Horizon Blog

Project Cargo: Factory Relocations [PODCAST]

Written by Expeditors | Apr 21, 2021 5:30:00 PM

Whether it's growth, new strategies, duties, or strengthening your supply chain resilience, a factory relocation is a massive undertaking for any organization and, as we'll hear with Vice President of Project & Energy Services Pat Roche, requires an incredible amount of coordination, preparation, and communication. Chris and Pat will discuss timelines, processes, and considerations to execute a successful relocation.

 

Chris Parker (Host): Hello everyone, and welcome to The Expeditors Podcast, where you can hear about front of mind topics in the logistics and freight forwarding industry through the lens of a global logistics provider. I'm your host, Chris Parker. And today we are talking about factory relocations. In case you missed my previous talk with Mike Bellezza from Tradewin in episode seven, we talked about the situations and decisions that could lead to a sourcing change or when a company is looking to change the location or provider of its materials or manufacturing. Sometimes it can be a case where you are just choosing a new partner, but what if your organization owns the machinery or the materials inside that building? What are your options? What needs to be considered? Taking us through the life of a factory relocation is our very own Pat Roche, Vice President of Project and Energy Services. How are you doing, Pat?

Pat Roche: Very well, Chris, thank you.

Chris Parker: Well, Pat, I want to get to know you a little bit more before we start talking about today's topic. What's your career been like before and with Expeditors?

Pat Roche: Well, it started at sea. I went to the New York Maritime College at Fort Schuyler in New York City and graduated from there and went to sea, and I was a deck officer and a merchant Marine and worked on RORO ships and tankers and breakbulk ships. And it was at that point in time where I fell in love with this thing called Project Cargo. And when you're living with the freight for three or four weeks at a time, you really get intimate with it. And so, I had a couple of work tours on board ship where we loaded some nasty freight, some really nice, big and heavy stuff. And I got to really become intimate with the whole process. So since that point in time, I've been engulfed in this Project Cargo environment where I've taken part in the movement and logistics of some massive stuff and some really complex freight. And it's a really dynamic industry.

Pat Roche: So when I came to shore, after my sailing career, I started working from the shoreside standpoint of a manufacturing and engineering company, and then moved into the freight forwarding industry, but always focused on this Project Cargo arena, where I was tasked with helping customers and helping them at the time for an engineering company managing our own business of moving some really complex freight from points of manufacturer to its final destination. And it covers all modes of transport. So your air freight, your ocean freight, your over the road, your barging, your rail. So it's just a very exciting thing.

Pat Roche: So at Expeditors, I came on board in mid-year 2006, with the intent of starting to build a formal group within the company that focused on just that on Project Cargo. And from there, it's been amazing ever since we built our team from a personnel of an army of one to over ninety folks now around the world that have a subject matter expertise in this dynamic environment. And we continue to grow and get involved with really interesting tasks and helping our customers out, and bringing value to them whenever they need it.

Chris Parker: So Project Cargo is now known as Project & Energy Services. How does this energy component play into Project Cargo? Why are they married together?

Pat Roche: Well, the oil and energy industry is always been a very large part of project forwarding because of the necessity of moving very large complex equipment for that particular industry. So growing up as a project forwarding professional, you find yourself immersed in the oil and gas industry just because it's where a lot of the complex movements are happening and where your skill sets are required. So we made a decision about two and a half years ago to disband the oil and energy vertical unit and take those resources and reallocate them over into the Project Cargo group. And so that's when we became Project & Energy Services. We continue to focus on the oil industry and the energy industry because that's where a lot of our demand is from a skillset perspective. But we also have a much broader focus on any industry where the customers require our expertise to move complex rate from point to point.

Chris Parker: You've also got a military background. Is that correct?

Pat Roche: Yes. I just retired after 21 years as a Navy intelligence officer. So I led a dual life for quite a while, but I now have my weekends back and no more surprise deployments anywhere. So I'm very excited about it.

Chris Parker: Yeah. Congratulations. Thank you for your service too.

Pat Roche: Thank you.

Chris Parker: How has your military experience really tie into the work that you do now? Is there any skillsets that you're bringing over into Project & Energy Services?

Pat Roche: There always is. No matter what I'm doing, there are bits and pieces of my military career and training that helped me with my day-to-day tasks and what I have in front of me. I would say one of the great things is just being able to handle stress. The ability to handle stress is something that I've been able to use to my advantage and my team's advantage, and many times our customers' advantage and our service providers' advantage as well. Just being able to work with people and knowing that we're going to figure this out. So let's take it chunk by chunk and step-by-step and work together, and through thorough communication and transparency, we'll get to a resolution. So I think just being able to convey that to whoever I'm dealing with because of my abilities, that I've kind of built up my immunities to "frazzlement." That's probably not a word.

