Companies continue to site their distribution and warehouse facilities to smaller towns outside of metro areas. They are also increasingly looking to inland ports to get away from congestion headaches and find lower costs of operation at the same time.

When Segrave Aviation, Inc., outgrew its facility in North Carolina it didn't have to look beyond the state's border to find a development that met every one of its needs. The company, which specializes in private jet charter, aircraft management and aircraft maintenance, selected the North Carolina Global TransPark in Kinston.

Jim Segrave, president, Segrave Aviation, says the TransPark's location is excellent because it is dead center on the East Coast. It also features an 11,500-foot runway, which is capable of serving military, commercial and general aviation aircraft.

“At the Global TransPark, we are an hour jet flight from New York City and a one hour and 20 minute flight from Palm Beach, Fla.,” Segrave says. “We work across the country, but those are some of our primary departure points and we are well positioned for those.”

Segrave says an advantage of the Global TransPark is its ability to immediately start construction because it has completed environmental work, whereas other sites would need more work to get development underway. The Global TransPark built two hangars for the company, and provides other incentives from the county and the park itself, as thresholds are met.

The Global TransPark is one example of the trend of warehouse and distribution operations locating near, but not directly in, congested transportation networks, which also typically offer lower costs of operation.

“Locations that made sense 10 years ago may not make sense anymore because of the population shifts in North America,” says Guy Toksoy, senior manager of business development, who is based at APL Logistics' Toronto office. The company operates about 26 million square feet of distribution space in 52 countries.

Toksoy notes that certain locations may be strong in terms of nearness to customers, but they may feature a tight labor pool. He says depending on how much labor goes into the distribution of the product, companies should take a look at smaller towns that may be less expensive.

Toksoy points out there are many variables to today's siting process for warehousing and distribution locations in terms of business costs. He says APL Logistics also reviews tax benefits locations might offer companies. “Taxes make a big difference in the annual operating costs for a DC,” Toksoy says. “Especially if the DC is 1 million square feet or more, your real estate taxes may put a big dent in operating budgets.”

Toksoy also notes the issue of traffic congestion leads companies to smaller cities. In addition, he says to watch for residential areas that adopt rules and regulations that impact a DC operator's ability to bring in trailers or trailer parks or parking lots for their employees.

Officials in Atlanta, which has some traffic congestion problems, are working on solutions. “We are in the middle of surveying manufacturers and major freight companies to identify specific bottlenecks,” says Hans Gant, senior vice president of economic development, Metro Atlanta Chamber of Commerce. He says based on the results of the surveys, the chamber will work with the Atlanta Regional Commission to develop multi-modal transportation improvement projects to reduce the bottlenecks.

Gant also notes that when companies think in terms of “congested” areas,  they should think in terms of what type of a logistics service they provide. For instance, he says UPS Logistics Supply Chain Management Corporation, which has customers all over the world, finds Atlanta's airport provides easy access to reach these customers. The same is true for Manhattan Associates, Inc.

Gant notes another advantage is the large supply of intellectual capital. For example, he says the Atlanta metro has 90,000 people employed in the logistics industry.

Less Costs, Fewer Headaches?

Lower real estate costs, labor costs and less congestion are heavily touted by the Southern California Logistics Airport, which is a 5,000-acre multi-modal freight transportation hub located 85 miles east of the Ports of Los Angeles and Long Beach and Los Angeles International Airport. It is estimated that 45 percent of all U.S. imports come through these two ports. The SCLA site is the former George Air Force Base in Victorville, Calif.

Dougall Agan, principal/owner of the SCLA, says the companies he deals with serve multiple markets and want to leverage their consolidation efforts by taking on larger facilities to serve not only the Los Angeles Basin but a 24-hour distribution ring as well.

The SCLA's costs advantages are found in its U.S. Customs Port of Entry designation, a Foreign Trade Zone, a LAMBRA Zone, and numerous incentives.

