- THE MAGAZINE
In recent decades, the Southeast United States has experienced an expansion — you might even say a boom — that has helped transform the regional economy. High-tech and service industries have both grown in the region, as has the manufacturing sector, led by foreign automakers that operate in Alabama, Georgia, Mississippi, South Carolina and Tennessee.
At the same time, the Southeast is in the middle of a population boom. The region contains nearly 45 percent of the U.S. population, and that number is expected to increase in the coming decades.
A growing population base means a growing consumer base. The majority of the nation’s customer base, roughly 70 percent, is located east of a line that stretches from Dallas to Chicago, and much of it in the Southeast.
These are facts that help drive supply chain and logistics decisions.
Logistics and distribution strategies have grown in importance for companies as supply chains and customer bases continue to evolve globally. Many companies depend on raw materials and finished products moving between countries and on multiple modes of transportation. It is critically important to secure those goods in a timely and efficient manner.
“More and more, distribution has come to drive location decisions,” says Reid Dulberger, president and CEO of Economic Development Growth Engine. “Companies are wrestling with what their distribution footprint needs to look like.”
The Memphis metro area describes itself as a quadri-modal distribution hub — runway, road, rail and river. These capabilities make Memphis a major inland port, with connections to ports on the East and West coasts (in both the U.S. and Canada), and the Gulf Coast.
The state of Georgia has similar logistics strengths.
The state has four ports, led by the Port of Savannah, and rail and road distribution networks that offer efficient and reliable access to markets across the Southeast and Midwest, says Page Siplon, executive director of the Georgia Center of Innovations for Logistics.
“We have a comprehensive logistics system,” he says. “This system is critical to manufacturers.”
Adding to the state’s location strength is a highly skilled workforce, especially in the logistics sector. There are more than 100 different logistical and supply chain education offerings around the state, ranging from a new logistics/supply chain management program at Georgia Southern University to technical colleges that train warehouse workers and truck drivers.
Another asset new and expanding companies can use in Georgia is Quick Start, which delivers workforce training in classrooms, mobile labs or directly on the plant floor, whatever is convenient for a company.
Landing Large-Scale Projects
As they seek to keep their cargo on the water longer (and thus save money), companies can utilize the region’s ports, such as Savannah, Mobile, Ala., and Jacksonville, Fla. These ports have upgraded their infrastructure during the past decade and tend to be less congested than their Southern California counterparts.
Having nearby access to a port can help a region land large-scale manufacturing projects.
European aircraft manufacturer Airbus announced a plan in July 2012 to build a production facility in Mobile, Ala. Groundbreaking is expected later in 2013. “One reason why Airbus chose Alabama was because the Port of Mobile demonstrated the ability to handle both large components (such as the fuselage sections and wings) and smaller components that are shipped in standard containers,” says James K. Lyons, director and CEO of the Alabama State Port Authority.
The Airbus announcement is the latest in a string of large manufacturing facility expansion projects in Alabama, fueled by the Port of Mobile. German-based steelmaker ThyssenKrupp built a plant in Alabama, in part because the port provided a transportation solution for handling steel slabs imported from Brazil. The port built a facility to efficiently transfer the slabs to barges for transport to the mill.
“Logistics play a big role in the overall cost structure for any type of large manufacturing facility,” Lyons says. “To the degree that a port can be placed into the mix, it not only adds efficiency but reliable transportation.”
Proximity to the Port of Savannah played a role in Caterpillar’s decision to build a plant in Athens, Ga., to manufacture track-type tractors and mini hydraulic excavators.
Logistics has also been critical to the continued growth of the automobile industry in the Southeast.
Automakers fully utilize JAXPORT (Jacksonville Port Authority), which ranks as the Number 1 vehicle export port in the U.S. That’s one of the reasons why Panama-based SC Line, a specialist in vehicle, truck and heavy equipment transport, has operations at JAXPORT as part of its roll-on/roll-off service, connecting Jacksonville with Colombia, Panama and Venezuela.
Automobile manufacturers also rely on the Port of Mobile for their import/export moves.
The Southeast contains an array of air, rail and highway choices.
Major freeway arteries crisscross the region, putting manufacturers within a one-day drive of much of the country. Much of the nation’s trucking industry has operations in the region.
Hartsfield-Jackson Atlanta International Airport is one of the busiest passenger and cargo airports in the world. In 2012, Hartsfield-Jackson handled more than 2,500 arrivals and departures, carrying more than 250,000 passengers on an average day. Monthly, Hartsfield handles about 54,000 metric tons of cargo. Atlanta is also the site of a major UPS hub operation, as well as many of the leading 3PL providers in the country.
Memphis International Airport is the home to FedEx, making it the Number 1 air cargo airport by tonnage in North America and Number 2 in the world.
In both cases, because of the proximity of the air and express resources, manufacturers (especially those in time-sensitive industries) have longer business days to ship cargo to and from domestic and international locations.
The region has extensive rail hubs. The Port of Mobile is accessible by six Class I railroads and Memphis is home to five Class 1 railroads. Georgia and Jacksonville have two Class I railroads each. Georgia’s rail system is a 5,000-mile network. There are also dozens of shortline rail operations in the region.
The state of Georgia has many parcels of land available for manufacturing and warehouse and distribution facilities with compelling prices for land and attractive rates for a workforce. “Different parts of the state can cater to different expansion projects,” Siplon says.
Space is also not an issue at JAXPORT, where 896 square miles of property is available for expansions of manufacturing plants, warehouses and distribution facilities. The metro area has 100 million square feet of industrial park area that can be used for import/export and domestic distribution. “There is a lot of land for long-term growth,” says Raul Alfonso, senior director, trade development and marketing, JAXPORT.
Jacksonville has become a viable alternative for numerous supply chains trying to reach the Southeast market. JAXPORT has been able to capture a share of cargo that moves into Florida from world ports that, at one time, went to Los Angeles/Long Beach or Savannah, Alfonso says.
Beyond Central Florida, geography works for Jacksonville. It is the western-most point on the East Coast, putting it closer to major consumer markets.
Interest in expanding near the Port of Mobile, which was high prior to the economic downturn of 2008-09 when construction of its container terminal was nearing completion, is returning, Lyons says.
“Companies are looking at possibly tweaking their distribution networks, possibly adding an entry point into the United States,” he points out. “There is a positive future for us in that sector.”
Memphis benefits by sitting at the confluence of three states: Tennessee, Mississippi and Arkansas.
While the largest warehouse and distribution market is in Memphis itself, substantial growth in warehouse development is occurring across the state line in DeSoto County, Miss. There is also large-scale industrial development in adjoining Fayette County, Tenn., where Norfolk Southern’s new intermodal facility is located. Directly across the Mississippi River in Marion, Ark., Union Pacific operates a 600-acre intermodal facility and BNSF Railway operates a yard.
Crittenden County, Ark., and the city of West Memphis, Ark., jointly operate a port on the Mississippi River across from International Port of Memphis.
“There are more options for companies here,” Dulberger says. “They know they have opportunities in our core real estate market and in new markets. This breadth of opportunity results in lower costs to the company.”
Thanks to its logistics strengths, the Southeast has become a viable — and in many cases preferred — alternative for company supply chains trying to reach the Southeast market and beyond to the Midwest.
“We have all the advantages that make us a great port city and logistics center for the future of the region,” Alfonso says of Jacksonville.
His counterparts in other Southeast cities echo that sentiment.
“We understand logistics,” Dulberger says. “The infrastructure is in place across the entire spectrum to support logistics, warehouse and distribution, and manufacturing.”