Chris Parker: It is now.

Pat Roche: My ability to kind of navigate through that, I think, is one of the most helpful aspects of my military time.

Chris Parker: Yeah, absolutely. And I think that kind of leads us into our topic because we're going to be talking about can be stressful. And there's a lot of coordination that needs to happen. It sounds like it requires definitely a very steeled and calm approach and perspective and a really wide understanding of things. So let's talk about factory relocations now. Why would an organization want to change their physical location and kind of more currently – what's been a really common reason these days that brings on a relocation?

Pat Roche: Well, I mean, from a wave top level. There's many reasons that could come up that would make a company or a manufacturer want to even think about doing a plant relocation. In recent years, one of the primary drivers have been trade regulations and shifting manufacturing from a country with maybe a high tax or duty level to a country with lower levels of those. More traditionally, and then we're going back five, ten years ago, one of the driving factors to something like this could be the cost of labor, overhead costs, geographic proximity to raw materials. Your geographic proximity to your key customers maybe you want to move your manufacturing location to where you're closer to the end-users. But supply chain resilience is a buzzword that's thrown around quite a bit. And it means something in regards to what we're talking about, because factors like ease of trade, political stability, again, closer proximity to your customers. These are all reasons that when you put them all together, it might make sense to pull a trigger on a plant relocation.

Chris Parker: Yeah. So when we're looking at a relocation, we're looking to gain something. We're looking to strengthen the supply chain resilience; what does an organization or manufacturer stand to lose when they're actually choosing to do a relocation?

Pat Roche: Well, there's a variety of trade-offs that you need to consider, and you can look at when you're considering doing something like this. And when you talked about duties and taxes and things like that, you may gain more favorable duty treatments in the primary market that you're moving to. A company has been operating in a certain location for many, many years and manufacturing their product in a certain area for many years. So over time, you build leverage with the local knowledge of how to operate within that particular geographic area. You might have well-established relationships with local trading partners in that area with the government bodies that you have to work with in order to do what you do. So there's a comfort level there, a comfort zone. And when you are considering kind of relocating yourself, you might lose that at least for a while.

Chris Parker: Sure. Yeah.

Pat Roche: So that's another area. From a transportation perspective, it's our job to really help the customer research more of the tactical items that will play a role in making a go or no-go decision. So there's always this risk of all the things that we're going to talk about today that you have to consider when you're going to go through with a plant relocation. Any aspects of the physical plant relocation it holds some risks that could prove as an area where a downside or an area of risk.

Chris Parker: So we're going to get to some of those things in a bit, but let's talk about timeline. And I know it depends as we're looking at a case-by-case basis, but what would you say is the typical timeline for relocation? I know that a lot of prep time is really important in order to have a really clean execution. When did the conversations need to start happening? And what does that whole end-to-end timeline look like?

Pat Roche: Yeah, there's so many variables. It's difficult to put a standard timeline on some of this, as you pointed out. But if you were to keep it real vanilla and wave top-esque, I think it could be three to five years of no kidding planning and thinking about things right through to the final execution and turning the light switch on at the new factory; it could be. There's so many details that from the planning stage, the design, the procurement, and construction, what capital equipment that's going to have to be moved, decommissioning plant A and then recommissioning plant B. It's a lot. It's a lot to go down, and we'll talk about throughout the podcast here; from that pre-planning through execution, there's a lot of things to consider. And the earlier that you can kind of sit down and start having those conversations, the better. We've found many, many, many times that the earlier, we can kind of come in and sit at the table with all the stakeholders, the more beneficial it is to the whole overall success to the mission.

Chris Parker: Now three years, I'm a little suspect because you have your military background. Why can't we just get a whole bunch of- a team of Chinook helicopters to come in and lift the factory from the ground and then plop it in its new location. And I know that's not the real process, but what is the real process like here?

Pat Roche: Well, when you first start talking about this, you've got to look at what the manufacturer wants to do. Do they want to just shut down, turn the switch off and then take everything and move it to the new place and then turn the switch on, or do you want to have parallel operations happening-

Chris Parker: Which costs production time.

Pat Roche: Right. Do you want to have scaled-down production? You know what they call it. So there's lots of considerations. And then there's the infrastructure, and there's the transportation aspect. And there's the cargo that we're going to be moving. So that three to five-year timeline from that very first meeting where you're talking internally at the manufacturing company to the very point in time where you turn the switch on the new manufacturing location. It's real easy to get to that three to five-year window. There's so many little nooks and crannies that you have to consider between pulling the trigger and finalizing. It's daunting for sure.

