MULTIMODAL DISTRIBUTION FACILITIES ARE PROLIFERATING. BACKED BY LOGISTICS PARTNERSHIPS AND WORLD ACCESS, THEY’RE ENCOURAGING DOMESTIC MANUFACTURERS TO GO GLOBAL.
What can your logistics center do for you? If you’re Randy Redmer, director of Global Business Development, the answer is, “Open up new markets.” Working with Port Lansing Global Logistics Centre, the maker and supplier of components for special vehicles and equipment decided to leap into the global marketplace. “We had planned to export and Port Lansing was a real encouragement to us,” Redmer says of Michigan’s new distribution center. “It’s been a huge help in a number of ways. They’ve helped us acquire a couple new customers; they’ve helped us find and partner with some great freight forwarders; they’ve put us in contact with a law firm that helped us comply with export requirements and helped us resolve some issues we had with customs.”
The staff at Port Lansing Global Logistics Centre, which was developed to increase the Greater Lansing region’s involvement in global commerce, also introduced Redmer to the U.S. Commercial Service and Michigan Economic Development Corporation, from which his company has received two grants and applied for a third “to expand our exporting operations,” he says.
As with many distribution centers, Port Lansing is located in a foreign trade zone (FTZ) offering duty-free importation on goods used in assembly then exported. Redmer plans to utilize that duty-free status to bring in components from Asia for solar-powered survival lights that will become part of internationally sold survival kits. The company also plans to use the Port Lansing center to export modified vehicles and assemble tanks that will be sold into Asia, Africa and South America.
Port Lansing’s work with Redmer is part of a trend that has seen the rise of distribution facilities across the U.S., and a growing number of freight forwarders and third-party logistic providers (3PLs) are working with these facilities to provide advice to manufacturers, including encouraging companies to expand or, as in Redmer’s case, begin exporting.
Port Lansing, which has been designated as an inland port by an act of Congress, is being used by “a handful of shippers,” according to Brent Case, director of Foreign Trade Zone and Global Logistics Development for the Capital Region Airport Authority, which established and manages Port Lansing. Case says that “the purpose [of the port] was to increase the amount of international freight moving through Lansing and to encourage area businesses to look at exports and international trade.”
Currently there are about 500 importers and exporters within 50 miles of Port Lansing, according to Case, with “a growing critical mass of people getting interested in international trade and looking at exports.”
A wide range of services—freight forwarding, logistics-operation management, trucking, warehousing, freight consolidation and containerization—are provided to Port Lansing users by members of the Port Lansing Global Logistics Cooperative. These intermodal services are being offered by an increasing number of distribution facilities.
By bringing together such private entities, a facility is at the forefront of providing all kinds of logistics efficiencies, explains Jeff Jorge, executive partner with Royal Oak, Michigan-based Global Development Partners, a member of the Port Lansing Cooperative.
“We’re seeing this trend start to migrate toward some of the more forward-thinking folks,” he observes. “Private industry is making these global gateways more aware of how they can incorporate those systems to make what they do even better for the exporters surrounding a particular location.”
More distribution and intermodal facilities are being opened, often by railroads, to carry exports to sea ports by rail and even air as trucking costs continue to rise and delivery time becomes more important. The aim is to place distribution facilities near producers of goods bound for export and reduce the dependence on slower, more costly trucks.
Burlington Northern Santa Fe (BNSF) and Union Pacific (UP) are among those railroads which have been building their own distribution centers along their tracks in areas with high import and export activity, while Kansas City Southern (KCS) has partnered with selected warehousing, trucking and logistics firms for the operation of distribution facilities, or “TransLoad Centers,” as the company calls them. KCS has some 50 small TransLoad Centers in 10 central U.S. states that serve nine gulf ports in Texas, Louisiana and Mississippi. It also controls five larger intermodal facilities in Kansas, Mississippi and Texas and extends its rail line into Mexico, where it serves three gulf ports and one ocean port.
Union Pacific operates some 30 intermodal facilities—“the largest intermodal network in North America” with “the most intermodal capacity in the industry,” the company says—from Chicago to the Pacific Ocean and south to the Gulf of Mexico. It is currently constructing what it terms a “new, state-of-the-art rail facility” in southern New Mexico, the Santa Teresa Logistics Park, to provide that state with its first key inland port. The logistics park, scheduled to open in March 2014, will feature an intermodal ramp, fueling facilities and an intermodal block swap/switching yard.
