Those terms were coined by Franco Eleuteri, senior vice president with AECOM-McClier Corp., and an expert on transport-related facility development.
“In a meeting with Dell in order to discuss trends in the creation of Industrial Zones, I was met by the directors of real estate and logistics,” he says. “This is indicative of the recognition of the multinational corporations of the importance of logistics issues in addition to production and real estate issues as part of a complex formula.”
Among the optimizers are such companies as Procter & Gamble, Wal-Mart, Sysco, Ford, Timken, RR Donnelley, Target and Unilever. In many cases, a key to their success is the role of third-party logistics service providers (3PLs), who keep gaining ground.
“I remember when it was a $10-billion market, and not believing it would be $20 billion in five years,” David P. Evans, vice president, business development, Western Area, USCO Logistics, told an audience at the I.con industrial real estate conference organized by the National Association of Industrial and Office Properties. “It was not – it was a $34-billion market.”
As for logistics market penetration, those 3PLs have gone from 2.7 percent in 1992 to 10 percent in 2002, driven largely by moves of Fortune 200 companies looking to increase efficiency, avoid liability and employment issues and standardize high quality. Plus, noted Evans, “getting rid of assets works wonders for your balance sheet.”
The field of play may be real estate, but the game also takes place on the never-ending clock face of commerce. A glance at current logistics projects finds no one napping.
Absolutely Growing Overnight
FedEx’s logistics services recently won a fifth straight “Supplier of the Year” award from General Motors. The company’s global build-out continues apace, driven especially hard by the company’s ground services. It’s all part of a $1.8 billion, six-year expansion plan to nearly double FedEx Ground’s daily package volume capacity from 2.5 million to 4.8 million by the end of fiscal year 2009. The plan includes the addition of 10 new and 23 expanded central distribution hubs, as well as the expansion or relocation of more than 300 existing facilities. It also includes the deletion of thousands of jobs from its air division.
Just look at this year so far:
• In April, a 163,000-sq.-ft. (15,143-sq.-m.) FedEx Ground facility opened in St. Louis to serve a 400-mile (644-km.) radius.
• In May, FedEx Ground purchased 75 acres (30 hectares) in the heart of Cobb Co., in Atlanta, for facility development. The seller? Atlanta-based United Parcel Service. David Nixon, senior vice president of CB Richard Ellis’ Atlanta office, admits to some surprise that UPS would sell to a rival, “but the property was for sale and it was a cash transaction.”
• In June, Stiles Corp. was chosen as the design/build firm for FedEx’s new 137,000-sq.-ft. (12,727-sq.-m.) Miami Airport Gateway office and warehouse facility, an $18-million project focused on the company’s exploding Latin American and Caribbean cargo business. The property sits on Miami-Dade Co. property, and at the end of FedEx’s 25-year lease, will revert to the airport authority.
• Also in June, FedEx Ground followed that up with a $53.5-million, 335,000-sq.-ft. (31,122-sq.-m.) mid-Atlantic processing hub on 114 acres (46 hectares) in Hagerstown, Md., which employs 400. As a sign of the company’s ramped-up scale, it processes 45,000 packages per hour, much like facilities planned for Memphis, Dallas and Cincinnati will do. The facility follows on the fall 2002 opening of a 342,000-sq.-ft. (31,772- sq.-m.) hub in Mississauga, Ont., adjacent to Toronto’s Pearson International Airport. The facility employs 450 and processes up to 12,000 packages per hour.
Clustering near FedEx Ground’s customers, particularly production-focused operations, was key strategic consideration in selecting the Hagerstown site, explained President and CEO Daniel Sullivan.
“The Mid-Atlantic region is home to a large concentration of manufacturing industries and is critical to our continued success,” he said at the announcement. The site will work in concert with the division’s existing hub in Harrisburg, Pa., 77 miles (124 km.) to the northeast. Among other incentives was a $1.2-million Community Development Block Grant.
In August, FedEx Freight opened a 120-door service center on 43 acres (14.4 hectares) in Newburgh, about 40 miles (64 km.) north of New York City.
Looking long term, the FedEx plan for a $500-million overnight cargo hub at Greensboro, N.C.’s Piedmont Triad International Airport is meeting with some community opposition. However, a judge’s refusal in July to order a new environmental review could help smooth the way to launch construction, pending state and federal environmental permitting. The U.S. Dept. of Transportation has pledged $10.7 million toward the project, which FedEx wants up and running by June 2009 to serve the entire East Coast.