Logistics USA: Moving A $1.4 Trillion Haul From Here To There

Logistics USA: Moving A $1.4 Trillion Haul From Here To There


https://businessfacilities.com/2016/11/logistics-usa-moving-a-1-4-trillion-haul-from-here-to-there/
Systemic improvements in cost efficiency are delivering better pricing to the logistics sector, but gaps in infrastructure are still a problem.

Logistics USA: Moving A $1.4 Trillion Haul From Here To There

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Logistics USA: Moving A $1.4 Trillion Haul From Here To There

Systemic improvements in cost efficiency are delivering better pricing to the logistics sector, but gaps in infrastructure are still a problem.

By the BF Staff
From the September/October 2016 Issue

It’s a buyer’s market for business logistics right now, but that is a fleeting condition subject to rapidly changing conditions in the $1.408 trillion U.S. freight sector.

That’s the report from the 27th Annual State of Logistics Report. The report is sponsored by the Council of Supply Chain Management Professionals (CSCMP). For the first time, CSCMP collaborated with global strategic management consulting firm, A.T. Kearney, as the new author and researcher. Penske Logistics continued in its longstanding role as top supporter of the report.

The report reveals total U.S. business logistics costs rose to $1.48 trillion in 2015, a 2.6 percent increase from the previous year. That represents a considerable slowdown from previous years.

“Today, the logistics system is sound,” the SoL report concludes. “Desired services and features are generally available, and a system designed for cost efficiency is delivering pricing favorable to shippers. However, gaps in infrastructure and accelerating trends for speed will increasingly pressure a system that was not designed for e-commerce-driven ‘last mile, last minute.”

Logistics specialists have driven down total U.S. business logistics costs (USBLC) six basis points from the previous year. USBLC amounted to $2.15 trillion last year, or about 7.85 percent of Gross Domestic Product. That was compared to USBLC being 7.91 percent of GDP in 2014. The all-time low was during the Great Recession in 2009 when USBLC was 7.37 percent of GDP.

“Supply chain transparency continues to grow in importance for shippers and third-party logistics providers,” said Penske Logistics President Marc Althen. “This is driving significant technological change for 3PLs and shippers alike as they collaborate and share more real-time information to enable data-driven business decisions and meet the growing needs of consumers.”

“This highly anticipated report contains the statistics and industry insights that will not only help our members do their jobs better, but also better prepare them for the business demands ahead,” said Rick Blasgen, president and CEO of CSCMP.

The report includes a focused narrative on the economic environment impacting logistics; insights from interviews with industry leaders, including shippers, carriers and analysts; a spotlight on relevant trends; and a strategic point of view on the state of the industry.

“It is a dynamic time for the logistics sector—macro economy, new business models, technology,” Sean Monahan, A.T. Kearney partner and co-author of the 2016 State of Logistics Report said. “We are pleased to support CSCMP in the development of this report.”

Among the report’s key conclusions is the logistics industry is entering a new era. The report predicts over the next decade, the logistics industry will face “disruptive forces,” including technology and operational constraints that threaten to fundamentally change the rules of the game.

It may already be starting. Motor carriers are experiencing rate weaknesses, especially in the $278 billion truckload market, as temporary overcapacity has given shippers some pricing power. The report concluded that TL rates and demand for transportation are “soft, and continue to fall.”

While this is occurring, the TL sector copes with nearly 100 percent driver turnover as the truck driver shortage continues. “Despite softening demand and slower rates, competition for drivers remains intense,” the report concludes.

There are bright sports for asset providers, however. The $82.2 billion parcel and express sector, fueled by double-digit growth in B2C online commerce, continues to grow. Its main drivers are the “explosion” of B2C e-commerce and omni-channel retail, the report says.

On the other hand, water shipping is in “flux,” as containerized shipping is experiencing significant overcapacity. Like truckload, this is creating a “favorable rate environment” for U.S. shippers, the report concludes.

The $67 billion air freight sector continues to be in the dumps. While the industry copes with overcapacity and falling rates, demand for airfreight services remains sluggish due to economic uncertainty. At the same time, the report says, overcapacity is being exacerbated by a shift to wide-body aircrafts.

