Old Man FedEx:
Industrial-strength truckin': FedEx Ground's $1.8-billion distribution network expansion will nearly double the company's daily package volume capacity, increasing from 2.5 million to 4.8 million by the end of fiscal year 2009.
Kentucky, Texas Centers Could Create 3,700+ Jobs
by JACK LYNE, Site Selection Executive Editor of Interactive Publishing
BOONE COUNTY, Ky. and HUTCHINS, Texas FedEx Ground (www.fedex.com), today's site selection equivalent of Old Man River, just keeps rollin' along.
Continuing the rollout of its ambitious US$1.8-billion distribution expansion, the express mail maven has now rolled into Boone County, Ky. (www.northernkentuckyusa.com), and Hutchins, Texas (www.dallascounty.org). And this bricks-and-mortar Old Man River creates quite a wake: The new Kentucky and Texas distribution centers together will generate as many as 2,500 package-handling jobs and 440 office and clerical positions, plus 770 jobs outsourced to independent contractors.
The Cincinnati- and Dallas-metro facilities are part of the first wave of the 10 new central distribution centers that FedEx Ground outlined in its six-year expansion plan announced in September 2002. FedEx Ground in July announced a third new central distribution operation in Hagerstown, Md. (for further details, see July 21, 2003 Project Watch).
Cincinnati, Dallas and Hagerstown were all specifically singled out in last year's blueprint as future distribution center sites. So, too, was Memphis, Tenn., headquarters city for FedEx Ground and parent FedEx Corp.
FedEx Ground hasn't yet selected the six other distribution center sites. And there's a heap of other network expansion work to be done, including expanding 23 existing hubs and relocating more than 300 pickup and delivery terminals.
That sweeping expansion program reflects the remaking of FedEx Corp. Although it initially made its mark in overnight shipping - which still accounts for three-fourths of total earnings - the company is now hitching its profit wagon to the ground.
FedEx Ground's location in North Kentucky positions its trucks within a 24-hour drive from 70 percent of the U.S. population.
UPS still clearly dominates the U.S. ground-shipping market, with its 79-percent share far ahead of No. 2 FedEx's 11 percent. FedEx Ground, though, has become a hot-selling, high-margin line. The company has recorded 20-plus percent sales growth for the last five quarters. And FedEx Ground's reported operating margins exceed 12 percent - nearly four times higher than the 3.3 percent for FedEx Express, the overnight air shipping operation.
Two Projects Announced in Three-Day Span
FedEx Ground's expansion blitz aims to capture more of that high-margin growth. Muscling up its distribution network will nearly double the company's daily package volume capacity, increasing from 2.5 million to 4.8 million by the end of fiscal year 2009.
The subsidiary moved in rapid-fire style to increase its capacity from Kentucky and Texas. The project announcements came in bang-bang fashion over a three-day span in late August.
The Northern Kentucky center surfaced first, and it will create more jobs than its behemoth-sized brother project. Located in unincorporated Boone County, the center at full capacity may employ as many as 235 office and clerical employees, 1,300 package handlers and 400 independent contractors, said FedEx Ground President and CEO Daniel Sullivan.
The company's center in Enterprise V Industrial Park will span 335,000 sq. ft. (30,150 sq. m.). FedEx Ground purchased the 96-acre (38-hectare) site for $6.3 million from Crescent Springs, Ky.-based Toebben Ltd. (www.toebben.com), which developed and owns Enterprise V, 16 miles (26 kilometers) from downtown Cincinnati.
Unsurprisingly, the location factors for the similar Kentucky and Texas facilities largely overlapped. Quality, available labor, and proximity to customers' distribution centers and the interstate highway system were top-shelf considerations in both decisions, Sullivan explained.
The Boone County site lies close to I-275, I-74 and the I-75/I-71 intersection. North Kentucky is a 24-hour drive from 70 percent of the U.S. population.
Lack of Nearby Center
Boone County also won out because it wasn't too close to another FedEx Ground center. The company plans to fill many package-handling positions with college students working one or two four-hour shifts, Sullivan said. And that made finding a location that wouldn't compete for workers with other company distribution centers a major concern. FedEx Ground's closest distribution center is in Columbus, Ohio, 101 miles (162 kilometers) northeast.
Key Kentucky Labor Concern
"This new facility will complement our Columbus operation while enhancing ground service throughout the Central U.S. region," Sullivan said.
FedEx Ground's Boone County location provides a large college-age population. The region is home to the University of Cincinnati, Thomas More College, the College of Mount St. Joseph, Northern Kentucky University and Xavier University.
"This decision clearly shows the strength and vitality of FedEx Ground and the Northern Kentucky regional economy," said Gene Strong, secretary of Kentucky's Cabinet for Economic Development (www.thinkkentucky.com).
It's also Northern Kentucky's biggest project since GE Capital Information Services announced in 1999 that it was bringing 800 jobs to Boone County. The slumping U.S. economy, however, slowed the company's expansion pace, and GE Capital Information Services has only created 300 jobs thus far.
Kentucky locked up the FedEx Ground project with a package that included $1.1 million in state tax incentives. Boone County is also providing a payroll tax credit, as well as issuing $65 million in industrial revenue bonds to assist the project.
FedEx Ground will break ground for its new center near Union, Ky., later this month. The operation will go online in 2005.
FedEx Ground's Dallas County distribution center in Hutchins will employ more than 200 office and clerical workers, 1,200 package handlers, and 370 independent contractors. (Pictured: the Dallas County courthouse, built in 1893.)
Texas Center Could Generate 1,700 Jobs
It's saying something big that FedEx Ground's new Texas center is the second-largest job-generator of the company's recent announcements. At full capacity, the Hutchins hub could employ more than 200 office and clerical workers, 1,200 package handlers, and 370 independent contractors.
FedEx Ground already had another distribution center in the area, a 500-employee operation in Fort Worth, 40 miles (64 kilometers) west of Hutchins. FedEx Ground officials, however, concluded that the area's labor force could support an additional center. The company has purchased a 100-acre (40-hectare) site in Hutchins near the intersection of I-20 and I-45.
Incentives were also part of FedEx Ground's Texas expansion equation. Hutchins and Dallas County are providing some $1.3 million for road improvements, as well as 10-year tax abatements.
Like its Kentucky counterpart, the new Texas center will break ground shortly and go online in 2005. FedEx Ground's hubs at the six other undisclosed locations are scheduled to open by 2009.
Editor's note: For more on location activity in Northern Kentucky and nearby states, watch for the Ohio River Corridor coverage in the upcoming November issue of Site Selection. And the November issue's Tennessee Spotlight will look at FedEx's catalyst role in the Memphis metro since the company brought its headquarters to the city in the 1970s. Finally, siteselection.com also contains an expanded Web version of the Logistics Industry Review from the September 2003 issue, which looks at a further array of FedEx projects on the boards and on the ground.
©2003 Conway Data, Inc. All rights reserved. Data is from many sources and is not warranted to be accurate or current.