Building in lower operational costs

By Robin Roenker

It’s hard to overestimate the importance of manufacturing to Kentucky’s economy. The state is home to more than 4,200 manufacturing facilities that employ roughly 231,000 people – that’s 11 percent of the commonwealth workforce, according to the U.S. Bureau of Labor Statistics.

operational costs
Scott, Murphy & Daniel LLC, a building contractor based in Bowling Green, is building a 91,000-s.f. addition to Metalsa’s Elizabethtown plant to accommodate frame assembly for the new generation of Ford F-150 pickup trucks.

What’s more, Kentucky’s total manufacturing output was $29.7 billion in 2012, accounting for 17 percent of the state’s total GDP, according to the National Association of Manufacturers.

“The manufacturing sector is growing in Kentucky,” said Greg Higdon, president of the Kentucky Association of Manufacturers. “In fact, it’s probably the primary reason that Kentucky has survived the deep recession like it has.”

With continued industry growth comes increased demand for new or expanded manufacturing and distribution facilities – a trend that’s been on the uptick across the state.

Bowling Green-based construction firm Scott, Murphy & Daniel, which also has offices in Hopkinsville and Owensboro, is at work on a 91,000-s.f. addition to Metalsa’s Elizabethtown plant to accommodate frame assembly for the new generation of Ford F-150 pickup trucks. It also just completed a new 60,000-s.f. facility for Sumitomo Electric Wiring Systems in Scottsville.

In Campbellsville, the Bristol Group completed work this year on a 12,000-s.f. expansion for automotive rearview mirror maker Murakami Manufacturing USA.

The Paul Hemmer Co., based in Fort Mitchell, recently landed a contract to build a 925-s.f. addition for Bonfiglioli USA, an Italian firm specializing in the manufacture and distribution of automotive gear motors and drive systems.

And high-end manufacturing facility builder Gray Construction, a Lexington firm whose customers tend to be multinationals, recently won a contract to design and build top-shelf Champion Petfoods’ first U.S. facility in Auburn, Ky.

Kentucky’s central geographic location is one key reason it has been – and continues to be – such an attractive spot for existing industries to expand or for new industries to locate, explained Higdon.

“You can put a pin in the center of Kentucky and draw a 600-mile radius, and you reach 90 percent of the Eastern Seaboard, from Canada to Florida plus a large portion of the Midwest,” he said.

operational Shop HQ fulfillment center SMD
This 350,000-s.f. addition to Shop HQ Fulfillment Center in Bowling Green will more than double the size of that operation and add up to 150 full-time jobs.

Add Kentucky’s other logistical assets – easily accessible interstate highways, short- and long-line railways, 600 miles of Ohio River front, plus major air freight hubs in Louisville (UPS) and Hebron (DHL) – then factor in energy rates among the country’s lowest, and you have a recipe for manufacturing attraction and retention that’s hard to beat, Higdon said.

It’s a boon that Kentucky’s many firms specializing in the design, engineering and construction of industrial facilities are relishing. And it’s one that they expect to see last at least for the foreseeable future

Auto industry continues to be strong

“In late 2010 and through 2011 and 2012, we started seeing the manufacturing sector of our business pick up,” said Todd Ball, founder and president of Bristol Group, a design, engineering and construction firm based in Lexington.

“In particular, the automotive manufacturing sector in Kentucky is especially strong right now,” Ball said. “What we see and hear currently is that there are a lot of Kentucky automotive suppliers that are running at more than capacity, in terms of their overtime hours. So we expect that the demand for new facilities expansion in that sector will be strong for at least the next two to three years.”

“We have approximately 1.2 million s.f. of facilities under construction right now in the state, and 70 percent of that is automotive related,” said G. Michael Murphy, CEO of Scott, Murphy & Daniel. “Our firm has grown as a result: We have added over 50 people to our workforce in the last year and have made substantial equipment purchases to facilitate our ‘self-perform’ work on these projects.”

