South Carolina: The Logistics Advantage
Boasting proximity to major U.S. markets and a wealth of transportation resources, the Palmetto State leads the Southeast in serving the nation’s distribution needs.
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South Carolina residents like to boast that they have it all: mountains, foothills, coastal plains, beaches, tropical sea islands, and beautiful weather. The state’s appeal becomes even clearer when you factor in its logistics advantages.
South Carolina lives by the golden rule of real estate— location, location, location. “The state is well-positioned from a logistics point of view,” notes South Carolina Secretary of Commerce Robert M. Hitt III.
Located halfway between New York City and Miami, the state boasts close proximity to major U.S. markets. South Carolina connects to the rest of the country through the following modal resources:
- Five primary airports and many others put any location in the state within about one hour of a commercial airport.
- The Port of Charleston, one of the busiest containerports along the Southeast and Gulf Coasts.
- CSX Transportation, Norfolk Southern, and seven affiliated and combined rail lines, offering daily service in every metro area.
- Five interstates, enhanced by another 41,000 miles of state-maintained highways.
Toss in an outstanding workforce, a business climate that is the envy of the nation, low power costs, and a state government committed to ongoing investment and continuous improvement, and it is little wonder that a litany of the biggest and best names in American commerce have chosen South Carolina for their logistics hubs. They recognize that when it comes to logistics, the advantage belongs to South Carolina.
“The state has more highway miles per capita than any state in the nation, and the deepest harbor in the South Atlantic region,” notes Donald P. Reed, vice president of business development for South Carolina Power Team, the economic development alliance of the state-owned electric and water utility, Santee Cooper, and the state’s 20 electric cooperatives. “And 130 million people— about half the U.S. population— live within one day’s drive.”
“South Carolina is small and compact,” says Hitt. “In a short day, you can drive across the state.”
Hitt cites the state’s extensive highway system as one of its greatest strategic assets. Interstate highways I-85, I-26, I-77, I-95, and I-20 crisscross the state. These thoroughfares, along with state-maintained highways, offer excellent access in every direction.
“South Carolina’s north-east-south-west capability puts us in a great place geographically,” says G. Clifton Parker, president of G&P Trucking. “We can deliver product anywhere east of the Mississippi River within one day.”
G&P, now celebrating its 75th year of operation, provides truckload freight and services including intermodal shipping, expedited delivery, dedicated routes, warehousing, transloading, third-party logistics (3PL), and brokerage. Headquartered in Columbia, S.C., the company operates three additional locations in the state, along with locations in five other states.
Easy outbound throw
ADS Logistic Services, a 3PL headquartered in Edison, N.J., operates a facility in Gaffney, S.C., because of the state’s proximity to U.S. population centers. “Our South Carolina facility sits in the middle of the eastern seaboard,” says Bruce Mantz, executive vice president, ADS Logistic Services. “This location gives us considerable ‘outbound throw’ in every direction.”
South Carolina’s location is ideal for supply chain planners and distribution networks, with easy access to major population centers on the East Coast and the growing population in the South. The state also offers available industrial and warehouse sites and buildings with close proximity to interstate highways. Such advantages serve as powerful catalysts for growth.
Much of that growth is taking place in Charleston. “We could have established our North American headquarters in any number of cities,” says Mark Darley-Usmar, CEO of UK-based Synergy Logistics. “For our company, delivering modern software solutions is global. Charleston represents the new breed of cities working hard to move from traditional industries to a global business hub.”
Synergy offers Snapfulfil, a warehouse management system using Web technologies and a business model called Software as a Service (SaaS).
“We serve companies ranging from mid-sized businesses with a single warehouse to large enterprises with many warehouses and plants around the globe,” says Darley-Usmar. “While we considered other cities with high concentrations of logistics technology resources, such as Atlanta, Chicago, and Los Angeles, we chose Charleston because it offers our employees a better quality of life. We believe Charleston will give Synergy North America an edge to attract and retain talent.”
Because of Snapfulfil’s enthusiastic reception in the European market— Synergy added 20 Snapfulfil clients in the middle of the global financial crisis— the company moved forward and established Synergy North America in Charleston in 2010.
South Carolina appeals to many growth-oriented businesses. “Our goal is to double our company’s size over the next five years, and Southeast hubs are a key component of our plan,” says Cliff Katab, president of Performance Team, a Santa Fe Springs, Calif.-based 3PL. “The Southeast represents one of our biggest growth areas.”
