- THE MAGAZINE
The logistics sector is not just a way to move goods from point to point anymore. It has become a strategic advantage for growing companies that can deliver their goods more quickly and extract value from their supply chains.
“More and more, companies understand where their inbound freight is coming from and where their outbound freight is going,” says Chris Gutierrez, president of KC SmartPort Inc. “They know where the growth is and how they can optimize their supply chain networks. It’s driving the private sector.”
There are myriad factors involved when a manufacturer or retailer makes a site location decision for their warehouse or distribution operations, including suitable land ready for development and a workforce that is high in quality and quantity. These are characteristics that companies can find in abundance in the Midwest.
The Midwest has long served as the nation’s logistics artery. Every map with concentric circles shows that from the Midwest, a company can reach a large marketplace through a warehouse and distribution system based in the region, including one of the biggest markets in the world, the eastern United States.
The region is connected by east-west and north-south interstates that crisscross the country. It is served by all major North American Class I railroads, which are developing intermodal facilities in many metro areas leading to new land for additional distribution and warehouse operations.
Companies that bring cargo through the ports of Long Beach and Los Angeles use Midwest distribution sites to ship products in the region and to the East Coast. Companies that use East Coast ports can use the Midwest for westbound shipments. The logistical advantages found in Midwest metro areas are substantial.
Columbus sits on Norfolk Southern’s Heartland Corridor, linking Port of Virginia and Chicago with double-stack cargo service. Norfolk Southern’s Rickenbacker Intermodal Terminal, part of the Rickenbacker Global Logistics Park, is a critical link in the Columbus region’s cargo-handling and distribution capabilities because of its ability to process large volumes of containers arriving from overseas. CSX has two intermodal facilities in the market.
Kansas City is where five North American Class I railroads interconnect (the metro area is the largest rail center in the country by tonnage). Three of the five Class I railroads are expanding their intermodal network in the region, with nearby logistics parks that will have ample land for warehouse and distribution facilities.
The state of Michigan is the gateway to trade with the eastern portion of Canada.
Four interstate highways converge in Indianapolis. The region also has an extensive rail system without the congestion of Chicago. On average, more than $245 million in rail freight has moved through Central Indiana in recent years.
“These attributes are important for manufacturers,” says Marty Vanags, VP and executive director of Indy Partnership.
Needed logistics infrastructure
As U.S. manufacturing continues to evolve into transporting goods in a just-in-time environment, metro areas such as Indianapolis and Kansas City will continue to play a big role.
“A trucking executive once told me that America’s warehouse is on the interstate,” Vanags says.
Central Indiana has a considerable amount of space along its interstate highways for warehouse and distribution center expansion projects, Vanags says. The state of Indiana recently budgeted $300 million for interstate growth, including work on Interstate 69, part of the NAFTA Corridor running from the Mexican to Canadian border.
Part of the growth in logistics in the Indianapolis region is spurred by e-commerce operations, led by Amazon.com, which has a regional workforce of 1,600 employees. The online retailer has three other warehouse facilities in Indiana, including its latest in Jeffersonville, which began operations earlier this year.
E-commerce and other warehouse and distribution operations in Indianapolis are boosted by the presence of FedEx and UPS, Vanags says. FedEx recently announced a 300,000-square-foot expansion near its hub at Indianapolis International Airport to handle an increase in logistical support.
The old terminal at Indianapolis International Airport is currently being razed (the new terminal opened in 2008), making land available for additional warehouse and distribution operations.
The Kansas City metro area offers a category of real estate — vertical-ready (as opposed to shovel-ready) — that can get a warehouse or distribution operation up and running quicker — perhaps by as much as three months, Gutierrez says.
At a vertical-ready site, the shovel portion of construction has been completed, including the foundation, utilities are in place and zoning permits have been granted. In some cases, state and local governments have approved incentive packages.
All of this occurs before a company agrees to buy or lease the land.
“When a company agrees, they can be ready to build immediately,” Gutierrez says. “Companies can build to their specifications. In that case, the land becomes build to suit.”
There is about 3 million square feet of vertical-ready space available at sites across the Kansas City metro area, Gutierrez says.
