red Smith, founder, chairman and CEO of FedEx Corp., put logistics into perspective in a presentation in May to a select group of site consultants visiting Memphis:
"We continue to grow and watch things get stronger and stronger," he said in response to a question about his views on the economy. "Those changes, absent some large political mistake, are very profound. First, you have a low- cost standardized means of exchange in the form of the Internet. The vast majority of new products and goods tend to have a high value- add, but not very much weight – the economy has grown by a factor of 5.5, but the aggregate weight of the economy is about the same. And we allow things to cross borders, without much friction. When politicians ask if globalization is here to stay, for somebody like me, it's laughable. The only thing that isn't globalized is agricultural products, or movie production, and some services. You have this force field of relatively friction- free transportation between any places in the world."
Keeping the friction out is the aim of numerous logistics projects throughout the U.S. and beyond.
Reports issued in May by Atlanta- based The Colography Group said air freight exports approached 92.4 million shipments, up 8 percent from 2004 and totaling 6.2 billion pounds. Domestic air freight shipments numbered 2.5 billion, totaling 17.4 billion pounds. Ground shipments were up over 4 billion, encompassing 42 billion pounds. And less- than- truckload shipments were up to 131.1 million and tonnage of 139 billion pounds.
WorldPort Takes Wing
"Last year was a splendid one for U.S. air exports as the vestiges of a weaker dollar, combined with resilient end- markets across the globe, created strong demand for the mode," said Ted Scherck, president, The Colography Group. "Beyond the macro factors, however, the results demonstrate that air freight is an increasingly vital force in enabling global trade and supporting world- class international inventory models."
As for the records in ground parcel activity, Scherck said, "Last year continued the long, secular trend of gains in this sector. As we have said many times in the past, U.S. commerce has migrated to a short- haul, regional model where goods are delivered and distributed less than 600 miles (965 km.) via lower- cost surface transport. As we move well into 2006, we see nothing on the horizon to change this trend."
UPS, FedEx, BNSF and others are counting on all these trends to continue.
In May, UPS Airlines announced a US$1- billion expansion of its $1.2- billion WorldPort sorting hub in Louisville, Ky., that will increase sorting capacity by 60 percent to 487,000 packages per hour in five years. Job growth is projected at 1,284 full- time jobs and 3,787 part- time jobs. The project is expected to be completed by November 2010 with the first phase opening in 2009.
The 5.1- million- sq.- ft. (473,790- sq.- m.) WorldPort hub is indeed the center of the company's global network: The wings it's gradually adding to its footprint may eventually support as many as 136 sets of aircraft wings on the ground at one time.
While the expansion will mean 1.1 million sq. ft. (102,190 sq. m.) more building space, it also will mean nearly 2.1 million sq. ft. (195,090 sq. m.) more ramp space for planes to navigate. On the drawing board is another 1.5 million sq. ft. (139,350 sq. m.) of ramp space, which could possibly expand by another 13 percent.
The latest WorldPort expansion follows the June 2006 completion of its new 785,257- sq.- ft. (73,000- sq.- m.) heavy cargo air service hub in Louisville, an $82.5- million investment that brings with it 1,200 jobs of its own. That project received a 10- year package worth $20 million from the state, tied to job creation. This time around, UPS received preliminary approval in May for $31.6 million in tax incentives for up to 10 years, with Kentucky ponying up 80 percent of that total and Louisville contributing the balance. In addition, UPS could get $20 million in state sales and use tax refunds through the Kentucky Enterprise Initiative Act, created through Gov. Ernie Fletcher's tax modernization plan and passed by the 2005 General Assembly. That program allows approved companies making an investment of $500,000 or more in Kentucky to recoup Kentucky sales and use tax on the cost of construction materials, building fixtures and equipment used for research and development.
The sales and use tax benefits for this project essentially replace a similar break afforded the original Hub2000 project, a benefit then attached to an enterprise zone designation that has since expired. John Hindman, UPS vice president for public affairs and communications, says the range of relationships between company officials and state and local officials allows all parties to skip the "get- acquainted" stage of negotiations and get right down to brass tacks. At the same time, there are no giveaways. Of this latest negotiation, he says, "Everybody was doing their jobs."
The hub expansion joins other major hub projects in China (to be completed by 2007); the Philippines (for intra- Asia capacity); and Cologne/Bonn, Germany, a $135- million project completed earlier this year.
But Louisville remains the company's all- points international hub, serving some 200 countries and territories, and helping Louisville's airport climb the charts in total landed cargo weight.
Mark Scherrens, UPS Airlines program manager for the WorldPort expansion, is a 30- year company veteran who says he got his start, like most, as a "part- time freeloader" in metro Detroit. (In UPS lingo, that term means the opposite of "laggard.") He has worked across the U.S. in a variety of operations and engineering roles, including having served as the project manager for WorldPort when it was first constructed (and called Hub2000).
Asked about the heavy freight facility project last year, Hindman told Site Selection the company had to "find a way to shoehorn it in." Asked what that means for this expansion, Scherrens says, "We're in a shoe one size too small."
But that's why the company is working so closely with the Louisville Regional Airport Authority (LRAA), he says. And in this case, unlike at nearby Churchill Downs, past success may indeed be indicative of future results.
"The success of WorldPort became a large factor in determining we would expand here," he says. "The productivity gains exceeded our original projections, so adding on became pretty attractive to do."
UPS spokesman Mark Giuffre says the land banking executed by the LRAA over the years has also helped put UPS in a position where it could expand: "It's another way the community has helped support us and made it attractive for us," he says, noting that it was out front in moving residences out of noise corridors, for example. Scherrens says the partnership includes everything from planning meetings (now bumped up from monthly to bi- weekly) to proactive maintenance of runway and taxiway infrastructure. He says yes, the authority approved plans, but more importantly it also bought into the company's long- term vision.
Giuffre says the LRAA, city and state have taken that vision and run with it: A new bridge connecting a main road near the terminal to a new development area was just announced by the state, and another area just to the south of the airport has been declared a Renaissance Zone, perhaps enticing another layer of logistics- related projects. Past success has aleady meant a boom in distribution operations from nearby Bullitt County to as far south as Elizabethtown, some 40 minutes to the south on I- 65.
©2006 Conway Data, Inc. All rights reserved. SiteNet data is from many sources and not warranted to be accurate or current.