In a challenging economic environment, an efficient logistics and distribution network is moving to the top of the list of requirements for business growth and expansion.
The system that moves a product from the supplier to the customer involves many steps. From the people to the technology and the resources to the components, the process takes sophisticated planning to account for never ending variables. Chosen sites have to keep these supply chain costs down while keeping quality and profits up. Logistics incorporates the complexity of integrating information, transportation, inventory, warehousing, material handling, and packaging. It is the largest business practice a company has to manage and comes with an even larger share of obstacles.
In addition to the flow of product, companies have to take things such as their carbon footprints into consideration. Who doesn’t want to be publicly perceived as socially responsible? And while sustainability is worth the cost, going green has placed added pressure on an already complicated process. Is your facility energy efficient? Does it have solar panels or fluorescent lighting? Is the product packaging recyclable? The number of questions will only increase as environmental awareness grows. And since shipping and distribution services account for most of a company’s carbon footprint, one way to lessen emissions may be to outsource them to third party logistics providers. Paying others who may already be headed where your goods need to go can help consolidate routes for better efficiency and less carbon. Companies can also take advantage of available automation to reduce paper trails and eliminate waste.
Relocating manufacturing to lower-cost labor markets like China and India can result in significant production savings—but on the flip side, in longer and more expensive transit times. Fuel prices, port delays, trade laws and security measurements all affect logistics costs. Reductions can be accomplished through such practices as researching transportation modes, insurance policies (company and carriers) and consolidation.
According to the Council of Supply Chain Management Professionals’ 21st Annual State of Logistics Report®, U.S. logistics costs accounted for $1.1 trillion in 2009, 7.7 percent of the U.S. Gross Domestic Product, bigger than the national GDP of all but 12 countries.
Ameren: Thriving Logistics Hub in the Middle of the U.S.
As a major population center and well-established hub for business and industry, the two-state Ameren service area is well positioned to compete for new businesses with competitive transportation assets.
Illinois and Missouri have a network of Interstate and other highways appropriate for heavy trucks. Both states receive good grades from multiple organizations which rank road systems by quality of design, maintenance, and other criteria. Levels of congestion are generally low, even in the St. Louis area which has a very large overall volume of truck traffic. In fact, the St. Louis region has less congestion issues than Chicago and other major Midwestern locations. With a few exceptions that are being addressed, the majority of communities in Ameren’s territory are within 30 miles of an Interstate or major highway.
In the center of Ameren’s territory, St. Louis’ Lambert International Airport is served by 13 airlines and has the shortest average flying time to and from selected major business centers of North America. It also has large air cargo facilities. St. Louis handles about 210,000 tons per year of air cargo shipments; besides general courier services such as FedEx and UPS, local air cargo includes high-value manufactured goods, pharmaceuticals, medical supplies, electronics (in both directions) and inbound shipments of high-value agricultural products.
MidAmerica St. Louis Airport (BLV) is located in Mascoutah, Illinois, about 20 miles east of downtown St. Louis. It shares 10,000-foot and 8,000-foot runways with Scott Air Force Base, which is a major military logistics and transportation center. More than half (3,800 acres) of BLV’s 6,000 acres are in Foreign Trade Zone 31; the airport also is Port of Entry 4581. A new 62,000-square-foot private air cargo facility is planned for the airport, and Boeing recently opened its first Illinois manufacturing center at BLV. Together, the region’s two air cargo facilities offer competitive location advantages for shippers throughout Asia and Latin America.
Numerous other airports within Ameren’s service area provide commercial air service and many parts of the area are within one to two hours of major commercial airports outside the Ameren service territory, including Chicago, Indianapolis, Kansas City, and Memphis.
Ameren is the only major electric utility company whose territory includes lines of all seven U.S./Canadian Class 1 railroads. This area’s historic role as a major railroad center gives it a strong positioning for added distribution flexibility and pricing as shippers seek greater energy efficiencies (and lower carbon footprints), lower costs, greater speed, and the need to reroute trucks from congested highways. Available rail service for Distribution Centers can provide the longest-distance haul as part of an intermodal transport system.
In addition, Illinois has received a $1.2 billion federal award to bring high-speed passenger rail service to the state by 2014. Illinois is among only three states to receive at least $1 billion for high-speed passenger rail, which will make the trip between Chicago and St. Louis faster than driving and will provide new train equipment. Illinois’ high-speed rail signature route, Chicago to St. Louis, received $1.1 billion for corridor improvements. Upgrades to this 284-mile route will allow passenger rail service to operate at speeds up to 110 miles per hour where safe and practical. The improvements include new track, signal systems and passenger trains, as well as substantial improvements to stations. The new signal system will be state-of-the-art train control technology that will improve train safety.
The research conducted for a recent competitive marketing analysis of the Wholesale Trade sector indicates that Ameren’s territory is especially well positioned to assist companies addressing issues critical to this sector. The analysis concluded that selected business costs in the Ameren territory are at least 18% below typical or national average costs for Distribution Centers and are up to 27% lower in some parts of the region. Even more relevant is the fact that these costs in most of Ameren’s territory are up to 32% below certain competing locations in the Midwest, such as parts of the Chicago metro area. The analysis also noted that Ameren is geographically positioned amidst a large regional customer base. The population base within an eight-hour driving radius of some sites in the territory approaches 78 million with above-average income.
