The Many Modes of Movement

Vann Cunningham, assistant vice president, economic development, for Burlington Northern Santa Fe Railway (BNSF), told the NAIOP audience that the nation's Class I railroads are becoming the Interstate system, with direct delivery going by the wayside. He counseled looking harder at the cost of inbound freight in making location decisions, especially when transportation accounts for 59 percent of the total cost of distribution.
        BNSF, along with rivals Union Pacific and CSX, sees the logistics park as the obvious way to go, and started with a 621-acre (251-hectare) facility at the CenterPoint development in Joliet, Ill.
        "We're looking at having 3 million lifts in this one facility," said Cunningham. "The minimum criteria for us is 1 million lifts. We're evaluating the Memphis market. Like Chicago, this will combine all three modes with 1,000 to 2,000 acres [405 to 810 hectares] of developable land."
        Cunningham lauds the public-private partnership that has resulted in the Alameda Corridor in southern California. And he offers this siting tip, factoring in inbound and outbound freight costs:
        "If you are looking at an intermodal hub, for every 30 miles [48 km.] you get closer to that hub, you're going to save about 50 cents per sq. ft. on your rent."
        The BNSF center in Chicago is about to have some company from rival Union Pacific, which is putting in its own $181-million multimodal facility near Rochelle, Ill., some 80 miles (129 km.) outside the Loop. Alter Group, along with Black Earth LLC, is going to develop a 200-acre (81-hectare), 3-million-sq.-ft. (278,700-sq.-m.) build-to-suit industrial park in the area as well, at a cost of some $100 million. And an option is in place to expand that to another 87 acres (35 hectares) if the need should arise.
        Duke Realty is another player entering the Midwest distribution market in a big way, with more than 5.8 million sq. ft. (538,820 sq. m.) of office and industrial properties in the Chicago market alone. The company is building on the success of its 350-acre (142-hectare) Crossroads Business Park in the area by recently acquiring 86 more acres (35 hectares) in Romeoville (also near Interstate 55) for the construction of three bulk distribution facilities totaling more than 1.9 million sq. ft. (176,510 sq. m.).
        The same company is pursuing a partnership with the Global Transpark Authority to develop the North Carolina Global Transpark in Kinston, N.C. The 2,000-acre (809-hectare) logistics and industrial park has 800 acres (324 hectares) available already, immediately adjacent to the state's longest commercial runway, at 11,500 ft. (3,505 m.) Following the Alliance Texas example, the park is trying to position itself as a major hub, within 90 minutes of Raleigh and of two deepwater ports.
        As for the powerful hub of Chicago, in late July, there was a sign that multiple logistics trends are coming full circle: all-powerful Wal-Mart, heretofore identified with small town America, announced it would be locating several stores in the nation's Second City.

Centroids, Night Hauls and Flow

Every speaker at the NAIOP conference in July mentioned Wal-Mart as the trend-setter in logistics. It extends from the distribution network of suppliers to the retailer to the kinds of pallets they use to accomplish it.
        "It blows me away everywhere I go – the impact that Wal-Mart has on everything," said Dirk Mosis III, vice president, real estate investments, for San Antonio-based USAA Real Estate Co., which is looking to the Chicago, Memphis and Columbus, Ohio, markets for logistics facility action.

Terry Harris, managing partner for Chicago Consulting, says it pays to pay attention to competitors' warehouse networks - so you can do them one better. Keeping customer service questions at the forefront is also essential: better service to that major client might mean better sales to other prospects. Network designers need to continually re-do the math on costs, he says, as well as keep plugging in the numbers on alternative sites ("Don't try to develop your own software," he warns). Finally, he says, the speed of the roll-out has to be determined. And once that roll-out is complete and evaluated, it's probably already time to re-evaluate.         "Not everybody is contracting," he says of the consolidation wave. "One of the vibrant parts of the American economy is new things sprout up ... and all of these new ideas require distribution. The 15-year trend for well-established businesses is to contract from 7 to 4, or from 15 to 7, but it's not universal."         Harris points out that computer software used in designing distribution networks has this crucial difference too - cost calculation is one thing, optimization another. The more flexibility in the software (as in the network itself), the more opportunity exists for accurate and profitable evaluation and choice.