Chris Parker: Absolutely. So there are two things that I'm thinking of or that I've read about. There's export handling and import handling. What are those, and how did those kind of fit into this process?

Pat Roche: But that's the perfect way to think about this, in my opinion, because if you were to divide the operation into two large silos or categories, that export handling part that's everything on the origin side. So from the first day of having discussions about making this move through to the port of loading, you've got hundreds of things to consider. And then transfer it across the ocean or across the country or wherever you're going. You've got the other side; you've got the incoming, the inbound challenges. So when we focus on the export side, so that origin point, the first thing that comes to mind is having site visits. So doing site walks at the manufacturing location or original manufacturing location, and you want to get your people onsite with maybe your trucking service providers that you're going to bring or your crane and your rigging partners, your export crating, and packing partners that are going to be helping prepare everything for the rigors of transport.

Pat Roche: So you want to come into the... We call the site walk where you literally walk the site you come into that point of origin. You walk the factory; you look at how everything is situated. You look at the room that you have to do what you're going to have to do. You have to look at turning radius, and can I bring big trailers in here to load out these larger pieces and the proper turning radius within this plant location. Do I have work areas that I can stage the cargo and export packet and prepare it for transport? Do I have all that? Do we have room to put cranes in if we have to use cranes?

Pat Roche: There are different types of cranes. There's boom cranes that will come in as like a mobile boom truck crane; there's overhead gantry cranes for really heavy pieces. There's all the work that's going to go into removing this machinery from where it's sitting now and where it could have been sitting for 50 years to prepare it and get it onto a transport of some kind. So just many, many things to worry about. But that sidewalk is probably one of the earliest points in which we start to paint a picture. And in addition to sidewalks, we have what we call route surveys. And this is where you actually determine the proper routing from that point of origin to your point of loading. So where are you going to be loading the ship or loading the airplane or whatnot? And so, a route survey will actually determine where you have choke points or areas of concern for bringing larger freight through.

Pat Roche: It could be traffic signals at an intersection. It could be telephone wires. It could be power wires. It could be tunnels or bridges or overpasses, underpasses, whatnot. It could be there are restrictions of timing when you're allowed to bring a big piece through; we call those curfews where you can only do it in certain hours a day to avoid the major traffic times, lots of different things. So that is the site survey, the site walk, and the route survey are your two initial things that you're going to conduct to start to paint the picture for your operation, and with the help of all your partners, including the customer, you're going to have your crane and rigging partners.

Pat Roche: You're going to have your export packing partners, your trucking partners, everyone comes together until we have a meeting of the minds, and we all get on the same sheet of music. So how are we going to execute? And that goes right up to your port of loading. It could be air freight mostly; it's going to be ocean freight. It could be container loading. You're going to put a lot of this cargo that you're pulling out; you're going to containerize it. So just a myriad of concerns that you have to cover down on.

Chris Parker: That's so much granularity and so much coordination that has to happen; that's incredible! And I was going to ask this later on, but you brought in all these players that are involved in the riggers and truckers and such that are involved in the move that I see as a very kind of a breadth of parties that need to be involved. What about the depth in terms of how high up in an organization, whether you're the manufacturer or a customer that's trying to conduct this move for yourselves. At what levels of the organization need to be involved in kind of the execution of these. I mean, you've got your players, but who are the coaches and the assistant coaches and such.

Pat Roche: Well, everyone can be different. And it depends on the manufacturing company. It could depend on the complexity of what you're talking about, the move you're talking about, but especially in the early days, you could be dealing with the C-suite folks, right through their compliance, directors, and their managers of compliance to make sure the product that we're looking to move here can legally be moved from country A to country B or area A to area B. And then from right down through the production management, the production engineers, the plant managers, right down to the deck plate level of operators at the plant itself. There'll still be stakeholders in just about every layer because they have to be; you have to have that breadth of a broad stroke approach to make sure that you don't leave anything out.

Pat Roche: And oftentimes, your C-level folks might be the ones that say, "Okay, let's do it. You have permission to go forward." And then the compliance folks will say, "Okay, let's make sure we do this and do this and dot our I's there and cross our T's here and make sure we're doing this legally." And then the production folks and the plant management folks are like, "Okay, tactically, how are we going to make this happen? We want to do a complete shutdown and then pull everything out and move it over and turn it on again." Or, "Do we want to scale our operations and do things in parallel?" What do we want to do? So to answer your question, it could be anything across that spectrum.

Chris Parker: Sure. Yeah, absolutely. It doesn't hurt to ask folks if they need to be involved. All right. So we've covered the export handling portion. What about import handling? What does that look like?