At Lexington’s Denham-Blythe Co., which provides architectural, engineering and construction management services, fully half of its current projects are automotive-related, said Bill Quenemoen, the company’s vice president, with healthcare would account for about 25 percent and other commercial/educational projects the other 25 percent.

At the end of September, Denham-Blythe broke ground in Corbin on a new industrial plant for Japanese company Kowa, that concern’s first North American facility. The new $8.3 million facility will specialize in an advanced metal surface treatment known as electroless nickel plating for automotive suppliers.

“We also expect to have ongoing work with Toyota in Georgetown for the next five to 10 months in preparation for the Lexus project,” Quenemoen said. Denham & Blythe has been heading renovation to several sectors of the TMMK facility as well as reconfiguring process pits and machine foundations in preparation for the new Lexus assembly line scheduled to begin production in 2015, he said. The company also will be breaking ground soon on a new powertrain assembly expansion project at Toyota, which Denham & Blythe is both designing and constructing.

The numbers don’t lie: Kentucky’s auto industry is booming. The Kentucky Cabinet for Economic Development reports that in the last five years, approximately 285 auto industry location or expansion announcements have occurred in Kentucky, representing 17,000 new jobs and nearly $4 billion in new capital investments.

Kentucky is now home to nearly 460 motor vehicle supply manufacturers, and thanks to production at Kentucky’s General Motors, Toyota and two Ford assembly plants, 11.2 percent of all cars and trucks produced in the United States last year were made in the Bluegrass State. Next year, as the new Lexus ES 350 assembly line goes live in Georgetown, Kentucky will surge ahead of Ohio to become the second-leading auto producing state in the nation, behind only Michigan, according to KAM’s expectations.

‘It’s about creating more value for the owner’

As the state’s busy automotive suppliers and other manufacturing industries – including logistics and warehouse distribution facilities – prepare for future growth, they are increasingly turning to specialized all-in-one design/engineering/construction firms within the state to help build facilities that can adapt as their business adapts.

“There’s been a shift away from industrial clients coming to us saying, ‘I just need the lowest possible cost.’ Now, there’s real attention given to how we can work together to build a better building,” said the Bristol Group’s Ball. “Clients today are wanting a better environment to actually do the manufacturing in.”

That translates to upgrades in a building’s energy efficiency, aesthetics and overall design.

“A term that’s used a lot in the industry today is ‘value engineering,’ ” said Paul Hemmer Jr., CEO of the Hemmer Co. “It’s not about making the building cheaper; it’s about creating more value for the owner.”

Many innovations in today’s industrial facilities relate to manufacturers’ increasing attention to energy conservation – a priority that was “very small on the radar just 15 or 20 years ago,” said Jeff Moneypenny, an associate and senior project manager with Louisville’s Luckett & Farley, Architects, Engineers and Construction Managers Inc.

For example, many large-scale manufacturers are making the switch from aging, metal-halide bulb technology to more efficient and less expensive modern fluorescent or to efficient and very long-lasting LED bulbs.

Modern industrial facilities also typically utilize robust energy management systems, with programmable heating and cooling systems that can adjust to coincide with work assembly schedules and timers and/or motion-detectors to turn on lights in sectors only when needed, said Ball.

Invest up front for future flexibility

“Everything used to be driven just by first-cost considerations,” said Ball. “But now we’re seeing more and more people asking, ‘What is it going to cost for me to operate it? What is it going to cost for me to maintain it?’ As a result, the trend is toward more attention to detail. We’re seeing a willingness to invest up front in better-built, better-insulated buildings, which in turn will have a lower operating cost over the long term.”

Clients, Moneypenny said, increasingly want buildings whose designs allow them to be “flexible to change.”

“Especially in the automotive industry, it’s all about change,” he said. “You have to change the car model each year, and the process to create that car changes. As a result, you’re upgrading your tooling and equipment fairly regularly. So, the more your building allows for those types of updates, the better.”

