How Does Location Affect the Productivity of a Business?

Choosing the right location for your business not only helps increase sales and reduce costs, it can also help you increase productivity. Creating goods and services faster, while maintaining high quality, is a key piece of the profit-maximization puzzle. Where you locate your company can affect your ability to efficiently move people, materials and finished goods through your facility.

Supply chain management is key to maximizing productivity. If one part of the supply chain is interrupted, the rest of the sales, production and distribution processes can stall. When businesses launch, expand or relocate, they consider their need to get raw materials into their production facilities. When managing the business site selection process, companies look at rail, air, road and sea transportation logistics to determine how effective these will be for receiving supplies. Companies also consider how easy it will be for customers and suppliers to reach the location for business meetings. Even for small local businesses, such as restaurants, banquet halls, delis or caterers that need to get fresh-baked bread, meats and vegetables several times a week, efficient access to suppliers is key to productivity.

Companies that ship their goods to wholesalers, distributors, retailers and direct customers rely on efficient outbound logistics. They might need to send samples to customers and suppliers on a regular basis for approval. Sales reps will be more productive if they have access to road systems and airports that are cost-effective and reduce travel time. An efficient outbound logistics system improves productivity by reducing travel time and costs, allowing companies to respond to customer and distributor needs faster, and deliver finished products to market quicker.

Cities, towns, counties, corridors and states offer relocating businesses a variety of incentives to come to their areas. These can include tax credits, reduced utilities costs, infrastructure improvements and free or low-cost buildings. Infrastructure improvements might include a new road created to service a new manufacturing or distribution facility, or a rail spur built to a specific location to help with distribution. Locations that help businesses streamline the permitting process, offer to re-zone properties or reduce operating hour restrictions help improve productivity.

More qualified workers and higher retention employee rates improve productivity through more innovation, better efficiency, and reduced employee replacement and training costs. Long daily commutes decrease the quality of life for employees and raise their out-of-pocket costs to work at a company. Air travelers who can’t get nonstop flights can spend long days in airports, decreasing their job satisfaction. A business location offering affordable, accessible public transit, a short road commute or a nearby airport with nonstop flights to frequently traveled cities can help businesses recruit and retain better workers. Locations offering a higher quality of life, such as good weather, low personal income taxes, good schools and natural and commercial attractions help attract and retain more productive workers.