ONWARD AND UPWARD IN DUPAGE COUNTY

By nearly any measure, DuPage County’s economy is thriving. Home to nearly 40,000 businesses and 700,000 jobs, DuPage County, Illinois is a formidable economic force in the region.

As a result, DuPage enjoys some very important and meaningful economic advantages. When we consider the issues that weigh on businesses everywhere (not just DuPage) such as the cost of doing business and the ability to recruit and retain top talent—it is these advantages that make the difference for businesses.

Location is among the county’s valuable, inherent advantages. Its proximity to O’Hare International Airport means that residents and businesses alike have direct, non-stop access to 200 destinations worldwide through 1,400 daily departures.

DuPage is in the midst of six interstate highways, making drive time to major markets convenient and cost-effective—with less than six-hours drive to major Midwest cities.

DuPage enjoy the benefits of an extensive multi-modal transportation network. Chicago is the nation’s rail hub that connects six of the seven class one railroads.

With a highly skilled and educated workforce, DuPage is first in the state in educational attainment. Nearly half its residents over the age of 25 have a bachelor’s degree or higher, and over 90 percent are high school graduates.

DuPage also has a business-friendly environment. Under the leadership of Chairman Cronin, DuPage County operates an accountable, efficient and transparent government—with a balanced and responsible budget. Unlike many other places, here you will find public and private sector leaders working together to grow and expand the economy.

And finally, as its nearly one million residents know, the DuPage quality of life is unmatched. This can be attributed to the County’s emphasis on education, culture and environmental preservation. It has some of the best schools in the nation, including 19 accredited colleges and universities. DuPage also offers a wealth of opportunities to experience arts and culture, and residents and visitors enjoy open spaces, tree-lined streets and lush wooded areas that characterize the landscape.

At Choose DuPage, the economic development alliance for DuPage County, this is called the DuPage Difference. It is what has allowed them to attract the variety of businesses that makeup the diverse economy—from technology to manufacturing, retail, warehousing, healthcare and more.

These advantages, the DuPage Difference, have led to over 100 economic development projects in the last year. That’s 3,792 jobs; 6.35 million square-feet of development; and 571 million dollars invested into DuPage County.

And, they are well positioned for continued success with the Western Access O’Hare project that will change the way business moves, at a global scale. In an increasingly global economy, enhanced access to national and global markets is the ultimate competitive advantage.

Now, that advantage is arriving in DuPage.

DuPage County’s Western Access O’Hare Project will create unprecedented access to O’Hare International Airport from the west. Just outside of Chicago, and with unparalleled proximity to the airport, I-90, I-294 and I-290, businesses looking to locate in the new developments will be taking advantage of transportation gateways to the rest of the world.

In a market where transportation, logistics and warehousing is thriving—the Western Access O’Hare project provides enough land for businesses to build big, and goods, people and information to flow efficiently on a domestic and international scale.

BLOUNT COUNTY: VIEW FROM THE MIDDLE

If you ever wanted to see a series of reunions among Blount County, Tennessee officials and business people with state and federal VIPs, then 2015 was the year as it signaled a time of unprecedented local job growth and capital investment.

logistics
Koji “Jack” Arima, President and CEO of DENSO Corp., and Jack Helmboldt, Senior Vice President of DENSO, announced in August 2015 that the company will expand its automotive components and systems manufacturing plant in Maryville, TN. (Photo: Blount Partnership)

It all kicked off Jan. 28 with the announcement of TeamHealth’s expanded Healthcare Financial Services (HCFS) anesthesia billing operations. This expansion brought about 450 new jobs with a $16.8 million investment to construct additional space next to its location at Base Pointe Business Park in Louisville.

“TeamHealth is a valued organization in Tennessee and I’m pleased they can take advantage of our business-friendly environment to continue expanding in our state,” Economic and Community Development Commissioner Randy Boyd said. “These jobs will make a big difference in our communities, paving the way for additional long-term growth.”