The Coleman Co. built at a vertical-ready site in the metro area, launching a distribution operation in 2010. The total time from discussion to when operations began was 11 months, Gutierrez says.
One of the largest projects going on in the Kansas City metro area is construction of BNSF’s intermodal park on the Kansas side of the state line. The 400- to 500-acre facility will be capable of about 500,000 lifts. Around the facility is a 600-acre site ready for logistics development, says Steve Kelly, deputy secretary of business development for Kansas Department of Commerce. One spec building is under construction adjacent to the intermodal site.
The Kansas City metro, on both sides of the Kansas and Missouri line, have learned to use their logistical strengths to their advantage. They are combining all the elements of logistics so companies can experience efficiencies in their supply chain.
Gutierrez points to one company that was set to relocate its operations from Kansas City to Dallas because it thought transportation and logistics costs and efficiencies would be better. An analysis showed the company that those costs and efficiencies would be better in Kansas City. The company has decided not only to stay in Kansas City but to expand its operations as well, attributing the decision to logistics and labor costs.
The state of Michigan is attempting to create that type of environment, tying together its logistical strengths to enhance the efficiencies of manufacturers and retailers.
The state has designated five logistics centers under the Next Michigan Development Corp., allowing areas within the state near transportation hubs, such as airports, rail lines and highways, to use tax incentives to attract businesses, particularly those that are multimodal.
“It’s designed to make available ready-to-build sites around our infrastructure assets,” says Peter Anastor, senior policy director for Michigan Economic Development Corp.
While any company can take advantage of these centers, those who trade with Canada can especially benefit. Canada is the number one trading partner of both the United States and Michigan.
Within Michigan, there are nine border crossings. One crossing, between Detroit and Windsor, Ontario, will be boosted within the next decade with the construction of a new structure, the New International Trade Crossing Bridge. The goal is for the bridge to be ready by 2020.
When completed, trucks will have direct highway-to-highway access between Ontario and Michigan (not possible with the current Ambassador Bridge), saving a considerable amount of downtime waiting to cross the border, Anastor says. The Ambassador Bridge also has space constraints, again causing delays, and it is aging, meaning more downtime for repairs.
From Entry Level to PhD
Efficiency in the supply chain doesn’t stop with available land with access to interstates, rail and other modes of transportation. Efficiencies depend on a well-trained workforce.
The skills required to work in a logistics operation are higher than ever before. It is not a function of brawn, but brains, that move goods efficiently all over the world.
“When it comes to developing talent for the industry we take a comprehensive approach,” says Kenny McDonald, chief economic officer for Columbus 2020. “We want younger workers to develop the math skills necessary to work in a fulfillment center.”
The Columbus metro area is home to large logistics centers and small technology companies that provide services to the industry. The region is increasingly at the center of innovation and technology commercialization.
Columbus-based Battelle Memorial Institute, one of the largest private research organizations in the world, is an example of how the field of logistics has become a science. Battelle experts, mostly equipped with PhDs, are studying new, more secure ways to transport cargo, developing sophisticated mathematical models for scenario planning and improving the way warehouses and distribution centers are designed and constructed.
“We’re trying to evolve to make sure we’re meeting the needs of industries from top to bottom,” McDonald points out.
Inside the facility, companies don’t want to continually train a new group of workers. To help avoid high turnover, programs in the Kansas City metro help train potential workers for logistics operations. One training program helps acquaint high school students with the work environment of a warehouse or distribution center, Gutierrez says. At the end of the two-week program, students receive a certified logistics associate certificate upon passing a test.
“Those students are still at their jobs one year and even 18 months out,” Gutierrez says. “They know what the job is going in and have the necessary skill sets. It’s the same for students coming from our community colleges.”
A skilled workforce is crucial, because manufacturers and retailers have to be profitable in a new warehouse and distribution facility almost from day one.
“Warehouse and distribution workers have to understand and read order systems, and they have to think on their feet,” Indy Partnership’s Vanags says. “Training is critical.”
It takes a combination of available land, facilities ready to be operational quickly, efficient dock-to-highway times and a highly skilled workforce to help achieve logistics success. These are ingredients that are in ample supply in the Midwest. The region’s strategic location can be of huge value to manufacturers and retailers.