The SCLA provides a 24-hour, seven days a week manned air traffic tower, a bonded warehouse for goods, a 10,000-foot runway and an 11,000-foot runway. The SCLA recently entitled an environmentally approved 3,500-acre rail complex. It is the only Southern California location where Union Pacific and Burlington Northern Santa Fe share joint rights to a mainline connection in the transcontinental rail line. 

The SCLA is also located off of major transportation corridors, including Interstate 15, U.S. Route 395 and the new High Desert Corridor, State Route 18. About $278 million has been allocated to the Inland Empire area to widen all three roads.

The Global TransPark in North Carolina, which is environmentally permitted for 5,775 acres, is also an inland multi-modal transportation hub. It is located in an attainment area, meaning it has no air quality issues.  The park is located 70 miles from the Ports of Morehead City and Wilmington, says Darlene Waddell, executive director, North Carolina Global TransPark. The park also has a Foreign Trade Zone and a 60,000-square-foot cargo facility.

In addition, the park is within four and five miles respectively from two rail lines, and spurs from these lines can be directed to the park. The site is also a one-hour's drive from Interstates 95 and 40.

“Our park's road access continues to improve,” Waddell says. “We recently completed a four-lane highway with connects the Global TransPark to Highway 258, and which will connect to Highway 70.”

Ideal Transportation Networks Span the Country

In the search for warehouse and distribution locations, you will find that many are ideal transportation hubs. In Laurens County, S.C. , the Sterilite Corporation, an independent producer of plastic products for the home, sited a $65 million manufacturing and distribution center. In making the announcement, Albert Stone, chairman of the company said: “We found a most suitable site in Clinton with all of the necessary infrastructure, including excellent rail an highway access.”

“The construction process is well underway and the rail spurs have been installed for Sterilite,” says Marvin Moss, president and CEO, Laurens County Chamber of Commerce. “We have also widened the road on South Carolina Highway 72, which is a four-lane road, and put in a third lane in for about 4,000 feet on Charlotte's Road to support the project.”

Rail is a key component of the transportation infrastructure in Galesburg, Ill., which features the second largest classification yard in Burlington Northern Santa Fe's system. “Galesburg is also located on Interstate 74, 30 miles south of Interstate 80, and 30 miles west of Interstate 155, which is part of the Interstate 55 system,” says Eric Voyles, president, Galesburg Regional Economic Development Association.

Hendricks County, Ind., is also staking its claim as a distribution hub. The area has grown from no bulk warehousing in 1996 to more than 18 million square feet today, with another 2 million square feet of spec buildings under construction.

Hendricks County is situated in the Indianapolis metro area. It is located adjacent to the Indianapolis International Airport, which is home to the second largest FedEx hub in the country. The community also provides direct access to two interstates, 70 and 74, and access to three more interstates nearby.

Hendricks County's warehouse and distribution advantages recently attracted a Griot's Garage location. The company will build a 100,000-square-foot facility. In addition, Eli Lilly is building a new distribution center in the area.

Grundy County, Ill., is making the most of its location 40 minutes south of Chicago, situated near Interstates 80 and 55. “The market has been booming in the last 10 years as developers look south on Interstate 55, and mainly on Interstate 80, treating it as the crossroads of the Midwest, if you will,” says Dan Duffy, Grundy County Economic Development Council.

Duffy notes the $13 million Brisbin Road Interchange project, which will establish an interchange on Interstate 80 between Morris and Minooka, is halfway funded. The interchange is scheduled for completion in 2007.

In the Louisville metro, economic development officials have been working overtime to develop its logistics and distribution networks since the mid-1990s. One of the critical projects was UPS' decision to conduct a $1 billion expansion to its hub at the Louisville International Airport, creating the UPS Worldport.

Joe Reagan, chief operating officer of Greater Louisville Inc., says Louisville is the crossroads of six “R's”: road, river, rail, runways, routers and racks. He notes Louisville would like to develop more intermodal services. Airport officials continue expanding runways and terminals. The airport is the sixth busiest cargo airport in the world.

In terms of highway access, Louisville is located at Interstates 71, 64, 65, 264 and 265. Reagan says the Ohio River features two inland waterway ports. Louisville is also undertaking a 10-year project to build two new bridges across the Ohio River.