Pat Roche: It's kind of the reverse engineering of what we did at the origin site, but you're going to determine where I'm bringing my ship in, for example, and you're going to do site walk at the new location. Is this a greenfield operation where it's nothing right now, and it's going to be a full thing constructed, or is it brownfield where you have an existing building or an existing structure already? You're going to do your site walk to determine those things. You're going to do your site walk to determine, "Okay, how much space do I have to do what I have to do?" When my trucks come in, "Do I have a good turning radius? Do I have places to put my cranes? Am I going to need cranes inside? Am I going to need super heavy-duty, forklift type machinery?" What am I going to need to make it so that I can bring this machinery in and get it to its final resting place?

Pat Roche: You'll have staging areas for your export, your crating; you're going to uncrate everything and prepare everything. And then, working your way backwards now toward the port of entry, you're going to do another route survey. So you're going to determine what's the optimal route to move all this cargo from the ship discharge point into your new factory location. So that will help you decide, "Okay, what's my transit time look like? What kind of restrictions am I going to experience? What's the distances?" The Crow flies, it could be three statute miles from where you're starting to where you're going, but because of the route, it could be 10 or 15 or 20 miles.

Chris Parker: Oh gosh.

Pat Roche: So one of the most important things to consider at that destination end is the schedule of the construction. So what pieces are they going to need and when to build out the new factory? So there's a sequence that's always involved. You have pieces coming in, and you need to deliver those pieces in the proper sequence to coincide with the construction crew and the crane, and the technicians that are actually doing, the actual installation and the startup of the equipment, and whatnot.

Pat Roche: So you think of it like an erector set. You're bringing all this equipment in, and it's going to be used to build whatever you're building in a certain sequence. So the delivery sequence becomes huge. So that takes you back now to the port of entry, where you might need a lot of space to stage out your cargo in a certain sequence so that you can have it picked up and load it out in the proper timeframe and in the proper order.

Chris Parker: Yeah. Yeah, because if we're working with a greenfield, as you said, and building a building from the ground up, you want to be able to take advantage of the opportunities of, I don't know, the roof not being there. And so you can drop things or drop machinery into there while the roof is gone and then build around that. Is that what the construction kind of aspect that you're talking about there or just those kinds of things?

Pat Roche: Conceptually that's exactly correct. Yes. In addition to that, I always talk to people about our business of moving complex rate. The actual physical movement is sometimes the easiest part; the more difficult part is the import compliance side of it, where your paperwork bringing this cargo into this country, it has to be perfect; otherwise, you run into potential delays, customs delays, and whatnot. So that becomes one of the real large blips on our radar screen as we're bringing cargo in to ensure we have all of our import compliance paperwork and processes squared away 100% because you can have the best plan and the best trucking service providers and the best execution operation, whatever you want to call it all setup and ready to go. But if you don't have your import documents squared away, it's going to throw a huge wrench in your plan.

Chris Parker: Absolutely. Because if the documentation is not in order, your assets get held up. And so then if construction relies on those things arriving on time, down to the day or the hour, I would imagine then that can really throw off your schedule that has just significant impact down the line. So what other risks are there that can be involved? What are the challenges that lie ahead? I mean, the import side definitely sounds more harrowing because of that documentation aspect, but what other challenges are at play or can affect a successful move?

Pat Roche: There's many, many, many challenges that you have to keep into consideration. And so a lot of the things that we talked about, like the site walks and these route surveys, determining what port of entry and the location of that port of entry, as compared to your final destination. You might want to call it infrastructure. You want to make sure you are thinking outside the box with regards to potential hiccups when it comes to the delivery of the cargo. Again, the site in route surveys are just a huge part of that because by conducting those surveys, you're uncovering all kinds of potential hiccups and potholes and whatnot. The risk of damage is always a concern, and how we address this risk can be taken way back to the point of origin.

Pat Roche: And oftentimes, when we're dealing with different machinery that our customer has been using for years, and years they have local technicians that have been repairing the machinery, and they know the machinery in and out. They know the inside of all the parts and the pieces and all the good stuff that make up those giant pieces of machinery. So oftentimes, we, as part of the team of who's going to manage the operation, some of the key stakeholders are these technicians that know the equipment very well. So working with the technicians to determine the best way to remove the machinery and pack the machinery so that the cargo can withstand the rigors of ocean transport and trucking and all that kind of stuff. That's a team approach big time.