Performance Team has more than 350 trucks and more than two million square feet of warehouse space in eight states, including a 250,000-square-foot warehouse in Charleston. “We’ve been in Charleston for about six years now,” says Katab, “and that hub continues to be an aggressive growth location for us.”
Performance Team plans to expand its Charleston location, which includes transload and full pick-and-pack operations, by about 100,000 square feet this year.
On the Road in South Carolina. Thanks to South Carolina’s extensive highway system, shippers can quickly get product on the road to just about anywhere. Five major interstates— I-85, I-26, I-77, I-95, and I-20— traverse the state, providing easy access to the many warehousing and distribution hubs operated there.
Shippers seeking a convenient port in the Southeast will find much to appreciate at the Port of Charleston. Numerous ocean carriers and service providers operate at or near the port.
“Charleston is the right market for us,” says Garry Neeves, vice president of Fife, Wash.-based 3PL Regal Logistics. In 2010, Regal expanded its operations to Charleston with 351,000 square feet of warehouse space designed for high-volume, quick-turnaround shipping. The new facility is centrally located three miles from I-526, four miles from the Port of Charleston’s main Wando Welch Terminal, and offers foreign trade zone and drayage zone status for less-expensive transportation to ports.
“Regal’s expansion in the U.S. Southeast is in direct response to demand from manufacturers, importers, and exporters for an ideal East Coast shipping point to satisfy retailers such as Walmart,” says Neeves. “Regal’s facility is already attracting new business to the area in the form of manufacturers and importers shipping product through the Port of Charleston for distribution to major retailers in the East.”
Dubbed the “economic engine of South Carolina,” the Port of Charleston already has the deepest water in the Southeast region: 47 feet of water at mean low water (MLW) in the entrance channel, and 45 feet MLW all the way to the dock. Using the tides— up to six feet are gained during a high tide— Charleston currently handles ships drafting up to 48 feet of water.
Efforts are underway to give the Port of Charleston even deeper channels— up to 50 feet— to accommodate larger ships that already are arriving in advance of 2014, the scheduled opening date of the expanded Panama Canal.
“The larger ships put tremendous focus on channel depth,” says Byron Miller, director of marketing for the South Carolina Ports Authority. Shippers are already considering where they can place their business to be ready for the opening of the new locks, he adds.
“Charleston is the only port on the South Atlantic Coast that currently can accommodate those ships, but it’s tight,” says Reed. “Some dredging and harbor deepening is needed.” To date, Charleston has handled more than 300 ships too big for the Panama Canal. Other ports would require considerably more dredging to handle the post-Panamax ships fully loaded.
“The ships will go where they can come in fully loaded,” adds Reed. “Ocean carriers do not want to halve their loads because they lack the draft to come in and out of the port.”
Southeastern Gateway. South Carolina’s location in the middle of the eastern seaboard makes it an ideal site for supply chain planners and distribution networks. The state boasts accessibility to major East Coast cities and the South’s growing population.
Efforts are ongoing to gain federal support for the next deepening project. The U.S. Army Corps of Engineers has completed the project’s “reconnaissance” phase and determined a federal interest in deepening the port. In fact, the Corps determined that Charleston is the best value for taxpayers, noting: “Preliminary studies at other nearby harbors show that Charleston Harbor would probably be the cheapest South Atlantic harbor to deepen to 50 feet.”
The Port of Charleston also offers shippers open access from all its terminals in a maximum of two hours’ transit time. To pave the way for trade growth, the port is bringing on significant new capacity and has in place a 10-year, $1.3-billion capital plan for new and existing terminals.
Charleston is currently building the only permitted new port terminal under construction on the East Coast. Since 2007, site preparation, demolition, and construction activities have been ongoing for the 280-acre facility on the Cooper River. At build-out, the new terminal will boost total port capacity by a full 50 percent. Additional improvements to existing facilities also are boosting capacity, and Charleston is implementing a $17-million new terminal operating system this year.
“There has been tremendous port-related investment in South Carolina,” says Miller.
The growth does not show any signs of slowing. “With transportation costs continuing to rise, we are focused on strategies to minimize those expenses for our 3PL clients,” says Patrick Moulton, director of new business development-East Coast, for Moulton Logistics Management, Van Nuys, Calif. The 3PL opened its Charleston facility in 2008.
