By Michael D. White, author and freelance writer
For any company wanting to remain stable and competitive in the ever-morphing world of global business, it’s absolutely critical to grasp how fluctuations in the economy impact the supply chain and what trends are developing that impact the efficiencies and costs of moving products to market.
In the “macro,” says Rosalyn Wilson, president of Freight Matters, a Maryland-based logistics consultancy, the global and U.S. economies “may well get worse before they get better, which doesn’t bode well for trade and logistics activity over the near term,” says Wilson.
“Retail sales have risen, but they’ve risen far less than everybody expected them to,” she says. “Consumer sentiment is really hot and real wages are going up, so it would be natural to expect consumers to begin spending, but what we’re seeing is that consumers are willing to spend on services rather than goods.”
That, says Wilson, means a tougher market for the logistics industry “because it’s usually the consumer purchases of goods that serve as a benchmark for an expansion of activity in the movement of goods. It so happens that the U.S. consumer sector is very rocky all the way around at the same time the global economy is very fragile and not very stable.”
The situation “puts U.S.-based companies in the position of being more creative than they ever thought they could be as to how they do business.”
As a result, more and more shippers are trending toward an increasingly sophisticated approach toward the actual geographic location and use of their distribution and warehouse operations, better controlling their inventories, implementing the latest technology to reduce the cost of doing business, and folding critical transportation efficiencies into their corporate expansion strategies.
Regional Distribution Centers
“We’re in an era now when companies are starting to offer same day delivery, so they can’t afford to have two or three warehouses to serve the entire country,” says Wilson.
It’s critical, she says, that companies position themselves best when they minimize the time needed and cost incurred in getting their goods to wherever they need to be. That means positioning facilities “close to more than just one mode of transportation.”
Simply, operating with multiple distribution centers enables companies to better disperse inventory over multiple locations, thus assuring faster delivery at lower cost.
In May, for example, Memphis-headquartered Federal Express completed the acquisition of 260 acres near Pennsylvania’s Lehigh Valley International Airport for the construction of a one million square foot distribution center. The facility, slated for completion in 2018, will have ready access to not only the airport, but several major highways linking it with Philadelphia and the state’s entire southeast.
Last fall, Walmart, the world’s largest retailer, opened a new 1.2 million square foot distribution center near Atlanta to serve its burgeoning U.S. Southeast e-commerce business. The facility, the third specializing in e-commerce order fulfillment opened by the company in as many months and its seventh in the state, is located southeast of Atlanta.
In November, e-commerce giant Amazon unveiled plans to open its first Ohio mega-warehouses of more than one million square feet, the other of more than 800,000 square feet – near Columbus, Ohio with another planned in Twinsburg. Amazon also has said it will double the size of its planned warehouse in Joliet, Illinois, and built additional regional facilities in both New York and New Jersey to better serve local markets.
Since the beginning of the year, the company has said it will bring the number of ‘fulfillment’ centers it operates in California to nine with a pair of new regional distribution warehouses in Eastville and the ‘Inland Empire’ community of Tracy, a region that is seeing a surge in the number of companies positioning or expanding distribution operations there.
More Focused Inventory Control
Fender, the iconic guitar manufacturer, has its North American distribution center in the Inland Empire city of Ontario, about 35 miles east of Los Angeles. Over the past several months, the company has recalibrated its approach toward distribution by implementing technology that allows “real time” control over inventory and expense, material, and shipping costs at the facility, the largest of the multiple distribution facilities it maintains around the world.
“We wanted to free up warehouse space to lease to other companies and add to our revenue stream and we wanted to shift our logistics from an internal operation that had been around for 40 years to an external operation overseen by GENCO, a 3PL division of FedEx,” says Nate White, Fender’s global director of artist relations. “We moved to cut down on the number of plates we were spinning in the air in an effort to keep the plates remaining spinning faster.”
This was a critical shift in the company’s traditional paradigm “as it’s necessary for the Ontario facility to maintain a more robust SKU count because of its proximity to our Ontario manufacturing facility,” says White. “We’re in a situation in North America where we have to support a more robust artist roster and dealers that are more specialized.”
The logistics industry, says Wilson of Freight Matters, “is seeing a much more collaborative approach now with 3PLs exerting significant influence over corporate decision making and companies understanding that if they can move the goods out of a facility quickly they can secure economies of scale that can free that piece of their property for subletting.”
According to Research and Markets’ Global Contract Logistics 2016 report, “Sophisticated technology systems are no longer reserved for those with the largest budgets. With greater data sharing, traditional barriers between operation and support departments within companies have been reduced greatly. As a consequence, these new work flow processes throughout the entirety of the supply chain require new platforms. Technology has literally transformed how the logistics functions,” states Wilson.
The effective application of the right technology, she says, “holds companies to account because their customers can observe the progress (or the lack thereof) of their shipments at any given point along the supply chain. It’s gone a long way in making the process more transparent and has contributed a lot to customer satisfaction.”
Logistics technology developer PINC Solutions recently teamed up with Tennessee-based 3PL Kenco to research the use of drones to manage activity at its 90 distribution facilities in the U.S. and Canada.