Another consideration driving facility design choices: manufacturers’ desire to create a comfortable, inviting work space in order to retain employees. Firms are finding it more difficult to identify enough skilled workers capable of running highly computerized, high-end manufacturing processes, so there’s a real urge to retain those they do have, Ball said.

That translates into buildings with more natural light – Hemmer’s company just completed a manufacturing facility with 200 skylights – and attention to interior details that might have gone unnoticed a few years ago.

“There was a period where clients weren’t painting the inside of the manufacturing facilities (to save money),” said Hemmer. “But now, we’re painting the insides of these buildings. Clients are wanting a brighter, more finished-looking work space.”

Design-build is the preferred approach

The vast majority of today’s industrial facilities projects utilize a design-build method of project delivery. In this process, a single entity design-build team works under a single contract with the project owner to provide design and construction services.

“Design-build has always been and continues to be the delivery method of choice for industrial clients. I can’t remember the last time I saw someone in the manufacturing industry not use design-build,” said Tommy Gumm, founder and CEO of Glasgow-based Alliance Corp., which just completed a manufacturing facility on speculation for the industrial authority in Franklin and will break ground on another spec facility in Glasgow this month. “Design-build streamlines the process. It brings together the owner, the builder and the designer all on one team, which gets the building process moving more quickly.”

Lexington’s Gray Construction has been utilizing the design-build project delivery method since the 1970s and was one of the five founding firms involved in the creation of the Design-Build Institute in Washington, D.C., over 20 years ago, said Jill Wilson, Gray’s vice president of communication and marketing.

The approach’s advantages are three-fold. First, with only one contract and therefore only one entity responsible for both design and construction, there is a single source of responsibility and accountability in ensuring a successful build. Second, by streamlining the facility planning process, design-build provides manufacturers with a greater speed to market. And third, the design-build method conveys greater cost efficiencies. The Design-Build Institute of America estimates that the process equates to 33 percent faster delivery speed and 6 percent lower overall project costs, nationally, when compared to other construction approaches.

“Manufacturing clients don’t tend to come to us two years ahead of time. They are typically working on their sales side. When they have received an order for additional business that they didn’t have before and they have a deadline to get that product to market, they come to us,” Ball said. “They want to be shoveling ground (beginning construction) on their facility just a few months out from that. And the only way to do that is with the faster delivery of information and pricing and definition of scope that we can do via the design-build approach.”

New tools let clients visualize features

In addition, firms such as Louisville’s Luckett & Farley are also using advanced design technologies like Building Information Modeling (BIM) software as part of an integrated project design (IPD) approach. Digital BIM models let clients “test drive” the proposed facilities – and all their systems – before a shovel ever hits the dirt. BIM models can offer clients during the design phase a precise estimate of the power use and potential savings if they opt for various energy-efficient building practices and high-efficiency systems.

“BIM models let clients visualize and understand the proposed project more fully, so that changes to the design can be made earlier in the planning process, and that in turn helps save money,” Moneypenny said. “It’s a much leaner method of design planning.”

Another tech tool streamlining the design-to-construction process is the eCommunication documents system that Lynn Imaging developed. Master documents for a construction project reside online and automatically flow down to the Internet-connected devices of all parties. The owner, design team/architect, general contractor/manager, and all subcontractors are continuously up to date on project requests for information, which party owns the decision on an RFI, all approved changes, and the current construction documents.

The eCommunication technology was developed in response to ongoing market pressures to become ever faster and cheaper at executing projects.

“Streamlining construction documentation enables project teams to maintain communication while meeting their deadlines and staying within budget,” said Michael Carter, president of Lynn Imaging, a Lexington-based construction information management company with offices in Frankfort and Louisville. “Tracking all of this digitally gives complete and readily available project closeout upon completion.”

Robin Roenker is a correspondent for The Lane Report. She can be reached at [email protected]

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