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Logistics Operations Ready to Handle Increases in Demand 

logistics summer 2014

By Rachel Duran

Companies seek intermodal logistics options to cut costs.

With the unfriendly winter and the delays it caused in regard to fulfilling supply chain activities behind them, companies are making plans to cost-effectively handle the pent up demand for their goods.

Based on numbers issued in May from the Institute for Supply Management, in April, the U.S. manufacturing sector experienced its 11th consecutive month of expansion. Seventeen of the 18 sectors ISM tracks in its Report on Business registered growth. The demand for new orders also continued to register growth in that same time frame, where 13 of the 18 sectors reported expansion.

Companies seeking ideal locations for distribution activities will find infrastructure advantages, and supportive public officials, in a variety of locations. From an evolving logistics sector in Wyoming to historical leaders in moving goods such as Kansas and Missouri, to a horizontal launch commercial spaceport in Jacksonville, Fla., companies will find the assets they need to move goods smoothly.

And perhaps, more importantly, moving these goods cost effectively. Intermodal developments are one transportation mode companies increasingly look to cut logistics-related costs. “You can consistently cut 20 percent of the costs by going intermodal as opposed to traditional truck,” says Chad Meyer, president and COO, NorthPoint Development, Riverside, Mo. Among the company’s development projects are the Riverside Horizons Central Industrial Park, and Logistics Park Kansas City, which is located on the Kansas side of the Kansas City metro region.

Meyer says new to the Kansas City logistics cluster is the increasing amount of goods coming from California, Texas, and the East Coast. “We have the post-recession rebound in growth you would expect to happen in Kansas City, plus you have this juggernaut BNSF intermodal project that we are confident will be incredible for Kansas City during the next few decades.”

Meyer is referring to Logistics Park Kansas City, which is home to BNSF’s newest intermodal facility. The soon to be 1,500-acre development has the support of more than $100 million in public infrastructure investments behind it. One of the assets is the diverging “diamond interchange” to support quicker turns and keep traffic moving.

Local officials did not wait for state and/or federal funding to come through in order to fund this new interstate interchange, as well as a heavy-haul corridor to accommodate containers coming into the intermodal development. “If they try to get that load onto a regular road, they would have to break it into two trucks,” says David Hinchman, first vice president, CBRE in Kansas City, Mo.

Hinchman says with BNSF running trains from the West Coast to Kansas City and Chicago it provides reliable and faster services than putting loads on team trucks to ship goods, which could triple the costs of shipping containers from the West Coast. “And they are monitoring everything so you know where the product is moving through the supply chain,” he says. “This is important because you may have to divert something and this allows you to remain extremely flexible.”

The intermodal park features six, 8,000-feet strip rail tracks, 4,300 container stacking spots, and five wide-span all electric cranes. “Most of the project activity we are seeing at the intermodal project is companies that need to take advantage of the transportation efficiencies and savings that intermodal provides,” Meyer says. Logistics Park Kansas City is home to a distribution center for Demdaco, which offers products through its retail stores and online.

Wyoming also features a logistics cluster in the Cheyenne region, an area that put the state on the map in regard to attracting the attention of large distribution center operations. A little more than a decade ago, Lowe’s Home Improvement was looking for distribution locations west of the Mississippi River. The company sited its first DC west of the Mississippi in Cheyenne, with a nearly 1 million-square-foot facility.

Rail parks are also being developed in the Casper, Wyo. region. Casper, located in the central part of the state, is located on Interstate 25 and features east-west rail services from BNSF. Business parks include McMurry Business Park, Platte River Commons and Salt Creek Heights Business Park. “The parks are filling up quickly, both for manufacturers as well as companies moving oil south to the refineries in the Gulf,” says Ben Avery, director, business and industry division, Wyoming Business Council.

Wyoming also features a logistics cluster in the Cheyenne region, an area that put the state on the map in regard to attracting the attention of large distribution center operations.  A little more than a decade ago, Lowe’s Home Improvement was looking for distribution locations west of the Mississippi River. The company sited its first DC west of the Mississippi in Cheyenne, with a nearly 1 million-square-foot facility. A few years later, Walmart Stores located a frozen and refrigerated food distribution center in Cheyenne.

Avery says Cheyenne offers access to interstates 80 and 25, and an east-west main rail line for Union Pacific. There are also north-south rail services offered by both BNSF and Union Pacific. Granite Peak Development LLC is behind the Cheyenne Logistics Hub at Swan Ranch. The intermodal park is located at the intersection of interstates 80 and 25, and is served by both rail lines. “The rail park is 1,500 acres, with a commitment to expand to 7,500 acres,” Avery says.

