is based on the number of full-time jobs created over a five-year period. He emphasized that this is not just for new companies coming into the state but also for companies expanding their operations. Dr. Cynthia Davis with the South Carolina Department of Commerce added that Secretary Harry Lightsey is working on improving the grants program to incentivize both job creation as well as capital investment and technology.

Julius pointed out that the SC Department of Commerce also helps with assets on a number of expansion resources. For instance, they will help identify local supplier and even coordinate B2B events. A searchable tool, SourceSC, is available to locate SC suppliers for particular commodities or industries: https://scbizdev.sccommerce.com/suppliers/become-part-sourcesc . They will even provide detailed wage and labor analysis reports. Your general contractor (GC) should help you in connecting with the SC Department of Commerce or you could reach out to them directly from the contacts below.

Preconstruction and Construction Project Management

Two essential parts of working with a GC is the preconstruction process and the project management during construction. Jon Campbell is the Director of Preconstruction and provided some very sage advice from his experience. With regards to facility expansion, “It is a complicated world to navigate. What you guys’ need is a guide to help you understand the parts and pieces – costs, schedules, and your options … kind-of like a tour guide.”  He stated that you need to involve your GC early in the planning process. Jon added that there really is no additional cost in having a GC involved early in the process.

Jon highly recommends being exceedingly particular when selecting a GC. All GCs have details on their costs. Expect to see that information up-front. You should not see a one-page proposal. The proposal should include design process, procurement practices, lead-times, and basic construction schedule. Shane added that all sub-contractors “worth their salt” are incredibly busy now and have a backlog out into 2023. If you are talking to a GC who is not busy, “run away!”

Andrew Webb is a project manager with THS Constructors and is managing an expansion with Fibertex, an OpExChange member in Laurens County. He explained that the project manager is the single point of contact to ensure that all the expectations of safety, quality, schedule, and cost are met. One of Andrew’s recommendations was to involve decision makers early. Costs change quickly in today’s market, and no-one wants to go back and explain a request for additional funding after a decision is made.

South Carolina – Team Environment

Shane summarized that the commercial ecosystem in South Carolina is hugely attractive. SC is a state that encourages and fosters friendly business politics, has a strong manufacturing base with vertical supply chain solutions, and is home to the best seaport in the world and two inland ports in Greer and Dillon. South Carolina is unique from the other states in the Southeast in the “Teamwork” approach it takes toward supporting expansion. Counties and competitors will work together, and the State agencies unite in a cohesive infrastructure to make the best possible pitch for expanding the South Carolina economy.

About THS Constructors

THS Constructors, Inc. is a 100% employee-owned design-build construction management firm based out of Greenville, South Carolina. Founded by T. Howard Suitt in 2005, they remain a relationship-focused construction services company, built on repeat business and committed to their clients, constantly improving for the benefit of our clients, suppliers, and stockholders. They pride themselves on delivering projects of value with integrity and commitment.

About OpExChange

The OpExChange, sponsored by the South Carolina Manufacturing Extension Partnership, is a peer-to-peer network of companies in South Carolina known for generating success for members through benchmarking and best practices activities. Member companies host events and share practical examples of industrial automation, lean manufacturing improvements, and leadership development. It is an invaluable resource to South Carolina companies that provides access to others who are on similar improvement journeys. If you are interested in joining, contact Mike Demos (Mike@OpExChange.com) or visit the OpExChange website www.OpExChange.com.

South Carolina Department of Commerce Contacts

• Expansion specific – If you are considering expanding your operations, you will definitely want to talk with Mandy Brawley. Part of her responsibilities include expansion of existing businesses in South Carolina. Mbrawley@sccommerce.com
• Finding Suppliers – Dayton Ward is the manager of the supplier outreach department and can help you find local suppliers and can even coordinate B2B sessions for you. There is also an extensive industrial directory, SourceSC, in which you can search and identify suppliers. You can also register your company in the directory to be considered a potential supplier for future sourcing requests. Dward@sccommerce.com
• Labor Analysis – The SC Department of Commerce can provide detailed labor market analysis including wage data, detailed wage analysis, and consult on total rewards (benefits, compensation, bonuses, etc.). Contact Kim Mann, Talent Management Consultant. Kmann@sccommerce.com
• Existing Industry – There are many resources available to help companies achieve their operational goals. Cynthia Davis leads this group. Cdavis@sccommerce.com