As the slow pace of the economic recovery continues to impact many industries, you will need to restructure your distribution networks to maximize efficiency and minimize miles to capitalize on better economic days to come.
According to the International Warehouse Logistics Association 95 percent of the U.S.’s chief executives believe they should have some form of logistics strategy, and nearly 50 percent of the nation’s CEOs currently are incorporating supply chain planning into their overall business strategies. This preparation is taking place with good reason since logistics costs accounted for $1.3 trillion or 9.4 percent of U.S. Gross Domestic Product in 2008.
For some more specific figures for the industry, we’ll take a look at the report Logistics: United States Industry Guide written by Laura Wood, Senior Manager at Research and Markets:
• The U.S. marine sector generated total revenues of $41 billion in 2009, representing a compound annual growth rate (CAGR) of 1.1 percent for the period spanning 2005-2009.
• The U.S. rail freight sector generated total revenues of $56.3 billion in 2008, representing a compound annual growth rate (CAGR) of 5.2 percent for the period spanning 2004-2008.
• The U.S. road freight sector generated total revenues of $704.9 billion in 2008, representing a compound annual growth rate (CAGR) of 4.3 percent for the period spanning 2004-2008.
• The U.S. air freight sector generated total revenues of $41.7 billion in 2008, representing a compound annual growth rate (CAGR) of 6.1 percent for the period spanning 2004-2008.
• The U.S. express market generated total revenues of $77 billion in 2009.
Globalization and outsourcing of logistics services created double digit revenue growth in the industry in the early part of the 21st century, however the economic downturn has resulted in a dramatic drop in the sector’s growth in 2009.
A benchmarking report titled The 20th Annual State of Logistics Report from the Council of Supply Chain Management Professionals (CSCMP) also showed that the 2008 U.S. logistics industry costs dropped for the first time in six years, at least in the transportation sector. Warehousing costs, however, rose 9.5 percent with warehouse managers reporting that inventory turns were down substantially from earlier years as stock spends more time in warehouses now.
Analysts at Pricewaterhouse-Coopers agree with Blasgen’s outlook and say that companies looking to build a durable business need to continuously offer added value. As business models change in the industry, many companies are evolving from forwarding and warehouse managing companies to highly industrialized IT driven supply chain providers. PricewaterhouseCoopers says there are two key factors to logistics success, one is to take advantage of the potential of logistics clusters and the other is focusing more on integrating digital infrastructure. This will need to involve close collaboration between industry, academia and government as trade routes shift and logistics networks become increasingly complex.
As you look at new locations to take advantage of industry clusters and create collaboration with local governments, here are some regions that are ready to partner with your company.
Caledon, Ontario: “Natural” Location for Success
Nestled in Southern Ontario’s beautiful Hills of Headwaters region, the Town of Caledon offers the best of all worlds for both its residents and its corporate citizens.
Located within the Greater Toronto Area (GTA), just minutes from downtown Toronto, Canada’s largest city and financial and transportation hub, Caledon offers a unique mixture of bustling urban and industrial centre surrounded by a calm rural environment characterized by beautiful rolling hills, valleys and vast open spaces.
Caledon’s residents enjoy a very high quality of life—with access to high-quality health care, and a diverse range of cultural and recreational activities and facilities—and boast one of the highest per-capita household incomes in Canada.
This town of 57,000 has also earned a reputation of providing a safe, stable and sustainable environment for its private and corporate residents. This is evidenced by its selection as “Ontario’s Greenest Community” and “Canada’s Safest Community”—titles bestowed by independent media outlets on multiple occasions.
And with Caledon’s close proximity to Canada’s largest and most diverse labor pool, highway and railway systems with multiple connections to the United States, and Pearson International Airport, Caledon-based companies enjoy efficient access to local, national and international markets—while paying amongst the lowest development fees and municipal taxes in the GTA.
Caledon’s appeal as a warehousing and distribution center location is illustrated by the many companies that have established themselves in the municipality.
