Selecting the proper site for a value-added processing business is important to the long-term profitability of the business. Locating the plant where you can purchase adequate quantities of inputs at their lowest cost is critical. For commodities like corn and wheat, this usually requires an evaluation of market basis patterns. Even if your business is a cooperative with delivery requirements, you will usually pay your patrons the going market price for the commodity at delivery, so basis patterns are still important. In addition, the cost of natural gas, electricity and other inputs affect the bottom line.
On the other side of the business equation, don’t forget about access to markets for your product. Being close to customers and having low-cost modes of transportation are important.
Creating a value-added processing business often means buying your feedstock from a commodity market and selling your product into a commodity market. Commodity markets are usually quite volatile. Having a wider profit margin than your competitors means that you will make more money during good times. More importantly, it means that your losses will be smaller when times get tough. This can mean the difference between staying in business and closing down.
To help you assess and evaluate various sites from you value-added processing business, read Location, Location, Location: Value-Added Processing/Manufacturing.
For more information on this topic, see the links listed below of articles posted on related Web sites.
- Characteristics of an Industrial Site – Ohio State University -- Each industry has particular needs that cause a specific site to be more appropriate for their uses than another.
- The Right Office for Your Business – Small Business Notes -- The most important factor in choosing your space is the old adage - location, location, location - whether it is within your home, your community or a larger region.
- A Comparison of Plant Location Determinants: Food vs. Non-Food Agricultural Processing – Food and Agricultural Products Research and Technology Center – Oklahoma State University – Summary of the results of a study that examined factors affecting location among value-added firms in Oklahoma.
- Planning the Engineering Design of a Food Processing Facility – Food and Agricultural Products Research and Technology Center – Oklahoma State University – Examines factors determining food processing design.
- Setting up a New Office – Inc.com -- Setting up a new office is a mighty task -- whether you're looking for the right location, negotiating a lease, designing a workplace, or deciding whether to buy or rent the equipment and services you'll need to do business in your new space.