“Adding the Charleston distribution center has saved many of our clients 20 to 30 percent on their small-parcel shipping by reducing the zones,” he says.
“The Port of Charleston also provides access for product being manufactured overseas and shipped by ocean,” Moulton adds. “Drayage is minimized by our facility’s location only six miles away. With the expansion of the Panama Canal, and with Charleston being the deepest harbor in the South Atlantic, this location is well- positioned to see a significant increase in inbound container share.”
In fiscal 2010, the Port of Charleston handled 1.28 million TEUs, and 585,013 tons of breakbulk cargo (see chart, page 70). Shippers from two dozen states use Charleston to access foreign customers and suppliers. The Port of Charleston is one of only a handful of ports to have received the Presidential “E” and “E-Star” awards for excellence in exporting.
South Carolina enjoys the additional advantage of the Port of Georgetown, a dedicated breakbulk and bulk facility. Steel, petroleum coke, and wood briquettes are top cargoes. With four berths, the Port of Georgetown’s intermodal breakbulk service lets shippers efficiently consolidate storage, handling, and transit as a single operation.
Success in logistics is about people as well as place, of course, and in South Carolina that essential fact is not overlooked. “Since 2006, the state has reported that 11,000 direct jobs and $1 billion of investment have come through the logistics sector,” says Reed. To maintain its logistics advantage, the state must offer trained, able, and qualified workers ready to excel.
“Logistics is one area you cannot outsource,” says Reed. “If you need a distribution center in South Carolina, you don’t have the option of putting it overseas. It has to be in South Carolina.”
The equation is borne out in the numbers. Manufacturing accounts for 11.5 percent of the state’s nonagricultural workforce. Sectors classified as Advanced Manufacturing, including the chemical, electrical, automotive, and pharmaceutical industries, have grown faster than the national average. Employees in high-tech jobs, meanwhile, number almost 120,000.
“Walgreens has a major facility in Anderson County, and I don’t know if there is a forklift in there,” Reed says. “It’s people sitting at computer terminals. The facility has miles of computerized conveyors. When they want an order to come down to the loading dock, a computer arm takes the toothpaste, aspirin, and other products off the shelf, puts it on the conveyor, and brings it to the loading dock. There are a lot of high-tech jobs involved in distribution.”
Likewise, the ADS Logistic Services facility in Gaffney is “highly automated and integrated to elaborate warehouse management and warehouse control systems,” says Mantz. The facility, opened about six years ago, is situated on a 77-acre site, with more than a half-million square feet of logistics processing area.
Mantz is a cheerleader both for the state and its workforce. “People in South Carolina have a strong work ethic,” he notes. “They go to work every day and do their jobs with very little trouble in between.” In particular, he cites above-average attendance rates, low turnover, and pride in the end product.
To help ensure that the needs of employers are met at all levels, South Carolina offers an innovative technical training program. Under the moniker readySC, the South Carolina Technical College System program provides training to new and expanding industries in South Carolina. The tech system was founded on the premise that the state would be well-served by providing a way to train its citizens and employ them with jobs that the state helped to create.
“While the South Carolina Technical College System is designed to help alleviate unemployment, it also reaches out to the underemployed,” says Reed. “The technical colleges offer classes at night. They are looking for people who want to upgrade their jobs or get jobs with health benefits.”
Tracing its roots to 1961, readySC is one of the oldest and most experienced workforce training programs in the United States. More than a quarter-million workers have been trained for almost 2,000 companies since the program’s inception. Among other services, readySC helps companies start new facilities, expand existing facilities, and determine needed skills. The program designs customized training solutions and provides world-class training and project management.
“The South Carolina technical school programs have partnered with industry to bring us the skill sets and technical advantages we need to compete,” says Parker, who notes that the University of South Carolina hosts one of the country’s best business schools. Over the past decade, South Carolina has boasted the 10th-fastest-growing labor force nationwide, and many colleges in South Carolina offer degrees or specializations in logistics or transportation management.
“We are producing some very bright young talent to help us compete internationally,” Parker says.
“One of the state’s greatest advantages is the ability to provide a quality workforce,” adds Commerce Secretary Hitt. “Very complex manufacturing is done here at a premium level.”
Another benefit South Carolina businesses enjoy is savings on energy costs and corporate taxes. “One reason for the state’s low power costs is that it operates on about 52 percent nuclear power,” says Hitt. “And at five percent, South Carolina has one of the lowest corporate income tax rates in the Southeast.”