The most ambitious logistics park being built is BNSF’s Logistics Park Kansas City Intermodal Facility (LPKC). Krista K. York-Woolley, a corporate director, says LPKC is “set to become among the largest, most modern freight logistic centers in the industry, a master-planned distribution and warehouse development configured to suit the broadest range of multi-modal needs.” The logistics park will add to BNSF’s intermodal facilities in Stockton and San Bernardino, California; Alliance, Texas; Chicago and Memphis.
Located 25 miles southwest of downtown Kansas City, Kansas, on a FTZ site with 535 developable acres, LPKC will offer direct rail service to and from Pacific and Gulf of Mexico ports and immediate access to Interstate Highways 35, 70 and 29. It will feature container and trailer service, six 8,000-foot strip tracks, five wide-span cranes and an automated gate system.
Norfolk Southern Railway, which has rail lines in 22 eastern states and the District of Columbia, recently opened new distribution facilities in Memphis; Birmingham and Green Castle, Pennsylvania; and will be opening a fourth new facility in Charlotte, North Carolina, at the end of 2013. According to Jeffrey Heller, group vice president for International Modal Operations, these additions will bring Norfolk Southern’s total number intermodal facilities to 23.
“The new facilities are like others in terms of features, Heller explains. “We have gates that allow trucks to go in and out without a physical check. We have locations so trucks know where to go to pick up their boxes. The goal is to get a truck in and out of the facility as fast as possible.
“They’re located either in areas that have some manufacturing or some consumption, which are the bigger cities or where there’s additional land that could help foster new activity, whether it be imports or exports,” he says. “Intermodal is now our fastest-growing segment. That probably speaks for most of the other railroads as well.”
What’s driving this increase? “Conversion from truck to rail,” Heller explains. “The potential business is in the majority of the freight that currently moves over highways. Fuel costs are going up. Highways are becoming congested. And there’s the whole environmental issue. We can move 280 to 300 boxes on one train, which would be 280 to 300 trucks on the highway. That causes us to add more capacity.”
Other efforts to create distribution facilities without direct railroad participation are under way.
Sean Wilcock, vice president of Imperial Valley Economic Development Corp., says his company is working toward establishing a distribution facility in the area east of Los Angeles that has a Union Pacific line running to the Long Beach and Los Angeles ports and could be used by exporters. Raw materials, using a reopened old train line, could be shipped to maquiladoras in Mexico for assembly, with finished goods being brought back, he explains.
“There are no other distribution facilities in this general area,” Wilcock says.
Central Indiana also is becoming a major distribution hub, says Charlie Podell, a senior vice president of Indianapolis-based Duke Realty Corp. Duke Realty recently co-developed AllPoints Midwest on land outside Indianapolis as a logistics headquarters and distribution park for Beloit, Wisconsin-based Regal Beloit Corp., which makes electric motors and generators and mechanical motion control products that it sells internationally. With the area crisscrossed by major interstates and rail lines, as well as being home to an international airport and FedEx’s second-largest hub, there is much export and import activity, providing Regal Beloit and others multiple transportation options.
Increasing land costs near sea ports make inland distribution facilities more attractive for both importers and exporters, says Olen Wood, president of Freeport, Long Island-based EMO Trans Inc., a freight forwarder with a new logistics office and warehouse operation at Port Lansing that opened in March. Wood says the facilities are especially attractive to exporters solely interested in getting goods onto vessels, not distributing imported goods throughout the U.S.
“The closer to a port you get, the more expensive the square footage becomes,” he notes. “So if you’re not doing business that’s tied directly to an importation process, or if the goods are not of high value, then part of your cost-basis is having the lowest possible costs for the warehouse space itself.
“So you see that logistics centers, distribution centers, warehousing centers, container freight stations and terminals are being opened because they can play a significant role in the cost and efficiency of delivering goods to a rail terminal and then using rail to move those goods to a port for export,” explains Wood.
“It’s very much an intermodal type situation that utilizes truck, rail and then ultimately ocean freight services,” he says. “Intermodal is a huge part of the industry and one that’s been coming into its own in the last 20 years.”
Persistence Pays Off