TeamHealth’s Healthcare Financial Services has been part of Blount County for 18 years. In addition to its new anesthesia-specific location, TeamHealth operates two HCFS locations in Blount County, the current Base Pointe facility supporting its national Hospital Medicine and Clinic operations and a Regal Drive location serving regional Emergency Medicine operations.

And that was only the beginning as Cirrus Aircraft landed at McGhee Tyson Airport on May 6. Co-Founder and CEO Dale Klapmeier announced the company will expand into Tennessee with its new Cirrus Customer Experience Center, called the ‘Vision Center.’ The new location will create 170 jobs in the area and represents a $15 million investment.

“Cirrus Aircraft will feel right at home here as a company that sets the standard for innovation in its industry, and we want to thank Cirrus for bringing its new customer experience facility to East Tennessee,” Gov. Bill Haslam said. “Tennessee has incredible resources such as Oak Ridge National Laboratory and the Arnold Engineering Development Complex that can help attract aerospace companies, and today’s announcement is another significant step toward our goal of becoming the No. 1 location in the Southeast for high quality jobs.”

Things got even more exciting after that because as part of DENSO’s 25th anniversary celebration, it announced on Aug. 25 that it will create 500 new jobs and invest $400 million to expand its manufacturing capabilities and construct a new warehouse. Due to expanded production needs at two of the company’s manufacturing plants, the existing warehouse will be converted to manufacturing space and a new consolidated warehouse will be built on the company’s current campus.

With a workforce of more than 3,100 employees, DENSO Manufacturing Tennessee continues to grow as Blount County’s largest employer.

This expansion lends support to the U.S. Economic Development Administration’s annual report which states that automotive manufacturing accounts for more than one-third of advanced industry employment in Tennessee. It serves as an anchor for research and innovation and employs a highly skilled and educated workforce. The state is now home to six major automotive manufacturers and nearly 600 manufacturers in the automotive supply chain, employing more than 100,000 workers.

And if that announcement wasn’t big enough, Blount County brought in the largest job and capital investment totals in the Knoxville area with Advanced Munitions International creating 605 jobs and investing $553.6 million. The Oct. 20 announcement of the relocation of its company’s headquarters, research and development and commercialization campus into Partnership Park North brought the grand total number of jobs created this year to 1,725 and an overall investment totaling $985.4 million.

Yes, that is nearly one billion dollars of economic investment into Blount County in 2015.

The rapid business growth in Blount County has never been matched by any other community in Tennessee’s history. And the numbers bear this out.

Over the last five years, nearly 4,000 new jobs have been created in Blount County as 15 new or existing businesses have either expanded or relocated their operations to the area. As a result, they brought with them a capital investment of nearly $1.5 billion dollars. Let’s restate that…$1.5 billion dollars.

In a recent University of Tennessee economic impact study on Blount County, average salaries in the technology parks reached nearly $64,000 per year with those tech workers producing an output of $4.2 billion.

As a result, Blount County’s property tax revenues were nearly $13 billion and region sales and use tax revenues were $47.4 billion, both all-time highs.

As Matt Erskine, deputy assistant secretary for Economic Development for the U.S. Economic Development Agency, noted in his 2013 visit to Blount County, “You’ve got a great partnership that has been formed here with private/public higher education sector. The fact that a technology cluster has been developing shows that you are taking advantage of the assets. And the quality of life is crucially important. When companies are looking to recruit and hire, you want people who want to live here. And when you have a place where people want to live, that really helps.”

Fifteen major companies get it, and Blount County’s got it.

BRUNSWICK COUNTY: COME GROW WITH US

Located within a day’s drive of two-thirds of the U.S. markets, Brunswick County, Virginia offers thousands of acres of land prime for industry. The picturesque rural setting recently welcomed a $1.3 billion investment by Dominion Virginia Power which constructed a cutting-edge technology power plant. The county’s rich natural resources attract a number of industries such as Redland Brick that uses robotics to manufacture some of the highest quality bricks that are shipped to markets all along the east coast and beyond. With tremendous timber resources, the county is number one in timber harvesting. It is home to Virginia-Carolina Wood Products which supplies both domestic and international markets with Class A lumber. Reaching international markets is convenient. The Port of Virginia is only 90 miles east of Brunswick County. With I-85 dissecting the county running north-south, US Route 58 dissecting the county running east-west and I-95 about five miles east of the county, transportation is convenient and efficient.