For example, the Canadian arm of international food and beverage juggernaut PepsiCo opened its newest distribution centre in January 2009. The 591,000 square foot facility manages the distribution of products from several PepsiCo manufacturing plants throughout North America and services PepsiCo’s customers across Canada. According to Sheri Morgan, Manager of PepsiCo Foods Canada Communications & Community Relations, the company’s decision to locate in Caledon was driven by “excellent access to Toronto’s Pearson International Airport as well as its major highway and railway systems.” She also states that “proximity to major PepsiCo Canada customers and the abundance of local skilled labor” were also key factors that made Caledon an attractive hub for PepsiCo’s distribution and logistical operations.
Vitran Corporation is a leading provider of freight services and distribution solutions throughout North America. In 2007 it moved into a 530,000 square foot distribution centre in Caledon, which is now a major hub in its logistical operations. This site utilizes multiple distribution and fulfillment methods to satisfy client requirements and get the right product, in the right store, at the right time. The Caledon site is strategically located next to major population centers within Ontario and is within excellent proximity to inter-modal rail yards, as well as Toronto’s high-volume 400-series highways. When this distribution centre was opened back in 2007, Mike Glodziak, President of Canadian and U.S. Logistics, noted that “Vitran was attracted to Caledon’s central location and its access to nearby major transportation nodes. Additionally, the facility meets our requirements for superior functional design, security and operational efficiency, as well as proximity to an excellent labor pool.”
Other notable corporations that have established distribution operations in Caledon include Mars, Colgate-Palmolive and Gap Inc.
In many ways, Caledon is just establishing itself as one of Canada’s most desirable sites for warehousing and distribution operations, and is poised for tremendous industrial growth. Its Municipal Council is pro-business, and the Town’s Economic Development Department is actively involved in facilitating the establishment, retention and expansion of business operations within the Town’s borders. Caledon currently boasts an inventory of completed industrial properties, including over 1.7 million square feet of new, state-of-the-art warehousing facilities built and/or managed by internationally renowned developers, including:
• IGRI: 628,000 sq. ft. (Single building; divisible)
• Panattoni Development Company: 576,000 sq. ft. (Single building; divisible)
• ProLogis: 416,000 sq. ft. (Single building; divisible and LEED Silver Certified)
• MJJJ Developments: 94,000 sq. ft. (Single building)
There are also several proposed properties, representing millions more square feet of warehouse space, which are slated for development in the near future.
With its enviable proximity to Canada’s largest market, labor pool and one of North America’s busiest international trade and transportation hubs, the Town of Caledon offers all the logistical benefits of its much larger urban neighbors throughout the GTA. However, given that it is able to do this while maintaining its small town ambiance, commitment to sustainable development and relatively low costs of doing business, Caledon is well positioned to become one of the most desirable industrial locations in North America.
Hesperia, CA: Making Access Even Easier
Strategically positioned for logistics and distribution, the fast-growing city of Hesperia in California’s Inland Empire is conveniently situated within easy access to the logistics network that serves the combined ports of Los Angeles and Long Beach (LA/LGB), the nation’s largest international cargo trade area. Hesperia’s High Desert location along the I-15 corridor and U.S. Highway 395 provides an affordable and central location for manufacturing and distribution operations that serve southern California and surrounding states.
Business-friendly Hesperia is a leader in supporting the long-term development of the regional economy. Hesperia’s proactive Economic Development Department and its Redevelopment Agency (RDA)—the wealthiest municipal RDA in the High Desert—are two powerhouses fueling Hesperia’s current growth. In April 2010 they were successful in achieving Final Designation as an Enterprise Zone from the California Department of Housing and Community Development (HCD)—a designation that will be in effect for 15 years. The Hesperia Enterprise Zone comprises a large area within Hesperia’s city limits and includes nearly all of its commercially and industrially zoned areas. Businesses looking to relocate or expand in the Zone may be eligible to take advantage of substantial benefits such as sales or use tax credits, business expense deductions and employee wage credits.
Having secured $2 million in federal grant funding from the Department of Commerce’s Economic Development Agency, Hesperia is ready to build the G Avenue Industrial Rail Lead Track Project. Consisting of approximately one mile of new railroad lead track and a parallel runaround track, it will be served by Burlington Northern Santa Fe Railway and accessible from more than 200 acres. Construction is slated to begin Q3 2010 and take approximately one year to complete.