Atlanta officials are also working on enhancements to their transportation networks, especially with the Hartsfield-Jackson Atlanta International Airport. “The $5.4 billion project will add another runway and will expand our air cargo capacity, which will make us more attractive for air cargo,” Gant says. The improvements are scheduled to be completed in 2006.

“Right now, Atlanta has been ranked 10th in terms of air cargo tonnage and our goal is to position Atlanta as a top five cargo center in the country,” Gant notes. Officials are marketing the airport to carriers in Latin America and China as a leading destination for air cargo.

Staffing the Industry

While access to markets is critical for any warehouse and distribution operation, a skilled and well-prepared workforce is equally as important. Hendricks County is able to tap into the metro Indianapolis workforce of 1.8 million, says Harold Gutzwiller, executive director, Hendricks County Economic Development Partnership.

Galesburg has access to a workforce of 880,000 within a 50-mile radius, Voyles says. Out of that pool, 25,000 people consider themselves underemployed. Galesburg is located in northwest central Illinois, between Peoria and the Quad Cities.

Reagan says Louisville is working on several initiatives between the University of Louisville and the Jefferson County Public Schools to promote the logistics industry. The area provides companies with workers ranging from certifications to Ph.D.s in the industry.

The Metropolitan Technical School is an example of Louisville's support for the logistics industry. The school was formed in three weeks to support the UPS Worldport. Reagan says the education is paid half by UPS and half by the state of Kentucky. The school has dramatically changed the retention rate for UPS, which has gone from a 90 percent turnover rate to a 90 percent retention rate of its employees.

At the Global TransPark, the park has established an education training center for companies to conduct workforce training. The 33,000-square-foot facility features a video-conference room and other state-of-the-art accommodations. The center has trained more than 50,000 people since the spring of 2000.

In Atlanta, officials are leveraging the Georgia Tech Institute of Technology's Logistics Institute, which is renown for its research and curriculum in logistics. “We have a vision of evolving the logistics institute into a global logistics innovation center,” Gant says. “This will create a place where companies, governments and academia gather to solve logistics issues and problems.”

Reagan points out that the convergence of info tech with logistics has driven the need for a more highly skilled workforce in the industry. He notes the just-in-time sequencing for a seat supplier to two Ford assembly plants. Every 10 seconds or so a message comes on and notes what seats need to be manufactured in what order to be delivered to Ford. “There are 120 possible combinations of those seats,” Reagan says. “This is a classic example of changes in the supply chain and logistics that go beyond the know-how of traditional manufacturing or logistics.”

Gant says a number of logistics companies in Atlanta are looking at the latest technologies, such as RFID, and how to use them to better move products to reach customers and vice versa. “The logistics institute can research a project working in collaboration with multiple companies to conduct case studies for these new technologies,” Gant says.

Available Facilities Desired

The presence of available facilities and acreage is also a key siting criterion for the warehouse and distribution industry. “Companies have compressed their decision-making time frames and having spec space available is critical,” Gutzwiller says. He says Hendricks County has two spec facilities available. One is 813,000 square feet, expandable to 1.4 million square feet. The other is 406,000 square feet, expandable to 900,000 square feet. The community also has four additional spec buildings under construction.

The Global TransPark is busy putting up three new buildings. Duke Realty Corporation is developing, leasing and managing the industrial land developments for the park.

New facilities include a 120,000-square-foot facility. The Global TransPark board has also approved an ARFF/operations building, which is strictly for use by airport personnel, and a 200,000-square-foot facility.

Agan says the SCLA has entitled the land around the airport for 43.5 million square feet. In addition to that space is the 3,500-acre rail project with 20 million square feet of rail served industrial space.

The SCLA also features a 100,000-square-foot bonded warehouse. At this time, the SCLA handles about 100 sea containers a week for DHL, which it provides a trucking service for. “We do all the break down and deconsolidation of freight,” Agan says. “We have established a T-1 connected dispatch point so products are consolidated and dispatched to stores.”

