A $9.3-billion medical device and equipment distribution company now based in a new HQ in the Chicago suburb of Northfield, Medline Industries houses 15,000 employees in 23 million sq. ft. (2.1 million sq. m.) of space. The firm owns 80 percent of that space, and operates distribution facilities at 44 US locations while maintaining factories at around 20 sites worldwide.
Dmitry Dukhan, vice president of real estate for Medline Industries, says that these days, “You compete for labor by being the employer of choice.” As for his team’s location choices, “The most important is getting to my customers,” he says. “Over the years, it stays consistent, in terms of customer being No. 1, labor No. 2, logistics No. 3. Incentives are usually No. 4 or 5 in terms of site selection. When incentives are less than 5 percent of the value of the project, we’re not going to make our decision based on that. Power, security and safety come next, followed by quality industrial park and amenities around the facilities.”
Here Dukhan offers further insights into the role his team’s actions and decisions plays in furthering Medline’s performance, profitability and employer-of-choice status.
Walk us through your recent spate of site selection and expansion activity, which has included projects we’ve tracked in Colorado, Alberta and Slovakia.
Dmitry Dukhan: We follow a very consistent, standardized site selection process. We start with sales mapping, understanding where our customers are and where they’re going to be. We marry that up with logistics. We have very specific logistics criteria — it must be within one to two miles of major arteries, and in anywhere from a 10- to 30-mile radius within that sales mapping.
Once we dig deeper, we look at infrastructure and quality industrial parks. My first preference is to work with Prologis or Duke. We want strong and strict CC&Rs (covenants, conditions and restrictions) to preserve value long term, and safety and quality long term. Then we start negotiating on the sites.
We’re a regional distributor, so our motto is to be within a 150- to 200-mile radius of our distribution center. You also don’t want to be too far away from where employees live.
About a year ago we moved forward with 1 million square feet in McDonough, Georgia (outside Atlanta). We looked at the entire region within a 100-mile radius, and after applying the sales, demographics, incentives and quality industrial park criteria, we picked McDonough. It’s within two miles if I-75, there’s an amazing workforce and a very strong pro-business community, and we have low-cost utilities.
Among the company’s major recent projects has been a headquarters investment in Northfield.
Dukhan: Our headquarters project is just a reflection of the company’s growth. We were at our current campus for 30-plus years, and outgrew our capacity to attract the right kind of talent. So we had to expand. We took a long-term view of how to position where to be, incentives and workforce development. We had to accomplish proximity to downtown (Chicago), and consider ease of logistics for employees, and impacts on various numbers of people. Incentives were important. We considered new vs. existing construction.
Chicago is unique because it has this amazing culture, vibe and growth downtown. It attracts everybody — look at McDonald’s and others. Yet we did not want to be downtown. Suburbia has 30-percent vacancy. We wanted to take advantage of that, yet be closer to downtown, within a 15- to 20-minute drive on a major artery.
We achieved that by being in the right place at the right time when Kraft was purchased and made an announcement they were moving downtown, and had major layoffs. Medline was able to be part of that solution. We’re leasing long term — we got in and negotiated a great deal.
Attracting millennials in the workforce is definitely a challenge ... With unemployment under 5 percent you have to compete for their talent. Providing a Class A suburban campus close to downtown is one way. We’re providing shuttles to the city and the train, an amazing fitness center, food choices, and a beautiful environment. The former headquarters in Mundelein was 35 miles away in true suburbia.
Weather calamities have thrust Medline sites in Texas and Louisiana into action recently.
Describe your team’s role in the company’s Emergency Action Plan.
Dukhan: The first thing is you have to plan ahead — plan, plan and plan again. Have an emergency process. The first thing that happens is daily communication gets established, and the right operations leaders lead those calls. Daily communication goes out that combines sales, customers, operations and drivers to order ahead of the event. The emergency preparedness team monitors closely, and pre-orders after talking to customers. There is close coordination among the right warehouse branch, the sales force and our internal transportation department to make sure we make those deliveries until a certain point.
Our facilities are protected. We own most of our sites, and because of that, we make extensive investments in things like backup generators, and satellite power to enable IT to function. The advantages we have include extra trailer space to load up ahead of time. We can continue to operate through total loss of power and Internet. Our sites are fenced in and with high security.
In cases of Florida and, before that, Katrina, we’ve never lost a facility or had one shut down for a long period of time. The facilities themselves stay dry, and all of our team members are safe. We haven’t lost any assets or trucks. In fact, in some cases we pulled some of our trucks inside the distribution center.
It takes really tight coordination — watching the weather, urging customers to pre-purchase ahead of their needs. As a real estate guy my function is limited to supporting the sites. Our operations leadership drives all of this. Fleet directors, regional VPs — that is the team really driving the solution.
But the most important thing is having the culture of always doing the right thing and going above and beyond for the customer. Once you based the decision on that, everything lines up like dominoes. The workforce is trained in emergency preparedness and going through those drills. Being a premier partner in medical/surgical, we automatically purchase hotel rooms for our team members, so people can work close to the site.
Our operations leadership works very closely with communities, because customers are all major hospitals and nursing homes and medical facilities, with life-and-death situations. It helps to be active with firefighters, Homeland Security and the police. It starts with a focus on the customer and great leadership in operations.