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“Nearly 40 percent of new and expanded industries were involved in distribution of products such as lumber, cement, steel, plastics, food, paper, chemicals, aggregates and auto parts,” said Larry Collingwood, assistant vice president of industrial development for Norfolk Southern Corp., in characterizing the company’s new plant and expansion participation in 2003, involving 89 projects along its rail lines.
In the Lehigh Valley of Pennsylvania, about half of the area’s 41 new plants and expansions in 2003 were distribution-related, a trend that echoed across North America. And food service distribution centers (DCs) lead the way.
Across the country in Portland, Ore., the DC trend is evident too. A recent study found the region’s value-added distribution segment created nearly $810 million in personal earnings and paid $88.6 million in taxes to state and local governments in 2003. The study also found that 68 area firms in the industry generated an estimated 17,242 jobs (1 in 10 for the area) and $2.81 billion of business revenue in 2003.
But the DC build-out runs across all industries. And two recent reports from distribution giant ProLogis offer a snapshot of the domestic DC landscape’s external and internal realities.
In December 2003, the company reported on the bulk warehouse and DC construction pipeline in the top 30 U.S. markets. Among its findings:
The 2003 total of 58 million sq. ft. (5.4 million sq. m.) in construction starts was less than half of what was started at the real estate cycle’s peak.
Build-to-suits accounted for 33 percent of total starts during the first half of 2003, 55 percent during the second half.
Ten of the 30 markets reported volumes of newly started space for the first half of 2003 that either equaled or exceeded total starts for the entire previous year: Baltimore, Charlotte, Cincinnati, Columbus (Ohio), Dallas, Denver, Indianapolis, Louisville, Phoenix and Portland (Ore.). However, the following 12 markets reported no new starts during that same period: Tampa (Fla.), St. Louis, San Francisco’s South Bay and East Bay submarkets, Orange County (Calif.), Seattle, Nashville, Miami, Houston, Harrisburg (Penn.), Allentown (Penn.), and Austin.
In February 2004, ProLogis released more research, conducted in partnership with Ohio State University, on whether years of expensive system investing had helped inventory turnover actually improve in the years between 1979 and 2001.
In 9 of 14 industries studied, overall inventory turns were on the rise. However, only four of the industries – apparel, building supplies, food products and medical products – showed “clear-cut improvements in their turnover” when it came to finished goods inventory turn. That led the report’s authors to conclude that “U.S. companies have been either unable or unwilling to manage their finished goods inventories more efficiently.”