Land of Opportunity?

By Mike Kilgore, President & CEO, Chainalytics Friday, September 17, 2010 The Wall Street Journal confirmed this week what many of us intuitively already knew...

By Mike Kilgore, President & CEO, Chainalytics
Friday, September 17, 2010

The Wall Street Journal confirmed this week what many of us intuitively already knew – state and local governments are ratcheting up the incentives to lure companies to their regions. Just this week Boeing announced plans to move 550 maintenance jobs to Oklahoma in exchange for cold hard cash – 10% of its payroll rebated plus $5,000 for every new engineering hire.

Other states and localities are just as eager to attract new jobs through incentives. Nucor Corp., the nation’s largest steelmaker, announced this week plans to build a new production complex in Louisiana in exchange for $160 million plus a piece of the $600 million Gulf Opportunity Zone incentives. New York Senator Gillibrand took aim at small businesses with the announcement Thursday of the Upstate Works Act. And the agriculture of Rock County, Wisconsin is not the only factor which helped the region grow into a food processing hub; it too offers direct developer incentives, state loans and city tax credits, among other financial incentives.

But the news from Oklahoma signals a new trend. While local governments have been using tax breaks and other incentives for years to lure specific types of manufacturing to their states, using cash is a sign of the eagerness – and perhaps desperation – for job growth across the country.

As we emerge from this troubling economic environment, this is perhaps some good news for supply chains in need of redesign. The difficult, and often capital-intensive, decisions you may be facing like opening and closing manufacturing or distribution facilities are made easier when incentive programs such as these are present. In some cases these additional incentives may even help you to justify strategic changes that might not meet internal hurdle rates on their own.

Is there an opportunity for you to have governments compete for your supply chain jobs?

Has your organization made any supply chain network decisions recently as a result of government incentives? If so, I’d love to hear from you. Drop me a note at mkilgore@chainalytics.com.

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