logistics
Groundbreaking for Dominion Virginia Power’s $1.3 billion technology power plant in Brunswick County, VA. The first full year of station operation is expected to save about $96 million in fuel with continued growth over time. (Photo: Brunswick County IDA)

It is well known that Virginia is one of the best locations for business in the U.S. because of its strong pro-business environment. And those pro-business factors are evident in Brunswick County with its low operating costs, exceptional transportation and utility infrastructure, strong commitment to education and workforce development and commitment to work in partnership with business. This commitment is shown by a broad range of incentives available to industry. Through the Enterprise Zones Program business and industry can realize state incentives such as Job Creation Grants and Real Property Investment Grants while also realizing a number of local tax and other incentives. In addition, Brunswick County is one of the localities that receive economic development support from the Tobacco Region Revitalization Commission. Among a number of things, this allows Brunswick County to provide industries fully developed shovel-ready sites at low or no cost.

Brunswick County is located in southern Virginia about an hour’s drive from Richmond to the north and Raleigh/Durham, North Carolina to the south. It is a rural area steeped in American history—one of the outposts settled shortly after Jamestown. On the historic Meherrin River many find canoeing and kayaking relaxing. Lake Gaston is where other boaters and water sports enthusiast like to relax. Whatever your recreational preference you will find it here or within a short drive.

Once reliant on a robust tobacco farming economy, Brunswick County is working to build a diversified, growth oriented economic base. One in which technology innovation is used to produce more efficiently. One in which there are job opportunities for those who live here or wish to locate here. And one in which business and industry find what they need to grow and be successful. To learn more visit the Brunswick County Industrial Development Authority at www.bcida.org. Come and grow with us.

AVEPT PICKS BROWNSBURG, IN

Avept, a distributor of powersports and automotive parts, will locate its new distribution center in Brownsburg, IN, creating up to 118 new jobs by 2019. The El Dorado Hills, CA-based company will invest $6.32 million to purchase, renovate and equip a 100,000-square-foot facility at 1210 E. Northfield Drive.

As its second distribution center and first facility outside California, Avept’s Indiana operations will allow the company to deliver products to its clients three to four days faster than it can solely from its California facility. In addition to distribution, the Indiana facility will also house sales, customer service and product development operations. Equipment installation is currently underway at the facility, with plans to launch operations this fall.

“Indiana is a state that is business friendly and Brownsburg and surrounding areas offer our employees a great quality of life,” said Nathan Klejwa, president of Avept. “As the Crossroads of America, Indiana’s central geography will lower our delivery costs and get products into customers’ hands in half the time.”

Avept works with small service and repair shops to supply them with parts for all-terrain vehicles, motorcycles, cars and trucks. Through a highly-automated system, the company will initially distribute more than 10,000 different automotive, powersports and motorcycle components from its Indiana facility to customers throughout the Midwest. With a planned ramp-up in operations, the company has a goal to distribute 100,000 different components from its Indiana facility within the next two years.

“As the Crossroads of America, Indiana is the perfect base for delivering products across the country,” said Gov. Mike Pence. “From our central location to our world-class airports, interstates, railroads and waterways, Indiana is a state that works for logistics.”

The Indiana Economic Development Corporation offered Avept Inc. up to $595,000 in conditional tax credits and up to $55,000 in training grants based on the company’s job creation plans. These incentives are performance-based, meaning until employees are hired, the company is not eligible to claim incentives. The town of Brownsburg approved additional incentives at the request of the Hendricks County Economic Development Partnership.

Avept is the fifth company this year to announce that it has selected Hendricks County for its growing operations. Earlier this month, national retailer Kohl’s made news that it had begun renovations on a 937,000-square-foot distribution center in Plainfield, with plans to create 300 new full-time jobs. The state’s logistics industry has earned an A grade from Conexus Indiana and Ball State University’s Center for Business and Economic Research for the past five years.

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