The trucking service runs daily to the Ports of Long Beach, Los Angeles or to Los Angeles International Airport. “We can provide streamline consolidation work for customers at about a 30 to 35 percent cost reduction of what they normally experience in their real estate format in and around Los Angeles,” Agan notes.

When it comes to the mega-warehousing trend, where companies site a few 1-million- square-foot facilities for distribution as opposed to several 400,000 or 500,000-square- foot facilities, experts say the trend will most likely continue.

“We see ‘orphan' distribution facilities (those not attached to a plant) being looked at and modeled to see if it makes sense to have five or 10 different small DCs located throughout the country,” APL Logistics' Toksoy says. “Or does it make sense to consolidate all of these locations into one or two or three different locations?”

Toksoy says for those verticals that require significant distribution footprints in North America and those companies that outsource manufacturing to Asia, we will continue to see more consolidation of their existing facilities into larger DC networks.

Supportive Business Climate

In Louisville, the city and county governments have merged to form the Louisville Metro Government. It has not only streamlined government services but has also increased the area's population to position it as the 16th largest metro area in the country. “This shows we are innovative in our government but also underscores we are an emerging market to watch,” Reagan says.

Laurens County's Moss says for a project of more than $5 million, the county can enter into a fee in lieu of tax contract with the company, which reduces the property tax by 42 percent for a period of 20 years. “Depending on what the investment is, it could be a five year adjustable millage rate,” Moss says. “If the investment is $20 to $25 million, the county council can choose to lock the millage rate to the full term of the contract.”

In addition, Laurens County can issue a special source revenue credit, which ranges from 15 to 50 percent for a 10-year period to reduce the taxes owed to the county. Another incentive for companies is the Tier 4 designation of Laurens County, from the state of South Carolina, which is surrounded by Tier 1 communities. “What happens is the average wage is lower in our county than it is in those two counties,” Moss notes.

Gutzwiller says that almost every building built in Hendricks County has received the maximum tax abatement allowed by Indiana, which is for up to 10 years on property improvements.

In addition, because distribution is a priority target industry for Indiana, a number of companies have received EDGE tax credits as well as job training funds, Gutzwiller notes. The credit lasts for up to 10 years.

In Grundy County, officials have developed an incentive program specifically to attract distribution operations. “It has helped us attract the Kellogg distribution center,” Duffy says. “It is a 1-million-square-foot facility.” Costco has also sited a 700,000-square-foot distribution center in the county.

The Grundy County incentive includes a traditional three-year tax abatement for any type of business. However, recently the county has included a fourth and fifth year at 50 percent for both years aimed at target industries, including large distribution centers of 1 million square feet or more.

Bringing it Home

As you consider the incentives available for the warehouse and distribution industry, there are numerous factors to keep in mind. Consider selecting inland multi-modal ports, or smaller towns that are near but not located in congested locations. In addition to avoiding traffic bottlenecks, these areas typically cost less to operate in.

However, don't overlook the advantages of busy locales, which offer deeper and skilled labor pools to draw from, as well as large, international airports to service customers and cargo.

Companies should also look at the enhancements and improvements to the transportation infrastructure of an area to ensure locations are moving forward in developing their networks. Also look into the education system, making note of logistics programs and how easy it is to tap into them.

Also search for available space located on or near transportation networks, as well as spaces that will support 1-million-square-foot distribution centers. Select those communities that will support your current and future warehouse and distribution needs.

For complete details on the companies and organizations featured in this article visit:

APL Logistics, www.apl.com

Galesburg (Ill.) Regional Economic Development Association, www.greda.galesburg.org

