Your Client’s Place in the Supply Chain

September 3, 2025

Commercial & Investment Real Estate, Transportation and Infrastructure, Real Estate Technology

Transportation needs and site selection will vary depending on whether the company is supplying raw materials, component parts or finished products to end-users.

We opened this series with an overview of intermodal transportation. In Part 2, we discussed the importance and competitive advantages of logistics supply hubs. In this article, we explore other factors that can affect the end user’s site selection criteria and final decisions in the logistics and supply chain arena.

A multitude of factors affect site selection criteria and location decisions, and everyone’s business operates differently. My intent in this article is to speak to a few of the foundational topics that real estate brokers should be aware of:

Does proximity to the original equipment manufacturer (OEM) matter?
Does the location of the OEM impact the ability to offshore manufacturing?
Is there a possibility that—sometime in the foreseeable future—a product will be near-shored, on-shored or created with 3D printing?

Original Equipment Manufacturers

Let’s start with an understanding of your client’s place in the supply chain. Is your client an original equipment manufacturer (OEM)? Or are they a company that supplies parts to an OEM (known as a Tier 1, Tier 2 or Tier 3/4 company)?

An OEM is a company that makes a final product for the consumer. Examples are General Motors, Ford and Apple. As you’re likely aware, these companies don’t make 100% of the parts of their final product. In fact, they may outsource thousands of parts. In a GM car, for instance, your car radio might have been made in Germany, the tires might be from Japan, the windshield might be manufactured in Minneapolis, and other parts might have come from Canada or Mexico.

Site selection for an OEM may be influenced by the location of its customers, such as car dealerships and consumers. Generally, however, other factors play a bigger role for an OEM, such as labor availability, tax incentives, intermodal capacity, highway access and infrastructure capacity.

Reshoring’s Effect

There’s a lot of talk about the impact tariffs may have on manufacturing and site selection. Real estate practitioners would do well to focus more on the long-term trends that might have a more lasting effect on business in their market. Labor costs constitute a large expense for an OEM. That’s why, in the 1960s and 1970s, global manufacturing began shifting to countries with lower labor costs. Even with the import costs, many manufacturers determined it was cheaper to make goods in China, India and other parts of Asia. So, what would happen if the manufacturing came back to U.S. soil? No doubt, some raw material and agriculture would continue to be imported to the U.S. However, there’d be less demand for ships and port entry, and one could imagine how site selection decisions would change. Reshoring could lead to a greater need for trucking and rail. Today, though, the U.S. is short 80,000–100,000 truck drivers. We’d need to solve the labor shortage to keep up with truck delivery demand.

The Future of 3D Printing

Today, the use of 3D printing is mostly limited to specialty items and prototypes. Yet, as I said in a 2017 REALTOR® Magazine article, 3D printing is more than a passing fad. There’s excitement in thinking about a technology that will enable manufacturers to design a product on a computer and have it produced in a box container in their facility.

Would we continue to heavily import products from abroad if we could economically produce them right here? A Boston Globe article from June 4, 2023, called Massachusetts- based VulcanForms “the most interesting start-up in America.” The company was pioneering a “radical transformation of manufacturing,” the Globe said, using 3D printing technology that eliminates the need for cutting, milling or otherwise “subtracting” from larger pieces of material. In some ways it reminds me of the 1960s when, as kids, we had molding equipment that let us make small toy cars and soldiers.

The Globe article said 3D printing won’t replace cheap, workaday manufacturing that is now located overseas, but it could usher in a new high-tech industrialism aimed straight at the country’s most pressing problems.

I’ve seen videos of 3D printing that produced everything from life-size cars to human organs to houses. In a video produced by New Story/Icon films, a 3D printer manufactured a house in less than 24 hours. Imagine a city getting wiped out by a hurricane and then having the technology to develop building replacements within hours!

3D printing can already be an additive when there are supply-chain issues and a lack of inventory. The publication Site Selection in July 2020 cited an example: Cumberland Additive printed and delivered new products during COVID to supply essential gear and medical equipment to the health care providers within a week

How might 3D printing change the transportation needs of your clients? Site selection may be influenced less by port location or rail service and more by highway and air cargo access. Or it may be based on where the right labor and brain power exist. Companies involved in 3D printing were once concentrated in northeast Ohio. Now, they’ve located in Austin, Boston, Chicago, Louisville, North Carolina, Palo Alto, Germany and other global markets.

Manufacturing in the U.S. would shorten the delivery time. As a result, location close to the end-client might become less important. The need for ports would be reduced, as would fears about stolen trade secrets from abroad.

Tier 1 Companies

Direct suppliers to the OEM are known as Tier 1 companies. Other than the OEM, Tier 1 companies are generally the largest and most technically capable companies in the supply chain. A Tier 1 company in the automotive industry, for instance, might manufacture windshield sensors.

In many cases, the Tier 1 company is freeing up manufacturing time for the OEM so that the OEM can concentrate on assembly and marketing.

A Tier 1 company typically wants to be located near an OEM or be immediately accessible to the OEM. That is, the company needs to be in a location from which it can deliver the final components to the OEM without delay, generally by truck, rail or air. There may be contractual penalties for not delivering on time.

Global logistics network tracked on iPad

Tier 2 Companies

Tier 1 companies typically don’t have the capacity to make 100% of their parts. Therefore, they outsource some part needs to smaller companies. These companies are known as Tier 2 companies. Like Tier 1 companies, they need to ensure that they can deliver on time and with precise specs. A Tier 2 company might make the radio speakers or the steering wheel, for instance. Those goods are then shipped to the Tier 1 company that is producing parts for the OEM. Tier 2 companies’ site selection decisions may be influenced by the location of the Tier 1 company and the location of the OEM.

Tier 3 and 4 Companies

Depending on the intricacies of the final product, Tier 1 and Tier 2 companies may need the services of Tier 3 and 4 companies. Tier 3 companies produce unassembled components or sub-assembled parts. Generally, the lower-tiered companies are dealing with raw material, such as the rubber manufacturer that is needed for a car tire. Tier 3 in some cases may be the raw material and unassembled component company.

When a Tier 3 company does not have the capacity to extract raw material, then the services of the Tier 4 company are needed. Tier 4 companies provide basic raw material such as paint or steel. Their real estate location may be dictated by the location of raw material such as petroleum or ore for steel.

Ask the Right Questions

As a real estate expert, are you asking the right questions of your client? Do you know how they are slotted in the supply chain network? Whether they are an OEM or a supplier of component parts, how does transportation fit into their site selection criteria? And how might trends, and developing technologies like 3D printing, change their criteria in the future? Ask, and you will save time and show your understanding of the supply-chain challenges.

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