A New Jersey-based provider of temperature-controlled logistics, East Coast Warehouse & Distribution, has also teamed with PINC to craft a cloud-based advanced yard management system (YMS) to help manage imports and exports for its food and beverage customers.
The YMS calls for every container moving in and out of the company’s Jersey City, New Jersey, facility to be equipped with a magnetic radio frequency identification, or RFID, tag can track its location using readers and GPS sensors mounted on spotter trucks.
The new system allows both employees and customers to have “real time access” into the status of their containers – including whether they are in transit, have arrived at the facility, are in process of being unloaded, or have been emptied and checked out.
The new system, says East Coast Warehouse & Distribution CEO Jamie Overley, “boosts our operating efficiencies, helps reduce errors, risk and exposure, and allows customers to have a clear window into our operations.”
Similarly, on the carrier side, last November, after five years of development, Denmark-based Maersk Line unveiled a remote container management (RCM) system designed to expedite the transport of perishable food products by transforming a standard refrigerated container into a digitally connected device that produces a mobile signal that can provide the shipper with real-time data on the status of the container across all links in the cold supply chain.
Since it was unveiled, RCM transponders have been installed in 270,000 Maersk refrigerated containers.
Working with data gleaned from a blind analysis of 116.8 million freight bills generated by 33 of the largest LTL carriers in the U.S., SMC³ developed an ‘industry platform’ that uses application program interfaces to link shippers, trucking companies and logistics providers.
The platform, called CzarLite XL, an enhanced edition of SMC³’s CzarLite product, is designed to speed supply chain communications by providing a neutral advanced tariff system when negotiating LTL (Less-Than-Truckload) shipping rates, according to the Atlanta-headquartered technology provider and trucking association.
Location, Location, Location
Competition for business isn’t confined to the goods and services sectors of the economy. States, regional economic development agencies, and chambers of commerce – aka ‘stakeholders – nationwide have spent countless hours and millions of dollars in positioning themselves a cut above other locales as ‘the place to do business.’
Enticing tax incentives to great weather, companies that have any hope of being competitive realize the key to deciding ‘The Big Where,’ says Rosalyn Wilson, is “making sure their operations have ready access to transportation networks that can move product efficiently. It makes absolutely no sense to locate a manufacturing facility or distribution warehouse where links to customers are poorly developed or inadequately maintained.”
Currently, some 95 percent of international trade moves by water and, according to Kurt Nagle, president and CEO of the American Association of Port Authorities, the correlation between port infrastructure and economic development “are in our nation’s best interest because it provides opportunities to bolster our economy, create and sustain jobs, enhance our international competitiveness, and pay annual dividends through the generation of more than $321 billion in federal, state and local tax revenues.”
U.S. ports “are pouring millions into attracting business by improving infrastructure and beefing-up their connections to the national transportation grid by improving their rail and highway access, says Rosalyn Wilson.
But, she adds, the Port of Savannah, Georgia serves as a prime example of the “critical nexus” between deep-water port capabilities and regional economic development.
According to officials at the Georgia Port Authority, demand should remain strong for additional industrial space as the market requires higher vacancy rates to ensure space upon demand for customers that do not have the luxury of time for construction.”
Currently, seven major projects are being developed with more than 1.7 million square feet of warehousing recently completed and more than 1.9 million square feet under construction.
In March, industrial real estate developer OmniTRAX announced details of a public-private partnership with the Effingham County Industrial Development Authority to build a 2,700-acre industrial ‘megasite’ that will be served by both the Norfolk Southern and CSX railroads.
Home furnishing retailer Safavieh, which already has two properties in Savannah, is currently building a 500,000 square-foot distribution facility with 100 loading docks with several small-to-mid-sized distribution facilities ranging from 22,000 to 88,000 square feet are under construction, as well as a 240,000 square-foot structure at the Pooler Distribution Complex near the port.
From coast to coast, with ready access to a maximum number of transportation modes, strategically-sited regional distribution centers that utilize the latest technologies to control inventory and speed the flow of goods are becoming more the norm than the exception.
The management of the time it takes to get products from the manufacturer to the customer has proven to be an increasingly critical element of the business plans of more and more companies.
In logistics, after all, time is money; and companies, both large and small, are cashing in.
Michael D. White is a published author with four non-fiction books and well more than 1,700 by-lined articles on international transportation and trade to his credit.
During his 35 year career as a journalist, White has served in positions from contributor and reporter to managing editor for a number of publications including Global Trade Magazine, the Los Angeles Daily Commercial News, Pacific Shipper, the Los Angeles Business Journal, International Business Magazine, the Long Beach Press-Telegram, Los Angeles Daily News, Pacific Traffic Magazine, and World Trade Magazine.
He has also served as editor of the CalTrade Report and Pacific Coast Trade websites, North America Public and Media Relations Manager for Mitsui O.S.K. Lines, and as a consultant to Pace University’s World Trade Institute and the Austrian Trade Commission.
A veteran of the United States Coast Guard, White has traveled in both Japan and China, and earned a degree in journalism from California State University and a Certificate in International Business from the Japanese Ministry of Trade & Industry’s International Institute for Studies & Training in Tokyo.