Greater Louisville Inc., www.greaterlouisville.com

Grundy County (Ill.) Economic Development Council, www.gedc.com

Hendricks County (Ind.) Economic Development Partnership, www.hcedp.org

Laurens County (S.C.) Chamber of Commerce, www.laurenscounty.org

Metro Atlanta Chamber of Commerce, www.metroatlantachamber.com

North Carolina Global TransPark, www.ncgtp.com

Segrave Aviation, Inc., www.segrave.com

Southern California Logistics Airport, www.logisticsairport.com

Top States for Transportation/Distribution

Based on number of establishments

New Branches

1.      California

2.      Texas

3.      Illinois

4.      Florida

5.      New York

6.      Georgia

7.      Pennsylvania

8.      New Jersey

9.      North Carolina

10.  Michigan

Startups

1.      California

2.      Texas

3.      Florida

4.      Michigan

5.      Illinois

6.      New Jersey

7.      Georgia

8.      New York

9.      Ohio

10.  North Carolina

Data include the following SICs:

40/42/45

4412/4424/4432/4449/4491/4492/4493/4499

4731/4741/4783/4785/4789

Source: Since 1990, BizMiner has built its reputation on quality research in the fields of economic and business development. The company tracks more than 11 million U.S. businesses annually, developing vitality benchmarks for more than 18,000 lines of business and every U.S. county, MSA and state.

Measures include business retention, entrepreneurial activity, new branch attraction, business relocation trends and concentrations of high-growth firms.

Visit www.bizminer.com for access to more than 1 million local and national marketing research and financial analysis reports.

Pennsylvania Set to Open the Interstate 99 Innovation Corridor

Sheetz Corporation, Smith Transportation and Ward Trucking have sited large distribution operations in Pennsylvania based on the vision of the Interstate 99 Innovation Corridor. This transportation corridor is set for completion in late 2006 or early 2007. The corridor spans three counties and is located 90 to 175 miles from major Northeastern metro business centers.

Sheetz Corporation's new distribution center will serve the Mid-Atlantic and Northeast regions. Smith Transportation, a major regional carrier, has built 500,000 square feet of new distribution space and added headquarters space in the corridor. Ward Trucking, another regional carrier, has added another 300,000 square feet to its logistics base in the corridor.

The three counties that form the corridor, Blair, Bedford and Centre, have organized the I-99 Corridor Alliance to promote the benefits of siting in this transportation corridor. Other members of the alliance include Penn State University and other universities.

In addition, distribution companies in the corridor are working together to promote the advantages of the corridor. These include the three companies previously mentioned, Wal-Mart Food Distribution and Siemens Medical Solutions Health Services, among others.

“The key item of the I-99 Innovation Corridor is that is the north-south connector between the Pennsylvania turnpike in the southern part of the state and Interstate 80 in north central Pennsylvania,” says Jay Strawmire, marketing manager, Altoona-Blair County Development Corporation. “These are the principal routes east and west.”

In addition to the highway structure, Altoona is a major site for the Norfolk Southern rail line. “We have repair facilities for the company, and we are a major check point in its system,” Strawmire notes.

Air service is also provided from Altoona and State College in the corridor, which are both served by US Air. Delta, Northwest and a couple of other air carriers also serve State College.

When it comes to the workforce to serve distribution companies' needs, Strawmire says the workforce has inherited skills from generations of manufacturing employment. “In the corridor, 85 percent of the workforce are high school graduates and 22 percent have college degrees,” Strawmire notes. “The colleges in the corridor award almost 10,000 bachelor's degrees annually.”

Also, Penn State University offers specialized fields of study and degrees in logistics and supply chain management.

In terms of available incentives in the corridor, Strawmire says the area includes Keystone Opportunity Zones, which provide property tax abatements and exemptions to qualified businesses. There are also Job Creation Tax Credits and Enterprise Zone Tax Credits. He says other incentives include the Customized Job Training and Guaranteed Free Training Program grants. There are also local incentives as well.

To discover the complete details on the advantages of the I-99 Innovation Corridor visit the Altoona-Blair County Development Corporation at www.abcdcorp.org or www.i99corridor.org.

Southern California's Congestion Free Inland Port

Companies looking to move their warehousing and distribution operations out of the crowded southern California market should take a look at the Southern California Logistics Airport (SCLA), located in Victorville at the former George Air Force Base.

The SCLA is a 5,000-acre freight transportation hub that allows companies to move goods by air, ground, rail transportation and port connections.