For Agracel Inc., a construction and development company based in Illinois, “We have seen an increase in companies looking at rail as a component of the site selection, and especially if they can have access to more than Class I railroad so they are not held captive to just one,” says Jack Schultz, CEO, Agracel.  The company assists organizations in the site selection process, and finds industries such as automotive suppliers, fabricated metal companies, food processors and plastics companies are expanding their operations. “A lot of our project activity is located in the south and Southeast, and by far in right-to-work states,” Schultz says. Agracel owns and leases 70 buildings and has done projects in 17 states. The company generally works in rural communities of 50,000 or less.

Kansas City Equipped to Handle Reshoring Initiatives
Industrial real estate officials in the Kansas City metro area, a bi-state region encompassing 18 counties in Kansas and Missouri, say the region is well positioned to support manufacturing and distribution activities returning to the United States from overseas, and those activities returning to the “nearshore” in Mexico. “I spend 90 percent of my time working with manufacturers, and a lot of it is tied to the automotive sector volumes coming back, but also coupled with Tier I suppliers to companies such as GM, Ford, Caterpillar, Deere, Case and others that have had manufacturing production interruption issues with critical components that are produced overseas,” says Chad Meyer, president and COO, NorthPoint Development, Riverside, Mo. The Kansas City region has seen an increased amount of industrial activity as a result of investments by the Ford Motor Co. and General Motors into their assembly plants in the metro region. Manufacturers find several advantages in Kansas City’s transportation infrastructure, including the fact that the region is the No. 1 rail center in terms of tonnage, and No. 3 in trucking capabilities. There are also more freeway miles per capita than any other metro market. “People can come here and occupy a facility and move their product efficiently,” says David Hinchman, first vice president, CBRE in Kansas City, Mo. Other advantages include fast and streamlined processes when attaining building permits. What’s more, Kansas City features nearly 10,000 acres of designated foreign trade zones, says Lou Serrone, senior vice president and director of brokerage, Block Real Estate Services, Kansas City, Mo. Additionally, the attorney who has written most of the national legislation in regard to these zones is based in the Kansas City area. The Kansas City market features the infrastructure and sites needed to support manufacturing activities returning to the United States. “Everyone wins because they are higher paying long term, skilled trades and career type jobs, and there is a ton of capital investment associated with a manufacturing facility that is not going to go anywhere fast,” Meyer says. For complete details about the advantages of the Kansas City logistics cluster, visit Kansas City SmartPort at www.kcsmartport.com.

What’s Behind the Expanding Supply Chain?

Despite the fact that ecommerce-related logistics projects fill the headlines (for example, Amazon.com and drone deliveries, discussed in December 2013), the logistics sector is driven by business-to-business activities.

Ecommerce projects continue to grow as a portion of companies’ businesses. “You will see this with companies that used traditional channels, such as dealer channels,” Hinchman says. “I think every smart manufacturer is looking at, ‘how do I move my product to my customers? How do I expand my customer base and how do I make it happen instantly?’”

“The ecommerce percentage growth numbers are bigger,” Meyer says. “But the metrics we have analyzed internally still has business to business at five times the overall volume of business to consumer right now.”

In Fort Smith, Ark., officials at Chaffee Crossing, a former Army base, expect to see more distribution projects selecting the development, says Ivy Owen, executive director and CEO, Fort Chaffee Redevelopment Authority. The property was recommended for permanent closure under the 1995 BRAC round. The federal government opted to lease 65,000 acres to the Arkansas Army National Guard to be used for training. The remaining 7,000-plus acres were turned over to local communities for redevelopment.

Owen expects increased activities at Chaffee Crossing in the next three to four years thanks to improved infrastructure. Chaffee Crossing offers industrial customers access to three interstate interchanges, two Class I rail lines, an airport, and a nearby seaport. The new port is being built on the Arkansas River, which is a four-minute drive from Chaffee Crossing, Owen says. He says the development’s location offers advantages in supporting increased activities resulting from the expansion of the Panama Canal.

“We have been in touch with officials at the Port of New Orleans, shipping lines and our Congressional delegation to attract freight that will be downloaded in the Gulf of Mexico that will come up the Mississippi River and the Arkansas River to us where we can transload goods onto trucks and send it west,” Owen says.

Chaffee Crossing is a mixed-use development, home to industries such as a manufacturer of aluminum sulfate, a pet food manufacturer, a gun manufacturer, a food packaging company and a metal bending company. Recently announced is the addition of an osteopathic medical school at the development. A brand new high school is also under construction, as well as six residential developments. A 70-store mall is also in the works.

Moving south and east to Jacksonville, Fla., the Cecil Commerce Center is located at a former Naval Air Station. A large portion of the 20,000- acre Cecil Field, 10,000 acres, went to the city of Jacksonville to develop a commerce center. A little more than 6,000 acres went to the Jacksonville Aviation Authority to own and operate Cecil Airport. AllianceFlorida at Cecil Commerce Center features a number of warehouse and distribution projects. The commerce center’s developer, Hillwood Development Co. LLC, is constructing a 510,000-square-foot spec industrial facility.