The study lauded other benefits offered by Ameren, including:
• a location likely to benefit from major shifts now occurring in international transportation lanes. For example, there is a clear trend of shifting imports from West Coast ports to those on the East and Gulf Coasts. This is due to many causes: the desirability of keeping as much of the route as possible on cost-effective water routes and the fact that most U.S. markets are in the east; expansion of the Panama and Suez Canals to allow bigger ships that are quickly becoming the standard; problems of costs, congestion, and labor-management relations at some West Coast ports; and major port expansions in the East. Ameren’s service territory, with its central location and outstanding transportation connections to all coasts, will remain an advantageous Sector 42 location regardless of most changes of this type.
• an available skilled labor pool
The capabilities of the workforce in Illinois and Missouri can be well utilized by new-generation Distribution Centers needing highly skilled staff. The basic education systems include some of the nation’s best schools, from elementary to post-doctoral. Many districts have chosen to develop special academic and R&D capabilities directly relevant to Wholesale Trade, logistics, transportation and other areas critical to business development.
At the top of most managers’ lists is the need to reduce capital and operating costs needed to establish and run their facilities. From an economic perspective, Ameren’s Illinois and Missouri territories offer locations that have the lowest overall combination of capital and operating costs in the central part of the U.S.
Finally, Wholesale Trade has been thoughtfully selected as a business which this area wishes to nurture. The choice of recruiting Distribution Centers and related facilities and businesses has been made carefully based on much analysis and consideration. A strong effort has been made to validate the good fit between the industry and the region. Companies in this field can expect to be well received and to find that much preparatory work has been done to make development and growth of their facilities smooth and efficient. Ameren has a strong Economic Development Department which works with states, communities, and development groups in its territory to attract Wholesale Trade and assure its success.
Topeka, KS: Central Hub in the Nation’s Heartland
In the July 2010 edition of Kiplinger’s Personal Finance, Topeka, KS was recognized as one of the “Top Ten Cities for the Next Decade”, a recognition that summarizes what is happening in the community… business growth, civic engagement, and an energetic, dynamic focus on the future.
Even during the low point of the Great Recession, Topeka and Shawnee County experienced stellar economic growth. In 2009, GO Topeka Economic Partnership, the economic development organization for the community, announced five major projects involving 2,000 jobs and $352.5 million in capital investment.
For more than 150 years, Topeka has been in the middle of everything, right in the nation’s heartland. With its centralized location, Topeka is a perfect place for transport with access to major Interstates (I-70 and I-35) and railroad arteries that allow for inexpensive shipment and delivery for business sites. Topeka’s close proximity to the intra-modal facilities in Kansas City enhances its position as a logistics and distribution center and Topeka ranks with New York City and San Francisco for fiber optic cable per square mile.
Having capitalized on its location, Topeka developed Central Crossing Commerce Park, 500 acres of shovel-ready sites featuring in place water, sewer, natural gas and electric. Its mixed-use land parcels are ideal for manufacturing and distribution with developed entryway and roads throughout the park. Already home to Target Distribution Center, Frito Lay, and the Home Depot Rapid Deployment Center and Bimbo/Allen Foods, Central Crossing is at the linkage of Hwy 75 and I-70 and offers direct rail connection with major rail service. It is also adjacent to Forbes Field Airport Air Logistics Facility, a 2000-acre foreign trade zone, and 50 minutes from Kansas City International Airport.
To complement Central Crossing Commerce Park, GO Topeka has started expansion of Kanza Fire Commerce Park, a 1,018-acre business and industrial megapark. Bisected by US-75—a four-lane, interstate grade, divided highway—with access on site, the new mixed-use park features easy access to I-70 and I-335, 6,000 feet of rail frontage (BNSF) and close proximity to Forbes Field Air Logistics Facility, that has a 12,800-foot runway for airfreight transport. This park is built to be smart with a sustainable design, energy efficiency, walking trails, water features, 130 acres of green space and shared renewable energy sources.
Topeka is an easy place to relocate and an affordable place to do business. The Topeka/Shawnee County area has a cost of doing business 15 percent lower than the national average, with an index of 85 according to Moody’s Economy.com, and a cost of living 10 percent lower than the national average (ACCRA). And because all machinery and equipment in Topeka is exempt from personal property taxes, Topeka is a less expensive to operate a business. Topeka also has the ability to offer incoming companies the most aggressive, flexible local incentive package in the Central United States, including free land and cash incentives for each job created supported by a sales tax for economic development.
Topeka and Shawnee County are also proud of the workforce available to incoming businesses. The community is located in the heart of the Kansas “knowledge corridor”, with four universities in a 60-mile radius—The University of Kansas, Kansas State University, Washburn University and Emporia State University. These universities have a combined enrollment of approximately 60,000 and an average graduation rate of more than 12,000 students per year. 36 percent of the region’s population age 25 or older hold a bachelor’s degree or higher (compared to 27.5 percent nationally).