Southern California moves 45 percent of all U.S. imports, which come through the Ports of Los Angeles and Long Beach and Los Angeles International Airport. The SCLA is located just 85 miles east of the ports of Long Beach and Los Angeles.

Companies that select the SCLA find they can reduce overall operating costs because they pay less for real estate and labor costs. Among the SCLA's cost advantages are the U.S. Customs Port of Entry designation, a bonded warehouse, a LAMBRA Zone and a Foreign Trade Zone. The development also qualifies for many state and local incentives.

The SCLA features  a10,000-foot runway and 15,000- foot runway, one of the longest in North America. It also features a seven days a week, 24-hour-a-day control tower and is a full fixed-base operation. “That has helped us land a $20 million dollar GE Aircraft Engines jet testing facility,” says Dougall Agan, principal/owner of SCLA.

He says that The Boeing Company has five divisions located at the facility. Pratt and Whitney and United Technologies have established a major after-market support and engine overhaul facility on about 320 acres.

The SCLA is also a rail served site. “We recently entitled a 3,500-acre rail complex, which is fully EIR certified,” Agan says. “The federal rail agency is sponsoring our EIS, which will be ready for full approval shortly.”

The rail complex provides a direct connection to the main transcontinental line that Union Pacific and Burlington Northern Santa Fe share common rights over. “There is no place in Southern California where these rail carriers have a mainline connection they share joint rights over,” Agan says.

Agan notes that projects supported by the rail service include the 1 million square foot distribution service for Goodyear, which has direct rail to its building. M&M Mars Candy also has a roughly 1-million-square-foot facility.

In addition to the air and rail service, the SCLA provides immediate access to Interstate 15 and U.S. Route 395. It is also located near the new High Desert Corridor, which is State Route18. Agan says that about $278 million has been awarded in transportation funding to the Inland Empire area to widen these three roads.

The SCLA is also located in a region where 900,000 workers are within a one-hour drive. Additionally, 68,000 local residents who commute to jobs outside of the Victorville area have indicated they would work where they live if the jobs were available. The community also features 34 area universities, college and technical schools for businesses to tap into.

For complete details on the SCLA visit www.logisticsairport.com.

Red River Waterway is no Longer the New Kid on the Block

The Red River Waterway Commission in Louisiana may be a newer port authority, but it continues to grow by leaps and bounds. The four public ports the commission supports saw a 20 percent increase in tonnage last year. “This system is only nine years old and people are getting comfortable with using it,” says Randy Walters, marketing director, Red River Waterway Commission. “We are up another 60 percent for the first quarter, although it won't remain that high.”

The authority consists of seven parishes with four independent public ports: The Port of Shreveport-Bossier, the Port of Alexandria, the Port of Natchitoches and the Port of Red River Parish.

The Port of Alexandria moves a lot of liquid and dry bulk fertilizer, as well as aggregate products. The Port of Shreveport-Bossier ships a large amount of liquid petroleum products, as well as moving coal, tire chips and some dry fertilizer. The Port of Natchitoches is primarily used for moving aggregates for the construction industry. The Port of Red River Parish handles aggregate, and this month the port is set to open its facility to offload fly ash.

Walters' commission assists the ports with basic infrastructure on projects at these ports. For instance, the Red River port received $2.5 million to assist with load-out facilities to meet a company's needs to send products to Puerto Rico.

“We also provided matching funds,” Walters says. “In Louisiana we have Port Construction Projects, which requires a local match to receive funding.” He says funds are used for cranes, docks and warehousing, among other uses.

“Companies should look at our ports because not only does water transportation provide the cheapest mode of transportation there is, but also because we have a tremendous base of workers, available sites and strong rail and highway systems,” Walters notes. He says Union Pacific runs on the west side of the river and Kansas City Southern runs on the east side of the river. Interstate 49 runs parallel to the river on the west side and Interstate 20 runs along the north side.

“We believe we can provide as inexpensive of a way of doing business as anyone in the country,” Walters says.

For complete details on conducting business with the Red River Waterway Commission and its ports visit www.redriverwaterway.com.