As improvements took place at the commerce center development, such as with road infrastructure, Cecil Airport benefitted as well. “The city and the authority worked with the local utility company, which improved the utility supply into the airport,” says Rusty Chandler, interim chief, Cecil Airport.

Chandler says the developments at Cecil Commerce Center not only allow companies to move their goods on the ground or in the air, but soon, will offer horizontal launch commercial spaceport services. The aviation authority has entered a memorandum of understanding with Generation Orbit, based in Atlanta, to conduct in-flight launches “over the ocean at an elevation of 40,000 feet, releasing rockets to put in low earth orbit nano or micro satellites,” says Michael Stewart, director of external affairs, Jacksonville Aviation Authority.

Chandler notes that Cecil Airport can handle any global in-production aircraft that exists. “Not many airports in the world can say that,” he says. “Our runways are stressed and we can support more than 1 million square foot of maximum takeoff weight.”

Other assets from the Cecil Commerce Center include access to three interstates, sites that are vertical ready, as well as multimodal capabilities such as rail, and a deepwater port located 19 miles away.

From landlocked locations, such as those found in the Midwest, businesses will find an ideal transportation infrastructure in Joplin, Mo. The region has seen an uptick in food processing activities, specifically in regard to animal nutrition.

Logistics in the Heartland

From landlocked locations, such as those found in the Midwest, businesses will find an ideal transportation infrastructure in Joplin, Mo. The region has seen an uptick in food processing activities, specifically in regard to animal nutrition. Heartland Pet Food Manufacturing, part of Blue Buffalo, selected Joplin for its first wholly owned manufacturing facility. The company will open a 425,000-square-foot facility in August.

“The industry does well both from the supply side, whether it is raw ingredients or micronutrients, as well as the outbound side from a logistics standpoint in terms of reaching the U.S. market,” says Rob O’Brian, president, Joplin Regional Economic Development Alliance. “Missouri is in the middle of the country, and we are within reach of the better part of the U.S. market within two days shipping time,” he says. The Joplin region features access to interstate highways, three Class I rail lines, and two short line rail lines.

O’Brian says logistics companies are also looking for skilled and hardworking talent, and logistics-industry training opportunities. An independent study on the workforce says Joplin’s employers credit the quality workforce as part of their success.  “We know a lot of people talk about having really good workforce availability; and we do have it according to this independent study,” he says.

What’s more, O’Brian says warehouse companies are increasingly incorporating technology in their operations, be it logistics or production activities, and notes the Joplin region offers instruction in logistics management and manufacturing technology.

Moving from Missouri to Kansas, Topeka, located 60 miles west of Kansas City, Kan., features a new workforce training initiative. Area manufacturers will visit high schools and discuss with students the skills needed to work in today’s manufacturing sector, as well as the career opportunities. “Nine of our top manufacturers will go into the high schools,” says Scott Smathers, vice president for economic development, Go Topeka Economic Partnership. “We think having them go in is more effective because they can discuss the industries. We will start with a couple of school districts this year; and next year we will present in all five of the school districts in our area.”

Companies that have selected Topeka for major distribution centers include Target and Home Depot. Companies operating and distributing from the region include Goodyear, US Foods Inc., Reser’s Fine Foods Inc., Frito-Lay and Bimbo Bakeries USA. Mars North America held a grand opening earlier this year at its Topeka facility. The company selected Topeka for the establishment of its first North American facility in 35 years.

Smathers says companies will find an inventory of site and building opportunities throughout the Topeka region, including the Kanza Fire Commerce Park and Central Crossing Commerce Park.

These criteria are vital to support a thriving supply chain. As the Institute for Supply Management’s numbers show, companies in a variety of sectors continue to see increased growth in new orders. When contemplating expansion opportunities, companies will find logistics industry friendly locales positioned to meet their needs in all manner of transportation modes.

For complete details about the organizations featured in this article, visit:

Agracel

CBRE

Cecil Airport (Jacksonville, Fla.)

Chaffee Crossing (Fort Smith, Ark.)

Go Topeka (Kan.) Economic Partnership

Institute for Supply Management

Jacksonville (Fla.) Aviation Authority

Joplin (Mo.) Regional Economic Development Alliance

NorthPoint Development (Riverside, Mo.)

Wyoming Business Council

Illustration by Stuart Miles at Free Digital Photos.net

 

 

 

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About the author: Rachel Duran

Rachel Duran is the editor in chief for Global Corporate Xpansion. Contact her at rduran@latitude3.com.

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