The rail project is guided by Hesperia’s efforts to create sustainable development that includes locally created partnerships and focuses on regional solutions for economic development. It is closely tied to Hesperia’s strong commitment to grow its economy, attract new businesses and development and provide jobs for its residents.
Completion of this project will stimulate development and indirectly impact the attraction and expansion of other businesses into the 1,300-acre I Avenue Industrial area. In addition, the project fosters entrepreneurship by making rail accessible throughout the region to smaller businesses that will now be able to ship and receive goods with the use of a team trans-load facility.
The addition of the rail track, one of the city’s far-reaching industrial development goals, will facilitate operations for a greater number of warehousing and distribution centers near Interstate 15. The new track will offer many opportunities for industrial users to purchase rail-accessible properties.
Ameren: Centrally Located Service
The world is changing, and today’s companies must be flexible enough to embrace change as the next opportunity for growth. The two-state Ameren service area—including central and southern Illinois, central and eastern Missouri and the St. Louis metropolitan area—is uniquely positioned as a low-cost Midwest distribution hub.
The region offers access to a market population of nearly 78 million persons with above-average incomes within a day’s transport and unsurpassed infrastructure including access to all seven U.S./Canadian Class 1 railroads and proximity to 17 intermodal terminals. According to independent analysis conducted by the site location firm BFPC, LLC and Modalgistics Supply Chain Solutions, these regional strengths provide competitive advantages to the Wholesale Trade Sector.
A key reason for this is the huge existing volume of Sector 42 activity within the Ameren service territory, assuring that critical features for distribution centers are in place. The two-state area has a much higher than average concentration of existing Wholesale Trade activities relative to its population, and has an even higher number of larger establishments in this business. In the entire two-state Ameren service territory there are about 10,000 Sector 42 establishments employing over 135,000 people. In metro St. Louis alone, nearly 60,000 people are employed in over 4,000 establishments that occupy 12 million square feet of distribution and warehouse space.
Furthermore, there has been significant new Wholesale Trade investment in Ameren’s area. A net total of 310 new Sector 42 facilities have been deployed in Missouri and Illinois over the most recent annual period for which complete statistics are available. Major centers of new warehousing and distribution centers have sprung up in locations such as Madison County, a suburban area just outside of St. Louis in southwestern Illinois. The northeastern part of Ameren’s territory, including LaSalle County along Interstate 80, is clearly in the path of a massive new distribution and logistics center being constructed on the west edge of the Chicago area.
Few utilities have such a centrally located service territory; it includes most of the area from the southern and western edge of metro Chicago, to the eastern edge of metro Kansas City, to the southern borders of both states. With a total population approaching 10 million, the counties served by Ameren contain about 30 percent of Illinois’ population and over 60 percent of Missouri’s residents. The region also includes fast growing areas such as Lincoln County—located in the northern suburbs of St. Louis—which was recently named one of the 100 fastest-growing counties in the U.S. Large metros served include St. Louis (2.8 million) and Peoria (375,000), and the region is characterized by other metro areas with populations of 150,000 to 250,000, like Columbia and Jefferson City, Missouri, and Bloomington-Normal and Champaign-Urbana, Illinois. All these have recently shown substantial economic and population expansion, with some such as Columbia and Bloomington growing at a rate well ahead of the national level. Major metro areas outside but within an hour or two of Ameren territory include Chicago, Indianapolis, Kansas City, Little Rock, Louisville, Milwaukee, Memphis and Nashville.
As a major population concentration and well-established center for business and industry, the Ameren area is well served with transportation services. Illinois and Missouri have a network of Interstate and other highways appropriate for heavy trucks. In addition to general courier services such as FedEx and UPS, St. Louis’ Lambert International Airport—located in the center of Ameren’s territory—handles about 210,000 tons of air cargo shipments per year. Local air cargo goods include high-value manufactured goods, pharmaceuticals, medical supplies, electronics in both directions and inbound shipments of high-value agricultural products. Mid America Airport is located in Belleville, Illinois, about 18 miles east of downtown St. Louis. It shares runways with Scott Air Force Base which is a major military logistics and transportation center, and has recently completed a major new passenger and air cargo terminal.
