Manufacturers have many ingredients to mix when they investigate locations to expand their facility. The recipe for the right location calls for low taxes, a well-trained workforce with a low cost of labor, state governments that have incentives to offset the cost of doing business, a logistics infrastructure that makes it easy to get product from point A to point B, and a high quality of life.

Those ingredients are in ample supply in the Southeast U.S., where many companies, both domestic and foreign-based, are relocating manufacturing and assembly operations, corporate and regional headquarters, and warehouse and distribution facilities.

Manufacturers in the region have proximity to numerous ports on the Atlantic Ocean and Gulf of Mexico, and well-connected highway and rail infrastructures that link the major metro areas in just a few hours.

“From an access and logistics perspective, the Southeast has everything a manufacturer needs to be well-positioned for success,” says Tim Feemster, senior vice president and director of global logistics for Grubb & Ellis Co.

"Built on Business"

Business began in Colonial America in 1607 when the first ships arrived from England in what is the present-day region of Hampton Roads in Southeast Virginia. “This is a region that is built on business,” says Darryl W. Gosnell, president and CEO of the Hampton Roads Economic Development Alliance. “There is a great mix of business environment and quality of life.”

Hampton Roads is comprised of 10 cites and five counties located in the middle of the U.S. eastern seaboard. The region is home to the Port of Virginia, one of the world’s largest natural deepwater harbors and the northernmost, year-round, ice-free port. It is capable of accommodating the largest cargo ships, including what is currently scheduled to be the largest container ship to be built in the next decade.

The road and rail systems connect the Hampton Roads region to the interior of the United States-and nearly two-thirds of its population-with a variety of goods. The Heartland Corridor, a public-private partnership between the Norfolk Southern Railway and the Federal Highway Administration, will enhance that transportation infrastructure.

The $150 million project is expected to facilitate more efficient travel on Norfolk Southern rail lines between the mid-Atlantic region and Chicago, says Rudy Husband, director of public relations for the Norfolk, Virginia-based company.

When fully operational, containerized freight moving in double-stack trains will eliminate about 200 miles and up to a day’s transit time between the East Coast and Midwest. Currently, double-stack trains must take longer routes by way of Harrisburg, Pa., or Knoxville, Tenn. The Heartland Corridor goes across Virginia, through southern West Virginia and north through Columbus, Ohio, and on to Chicago.

The increased use of double-stack freight cars, including intermodal cargo containers, is expected to grow capacity of rail lines and reduce tractor-trailer traffic on interstate highways, Husband says.

Construction on the project, which began in 2007, is expected to be completed by September. Intermodal trains have been moving on the route since 2008.

“We see it as a huge opportunity to open up markets to Chicago,” Gosnell says. “Companies can bring their containers into our port, then serve markets in the Midwest.”

Hampton Roads has an inventory of warehouse and distribution facilities that are immediately available for lease or purchase. There are also numerous business parks for companies looking for land to build and own their own facility.

One resource that is virtually impossible for other U.S. metro areas to match is the high number of military personnel (about 14,000 annually) that transitions to the civilian workforce in Hampton Roads. “This is a highly trained, experienced, and skilled workforce readily available,” Gosnell points out. This is in addition to the 14,000 graduates that enter the workforce annually from Hampton Roads-area colleges and universities. “When companies are looking for areas to locate or expand their operations, the first criteria is to fill workforce needs,” Gosnell notes. “We can demonstrate our ability to fill that need better than most other places in the country and the world.”

Location strength

The U.S. states that border on the Gulf of Mexico are using their ports to help drive economic development. Activity stemming from their ports has helped these states navigate the difficult economic conditions better than many of their inland counterparts. The ports directly and indirectly account for hundreds of thousands of jobs and pump billions of dollars into the states’ economies.

“Transportation-related jobs historically pay better, even in times of recession,” says Don Alee, executive director and CEO of the Mississippi State Port Authority, which operates the Port of Gulfport. “Ports are necessary and have to operate in all [economic] situations.”

Alee says location is a major strength of the Gulf region. “This is a central location as far as access to North America,” he stresses. The Port of Gulfport is strategically located, with New Orleans about 65 miles to the west and Mobile, Alabama about 65 miles to the east. “We sit in the middle,” Alee points out.

Gulfport has replaced about 400,000 square feet of shed space and all but one of the seven docks destroyed by Hurricane Katrina in 2005. But the port is not looking back. It is in the midst of a strategic master plan for expansion that will add 84 acres of new capacity, allowing it to handle an increase in containerized traffic and accommodate new tenants.

“Our plan is to create facilities that allow for the handling of huge volumes of containers,” Alee says.

Once unloaded, cargo has access to Class I rail systems operated by Kansas City Southern and CSX, and Interstate 10, the nation’s busiest east-west highway. There is also access to interstates 55 and 59, which both run north-south. More than 40 truck lines service Gulfport daily.

The Port Authority works closely with local and regional economic development agencies in Mississippi. “They know the value of the port to their own communities,” Alee stresses. “They know they are only a rail line or highway away from tapping right into the port.”

Gulfport is home to the largest fruit importation operation on the Gulf of Mexico with two tenants, Dole and Chiquita, operating inbound and outbound shipments weekly.

Preparing for the future

Further south, the Port of Tampa contributes to the creation of nearly 100,000 jobs and adds billions of dollars to region’s economy. The port is an important component of Florida’s domestic and international trading system, which represents the state’s most dynamic and proven catalyst for economic growth, says Richard Wainio, director and CEO of the Tampa Port Authority.

Significant projects completed or begun since the beginning of 2009 include expansion and improvements in berths, channels, road, and rail connections. Major dredging is underway at the port’s East Bay to prepare for future development. The port is renovating the REK Petroleum pier, a project that will be completed by 2011 at a cost of $30 million. The facility is the primary energy gateway for jet fuel for the region’s airports and much of the gasoline used in middle Florida, Wainio says.

The Tampa Port Authority is also preparing for the opening of the expanded Panama Canal in 2014 by developing its container facilities, including a terminal expansion from 25 to 40 acres, new crane rails, additional refrigerated capacity, and a new Gottwald mobile harbor crane.

The state of Florida has a number of incentive programs that can help manufacturers offset the cost of doing business. These incentives include up to $5 million in grants for customized, pre-employment training to new and expanding companies, and state income tax credits up to a maximum of $5,000 ($7,500 in an enterprise zone) per new employee for job creation.

Logistics options

Every site-location decision is distinct to the needs of the individual company; some prefer to be near a port, while others prefer to be inland and use intermodal connectivity.

Being closer to the port offers advantages like lower transportation costs for inland carriage or equipment detention and shorter transit times, meaning quicker availability of imported goods or getting product to foreign markets faster. On the other hand, a manufacturer may want a site near its source of raw materials or customers, or a company may want to locate a distribution center further inland to be closer to their customer base.

The logistics infrastructure in the Southeast U.S. offers manufacturers the ability to choose either option at a low cost of doing business.

“It really comes down to what works best for [manufacturers] within their particular logistics network or supply chain,” concludes Russell J. Held, deputy executive director of development for the Virginia Port Authority. wt



Ken Krizner is a freelance writer based in Cleveland, Ohio, where he writes often on economic development and technology issues.