Labor analytics – using a combination of both primary and secondary data – will help a company to ensure the location it is considering will be able to meet its workforce needs, today and in the foreseeable future.
Understanding your potential workforce, and/or your current workforce is critical when undertaking a site selection project. Ensuring you will have employees with the right skills at the right cost at each of your location options will lead to long-term success. The monetary value add captured for the right decision will dwarf any differentials in real estate rent and opex costs.
View of the Macro Site Selection Process
As a business begins the process of making a site location decision, an extensive analysis should be conducted to determine the optimal location to meet a company’s specific operational needs. This analysis should focus on a variety of factors that are relevant to the business. Advisors must make certain that the research ultimately provides a relevant and clear understanding of the operating environment in each location being considered.
The criteria list will vary depending on your industry and specific operations and needs, but the attributes most frequently considered are (in no particular order):
- Customer proximity
- Taxes/regulatory environment
- Supply chain/industry cluster
- Government Incentives
- Political/economic stability
- Community support
Better Data/Better Outcome
The best labor analytical studies blend primary and secondary source data together using a weighting system to drive the entire analysis. Secondary source data (most commonly used) are data collected by someone else and aren’t specifically collected for any particular project. You might also refer to it as an “off-the-shelf”or public product. The issue with secondary data is that its general purpose might not be perfectly crafted for your project and, therefore, may contain a bias (it’s out of date; its perspective is skewed to meet some other purpose; it is too general, etc.). Primary source data are location-specific and collected firsthand. It is great information to have, but can be expensive and tricky to collect. Primary sources of data can come from “boots on the ground” surveys and the virtual mining of data.
A skilled analyst can “correct” secondary data errors through a process called “ground truthing,” which blends primary and secondary data to allow variation in space. Example: The Bureau of Labor Statistics publishes wage data at the county/MSA level, which flattens wages into an average that is constant across the entire region. By “ground truthing” the wage data through mining social media and possibly conducting a local survey, one can develop a view of wages that changes throughout the region to approximate the local market fluctuations.
Every community has unique workforce characteristics. These factors may contrast greatly between particular locations, and if pertinent, may be included in the overall decision-making process.
Challenges of Data Analysis in Global Markets
As companies expand into international markets and become truly multinational, comparing labor across global markets becomes even more necessary. The key is having comparable metrics across countries. Along with the availability of skills, companies must also consider the cost of labor, both actual wages and the associated benefits specific to that market and occupation.
Determining the cost of labor can often be difficult to pinpoint, especially when considering locations in different nations. The usefulness of governmental statistics varies from country to country due to variations in methodology and calculations. For a company to understand the true cost, quality and availability of labor, it must consider deeper micro and macro factors that are developed around your specific project and needs.
Now more than ever, with the majority of markets tightening and inflation kicking in, the availability of a suitable labor pool and total cost of labor will drive the ultimate placement of a new or expanded facility. It is critical to get beyond the basic statistics and holistically understand the strengths and shortcomings of a location’s workforce!