Hesperia: Planning for Prosperity
With strong economic indicators in its favor and having developed a diverse toolkit of business friendly programs and strategies, the economic development team for the city of Hesperia is primed for prosperity. Hesperia offers a multi-tiered selling proposition for business that’s virtually impossible to dismiss: a strategic location with land, infrastructure, affordability and opportunity.
Hesperia is located along both the I-15 and SR-395 highways, in the expanding High Desert region of Southern California. Framed by the San Gabriel and San Bernardino mountain ranges, this gateway to the high desert features a temperate climate with clean air, abundant sunshine and large tracts of available land. With 17 miles of freeway frontage, Hesperia offers easy access to 366,000 High Desert residents and proximity to 20 million residents in Southern California.
Located in California’s Inland Empire, Hesperia is conveniently situated for 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. The region is becoming a major distribution and logistics hub, with the nearby Southern California Logistics Airport and highly efficient freight rail lines that run through the city and serve Ontario, San Bernardino and LAX airports as well as the ports of Los Angeles and Long Beach. From Hesperia, distributors can transport cargo by truck to 11 Western states within 24 hours.
Economic development projects are brought to fruition in Hesperia with impressive incentive programs and full access to the city’s business development brain trust.
In 2009, the city’s economic management team seized two highly prized competitive advantages to add to Hesperia’s business development arsenal. Designation of much of the city (30 square miles) as a California Enterprise Zone means that businesses currently located or newly locating “in the zone” qualify for substantial benefits and incentives. These include an array of cost-savings and advantages such as hiring and wage credits, net operating loss deductions, business expense deductions, sales or use tax credits, net interest deductions on business and mortgage loans and even bidding preferences in specified state contracts. These benefits can be quite lucrative, with reductions in the cost of doing business ranging from the tens to the hundreds of thousands of dollars annually.
A second state designation has targeted Hesperia as an area incentivized to promote recycling and reduce landfill waste. The Hesperia Recycling Market Development Zone combines state benefits, such as below market-rate loans, with innovative incentives offered by the city. In addition, some participating businesses may receive market identification and research, business planning, marketing, and technical assistance.
In a dauntless quest to expand business and create jobs for Hesperia, a team of economic development experts leaves no stone unturned in ferreting out programs and advantages for businesses. With expert knowledge of a wide range of incentive and assistance tools available from the city, the state and even from the federal government, well-informed and motivated management advisors are available to provide assistance on an individualized basis to help executives identify and navigate the maze of opportunities available, but perhaps unknown, to them. There also are additional programs targeted specifically to brokers, franchisees, and restaurateurs.
Regional economic indicators support the premise that Hesperia is poised for the next big wave of opportunity. According to the 2010 San Bernardino County Community Indicators Report, since 1990 the region has demonstrated a 300 percent growth in business and professional services, 180 percent growth in logistics and distribution and 180 percent growth in wholesale trade.
A growing labor force in Hesperia has a younger median age (31) than both the state and national averages. More than 70 percent of residents are homeowners and average household income is about $66,000. Hesperia offers a diversified workforce, with about two-thirds of residents having some college education and eight percent have bachelor degrees or higher.
A relatively stable housing market has retained an affordable pricing index—according to the California Association of Realtors, the most affordable in California—and a median home price of $121,000. The city of Hesperia has proactively since 2008 been identifying and purchasing abandoned and foreclosed residential properties through a $4.6 million federal grant. Currently the city is rehabilitating the homes to prepare them for sale or lease.
Even during the economic downturn of the recent past, Hesperia has demonstrated strong growth and astute regional planning, keeping its ribbon-cutting shears impressively honed with 29 commercial openings over two years. Last fall, The High Desert Gateway Center, a 500,000-square foot retail center, opened and now features 18 tenants, among them a Super Target, Marshall’s, Farmer Boys and Golden Corral restaurants and Ross Dress for Less.
Businesses rely on sophisticated infrastructure and Hesperia has it in spades. Transportation improvements are planned for I-15, with one new interchange planned and one new underpass approved and funded in Hesperia city limits. Caltrans also is in the planning stages for a High Desert Corridor freeway, which will create a 63-mile link from I-15 to I-5.
Hesperia is ideally situated near the Southern California Logistics Airport, located just 18 miles up the highway. Since two major freight rail lines pass directly through Hesperia, the city has secured a $2 million federal grant and is currently developing almost one mile of industrial rail lead track and a parallel runaround track. Scheduled for completion next year, the industrial rail will provide outstanding access for 200 acres of adjacent industrially zoned parcels and is expected to stimulate development of more warehousing and distribution centers near I-15. A team trans-load facility also is planned to make rail accessible for small businesses throughout the region that will now be able to ship and receive goods by rail.
With water shortages projected throughout the state by 2020, the Victor Valley Wastewater reclamation Authority has developed innovative strategies to efficiently use and reuse water for sustainable living. Pipelines are currently being upgraded and Hesperia is one of two locations where a new local sub-regional treatment facility will be constructed.
In Business Facilities’ 2010 Rankings Report, Hesperia was a top 10 Emerging Logistics/Distribution Growth Center.