        Others in the retail sector are doing their part to keep the pace. In May 2002, Dollar Tree Stores, based in Chesapeake, Va., announced plans to locate a $75-million center on 112 acres (45 hectares) in Joliet, and another $40-million, 665,500-sq.-ft. (61,825-sq.-m.) center on 58 acres (24 hectares) in Ridgefield, Wash.
        "These two sites fit very well with our logistics model, offering excellent access to transportation and import channels, which are key to the efficiency of Dollar Tree's distribution systems," said Steve White, Chief Logistics Officer. The company currently serves 2,319 stores in 41 states with a network of seven distribution centers, one of which will be replaced by the Joliet facility. The move of business operations and jobs to Joliet may be one reason that, among a list of cities predominantly in California and the Southwest, Joliet was revealed in July as the 10th-fastest-growing city of 100,000 or more residents in the country.
        The State of Washington is no slouch in the logistics arena either. Newport News, Va.-based Ferguson Enterprises, a plastic pipe and plumbing supply distributor, is building an $18.5-million, 350,000-sq.-ft. (32,515-sq.-m.) facility on 75 acres (30 hectares) in the Horn Rapids Industrial Park in Richland, scheduled to open this fall. The initial facility will employ 90, but Ferguson plans to eventually build a 95,000-sq.-ft. (8,826-sq.-m.) fabrication and storage facility that could employ another 110 people.
        The incentive package included a rail spur, customized training, a $450,000 grant and a $1.2-million no-interest loan. "Logistically, the Tri-Cities is an ideal location to service our regional branch and customer needs," says Don Swain, Ferguson's manager of facility development.
        USCO's Evans notes that companies want shorter and shorter terms these days, as well as an increase in cross-docking capability. And his firm has found a niche in serving the small-space users who want to share a facility, with anywhere from 15 to 55 clients sometimes sharing space and workers, and changing their allocations as peak seasons come and go.
        Bob Delaney, vice president of Cass Information Systems, says the labor question goes to the heart of things, noting the different ways that FedEx and UPS have approached it. And he makes some observations about what has worked with workers.
        "A good example years back was Reno-Sparks, Nevada," he says. "They had gambling, and not much of an alternative, yet the location was terrific, for reaching all of California, Oregon and Washington. The rates were favorable in those days, even regulated. And you had people dealing cards at night and working in a warehouse during the day."
        And the desired labor pool and work ethic can be found in all kinds of places.
        "Wal-Mart has DCs in places like Olney, South Carolina and Bedford, Kentucky," he says, places barely on the map, but near Interstates. "They run two shifts and employ families, with five or six farming people who can supplement their incomes." And those workers come with a farmer's value system, offering employers a certain degree of comfort.
        John Swanstrom, senior vice president of logistics for Englewood, Colo.-based Gart Sports, told the NAIOP audience that 38 percent of the company's freight comes through West Coast ports like Long Beach, in part due to Asia-based production. The company currently serves 184 stores through four DCs. He noted a couple of trends: lots of height (at least 32 ft. [9.8 m.] clear) and big trailer yards.
        "Egress is a constant issue," he said, noting the need for at least 100 trailer spots because of the constant flow of traffic. In Ontario, Calif., that's especially an issue at night, when the predominant number of trucks prefers to travel. Meanwhile, Swanstrom balances cost, flow and flexibility as "optimum" keeps changing its definition depending on the company's store configuration.
        Other trends in evidence include sheer facility size, with 1 million sq. ft. (92,900 sq. m.) becoming almost common. Also, says Kent Waggoner, vice president of business development for TRISTAR Business Communities, clear heights approaching 40 ft. (12 m.) require "super-flat" floors for proper racking.
        The power of Long Beach has also created new opportunities for some logistics players. Ron Shamlaty, of APL Logistics, says much of the Long Beach inbound cargo was making the trek to consolidation centers in the Midwest and East before coming back out again for West Coast distribution.
        "So we have created de-consolidation," he says, with the first facility about four miles (6 km.) from the port, in Torrance. "We unload your containers, bring it into our de-consolidation center, sort it out and help you set up distribution right out of that facility for your West Coast."
        He notes further that the handling affords a "re-consolidation" savings opportunity for the remaining eastbound cargo. APL is looking at other ports in Seattle, New Jersey, Houston and Charleston, S.C., for opportunities to expand the concept.