Indeed, the size and number of utilities and the mix of electric generation fuels, including nuclear, coal, and hydro, have led to some of the region’s most affordable power costs. Industrial power rates in the state average 5.67 cents per kilowatt-hour, among the lowest rates in the nation (about 17 percent less than the national average). Two interstate pipeline systems and intrastate pipelines also provide abundant supplies of natural gas to South Carolina’s manufacturers.
In addition to its low corporate tax rates, South Carolina offers numerous business incentives, such as corporate tax credits for creating jobs, establishing or adding to corporate headquarters, investing in research and development facilities, producing ethanol or biodiesel, and setting up commercial biomass production.
Additional discretionary incentives include the following provisions:
- The Job Development Credit rebates a portion of new employees’ withholding taxes to be used by a company for certain approved expenses such as real property costs, training, or infrastructure.
- The Port Volume Increase Credit is available to manufacturers, warehousers, and distributors that use South Carolina port facilities and increase base port cargo volume by five percent over base-year totals.
- The Corporate Income Tax Moratorium is available for a period of either 10 or 15 years to companies creating new jobs in certain counties.
Other incentives include the Textile Revitalization Credit, Negotiated Fee in Lieu of Property Taxes, and sales tax exemptions on certain equipment and materials. Depending on the type of business establishment, number of jobs, capital investment, project location, and other factors, additional incentives may be available from either the state or local government.
“Different companies have different needs, and South Carolina offers an array of tools to help them,” says Hitt. “The state values manufacturing, and employs a group of specialists who work with companies to customize packages to meet their objectives.”
“South Carolina is business friendly,” says Parker. “Its operating costs are among the lowest anywhere, and it has one of the lowest fuel taxes in the country. South Carolina continually does more to be attractive to businesses internationally.”
The Home Field
South Carolina’s cost advantages extend from business to life at home. Residents enjoy a cost of living below the national average and some of the most affordable housing in the nation. The median home sales price in South Carolina in 2009 was $141,000.
“I’ve established many friends and colleagues in the logistics sector over the past 15 years who live and work in various cities around the country,” says Lori Kesten, vice president of sales, Synergy North America. “I wouldn’t trade places with any of them, yet I believe a great many of them would trade with me in a heartbeat.”
“South Carolina is a great place to live, work, and play. Employers such as Boeing and BMW have chosen to locate or expand operations here,” says James H. Hill, vice president, community development and land management, MeadWestvaco Corporation (MWV), a Richmond, Va.-based company with packaging solutions, community development, and specialty chemicals divisions.
MWV has more than 700,000 acres of property, with about 375,000 acres in South Carolina. In addition to highly productive timber property, MWV has undertaken the development of the most commercially viable tracts into master-planned communities and commerce parks.
“The state’s business-friendly climate attracts employers, and their employees appreciate the top-quality higher education, diverse cultural events, and outdoor recreation,” Hill continues. “In short, businesses succeed, and employees can live the lifestyle they choose.”
On a Roll
Many leading companies— including Dollar General, Home Depot, QVC, Target, Walgreens, and Walmart— have found South Carolina an ideal location for distribution operations. And the list of firms choosing South Carolina continues to grow. One case in point: Amazon recently announced it will employ more than 1,000 people in Lexington County.
“This is an exciting time in South Carolina,” says Hitt. He cites the state’s “energetic and enthusiastic governor,” Nikki Haley, as well as South Carolina’s leadership in the country’s emergence from the economic downturn of the past few years.
Hitt notes with particular pride the recent announcement by BMW Manufacturing that the export value of its passenger vehicles through the Port of Charleston in 2010 totaled $4.42 billion. Prior to being appointed his commerce post by Gov. Haley in January 2011, Hitt was manager of corporate affairs at BMW in Spartanburg.
The value of BMW exports confirms the company’s Spartanburg facility as the largest vehicle exporter from the United States to non-NAFTA countries, according to U.S. Department of Commerce data. In 2010, more than 110,000 vehicles were exported from BMW’s South Carolina plant.
“Three-quarters of those cars never touch American soil,” notes Reed. “They ship from the Port of Charleston to Europe, South America, and all over the world.”
Clearly, leaders in South Carolina are pleased with both the number and the performance of the companies that have recognized South Carolina’s advantage. But the state is not resting on its laurels.
Says Hitt: “We have plenty of room for others that want to join us.”
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