The study concluded that selected business costs in the region range from 18 percent to 27 percent below the national average costs for distribution centers.
Decatur, IL: Ready to Meet Your Needs
In today’s global economy, businesses require integrated transportation systems that meet their regional, national and international distribution needs. Decatur, IL is uniquely positioned and ready to meet these needs through its world-class transportation system.
Situated 36 miles from Springfield, 120 miles from St. Louis, 165 miles from Indianapolis and 179 miles from Chicago, Decatur boasts a number of access outlets. It offers highway entree to I-72, U.S. 36 and U.S. 51, as well as a number of state routes; rail service via Norfolk Southern, Canadian National and CSX, along with short-line and piggy-back service; motor carriers; commercial bus service; and a world class airport facility capable of handling aircraft of all sizes. Decatur is also home to Foreign Trade Zone #245 and a U.S. Customs Point of Entry.
With nearly $600 million in capital investment planned or underway in the region, it is easy to see why more and more businesses are looking to Decatur for logistics, distribution and manufacturing projects. Combine this with a venture capital fund dedicated to businesses that locate in Decatur and Macon County, aggressive local and state economic development incentives, infrastructure and optimal location, and you have all of the ingredients for success.
Another benefit for businesses located in Decatur is the Decatur Enterprise Zone. It encompasses significant portions of the region’s industrial and business sections and offers a variety of state and local incentives for eligible projects in the zone—including local property tax abatement and sales tax exemptions on construction materials.
The EDC of Decatur & Macon County, IL, has great expectations for a large new rail-served logistics location being redeveloped in the region—the former Wagner Castings/Intermet foundry site in Decatur.
The 32-acre Intermet foundry site, which is located along a major logistics corridor adjacent to the Norfolk Southern Railroad and only moments from I-72, has remained vacant since 2005. An environmental clean-up of the property, estimated at $2 million, is now underway. A Class A logistics, rail-served distribution facility is planned for the site, allowing for construction of 360,000 square feet of warehouse distribution space along with 20+ acres of trailer and container storage company with national interests has the faith in the Decatur market to commit considerable financial resources to redevelop the site to meet the needs of today’s logistics and manufacturing clients.
The purchasing entity’s recent revitalization projects have included the former Stanley Flagg/Amcast site in Stowe, PA; the former Amtrak rail site in Queens, NY; and the Krejci dump site—part of the Cuyahoga Valley National Park—in Hudson, OH.
Dyersburg: Moving Forward on Cates Landing
The Port of Cates Landing will consist of a 9,000 foot, slack water harbor with a state of the art, intermodal dock and freight transfer system, providing intermodal rail, truck and river barge connections on the eastern shore of the Mississippi River. The harbor’s channel is the deepest of any port between Baton Rouge, Louisiana, and St. Louis, Missouri. The intermodal dock and connected facilities will all be constructed above the Mississippi River’s 100 year flood plain.
An industrial park comprising 350 acres is being developed adjacent to the Port site by the County of Lake, TN for use by industries and transport firms requiring Port services. The Port is applying for designation as a Foreign Trade Zone and will serve as a new national and international intermodal freight hub from its strategic mid-continent location on the Mississippi River.
The Port of Cates Landing has been in the planning and development stage by regional partners for more than 20 years. Phase I of the Port’s construction, consisting primarily of the dredging of the 9,000 foot slack water harbor, was completed by the U.S. Corps of Engineers in December 2009. The project site of 1100 acres, including 350 acres of wetland mitigation lands, has been acquired and is ready for construction. All conditions for the Phase II build-out and completion of the Project are in place and “shovel ready” for the start of construction which is scheduled for final completion by January 1, 2012.
The Port of Cates Landing is located at the geographical center of the contiguous United States in Northwest TN on the Mississippi River’s east bank, 90 miles north of Memphis, TN, 59 miles south of Cairo, Illinois, and 70 miles downstream from the confluence of 3 the Mississippi and Ohio Rivers. Cates Landing is within one day’s drive to 76 percent of U.S. major markets. The site is 30 miles from both the main line of the Canadian National Railroad and the Interstate 155 Mississippi River Bridge, and in close proximity to Interstates 40, 55, 24, 155 and the I-69 corridor.