Pat Roche: And without having that done very thoroughly, that's when damage can become a major issue, because if you don't block and brace a certain piece the right way, or if you don't hood crate it adequately with shrink wrap and if there's sometimes nitrogen purges are required to inhibit any corrosion along the way, for example, inside a machine, really important factors that you have to consider. So the idea of damage starts really early on in the whole process and having proper boots on ground, as I say, at both ends ensuring that the technician's advice and guidance is being adhered to 110% all the way through the export, crating, and packing, and the way the cargo is handled and loaded onto trucks, and then transported, and then loaded onto the vessel.

Pat Roche: Oftentimes, we engage with what we call third-party survey companies. And these are folks that just know how to handle cargo. They know how to ensure the cargo is loaded on the ship correctly and secured, onboard the ship correctly to withstand the rigors of the ocean transport. We engage with those folks on both ends to determine and ensure the cargo is being handled correctly all the way through its delivery to the destination. So damage is a very broad topic, and there's lots of areas that it can rear its head, but there are ways that we work to mitigate the potentiality of damage from that very first time that we touched the piece, that origin, through the very last time when we're laying that piece into its final resting place in the foundation at the destination. So it's a concern, but there are many, many ways that we can mitigate. And there are many ways that we do mitigate it. And it's a combination of all those that come together to ensure that we're doing this in a very safe manner.

Chris Parker: Yeah. It just speaks to that the level of planning that needs to happen beforehand. And really, it sounds like everyone, like there's so many parties that need a seat at the table in order to have their voices heard, to make sure that damage at sea or deterioration of equipment while at sea can be accounted for in a way that helps the machine and the assets, I guess, travel safety. That's incredible. Yeah. How does distance affect outcomes? I mean, whether you're moving across town across borders or even within a country at great distances, what are some of the considerations that really need to be thought about and taken into account or things that could potentially slow you down a good amount?

Pat Roche: The bottom line is when you consider a factory relocation to another country, because the longer your transit time if you will, or the longer the lifecycle of the shipment activity from that point of origin to its final destination, the longer and more complex that is, it adds more complexity. It adds more potential time, travel times will be longer. It heightens your risk for things that could happen, whether it be on the export compliance side or the import compliance side. So it has a great effect, but if you plan properly like we've discussed, and you think early enough on, in the process, you can mitigate, if not eliminate, a lot of the risk that you might encounter with these longer, relocating events overseas.

Chris Parker: Yeah, absolutely. Last question for you. And this is something for anyone who would be considering a relocation is: from your perspective and from the perspective of peers in what you do. What do you feel is one of the most overlooked things when conducting a relocation or project moves in general, what gets overlooked the most, whether it's pressure from leadership or pressure from partners, when you're trying to do an evaluation, simply what is one of the most overlooked things?

Pat Roche: Well, there's a couple that come to mind or off the bat. And the first, especially with regards to factory relocations, is the time that's required, in my opinion, is often underestimated. The proper execution of plant relocation it requires substantial planning, and the physical work that will go into every nook and cranny of the process can't be rushed or expedited.

Chris Parker: Sure, sure.

Pat Roche: So there's really no such thing as being involved or talking too early when it comes to a factory location because the earlier you can start having the conversations, the better because that'll give you more time to think and rethink and think it over again, and analyze from the very early stages, what you need to cover down on. So time is a big thing. And the other one is the impactfulness of having boots on ground at both origin and destination, and ideally having boots on ground that are made up of the same team, coming from the same group, because the level of communication and the transparency that happens when you have extra sets of eyes and ears and boots on the ground is invaluable with regards to ensuring things do not fall through the cracks that you can mitigate, that you can communicate.

Pat Roche: Lots of times, the absolute number, one tool that we have in our toolkit here is thorough communication. Bad news is not like wine; it doesn't get better with age. So therefore, when something happens, it's best to identify it and communicate it immediately. And we find that when you do that, you're successful getting that done the smoother you can iron out those wrinkles that may happen during an initiative.

Chris Parker: Yeah, absolutely. Pat, thank you so much for talking me through this. There's a lot of great stuff to learn about. If people were curious to learn more, want to get into touch with you, learn more about Project & Energy Services, where would you direct them?

Pat Roche: They can always email me at pat.roche@expeditors.com, and we can take it from there. We're open 24/7.

Chris Parker: Perfect. Sounds good. Thank you so much for your time, Pat. I really appreciate it.

Pat Roche: All right. Great. Thank you.

Chris Parker: Thanks for listening to today's episode. If you've got any questions or want to learn more about today's topic, check out the show notes for more information. And before you go, make sure you're subscribed on whatever podcast app you're using so you won't miss the next episode. To learn more about Expeditors, you can find us on LinkedInFacebookInstagram, and Twitter, or simply visit us at expeditors.com. Take care, and I'll see you next time.