Space Exploration: New Frontiers in Site Selection
They might not yet have the clout of their long-in-the- tooth but short-on-space peers, but that's exactly why shippers are gravitating toward their pull. These new logistics hotspots are committed to going to the ends of the earth—and then some—to meet shipper and consignee needs..
Undoubtedly, offshoring is markedly shaping the outward-arcing trajectory of U.S. trade as enterprises routinely orbit the globe looking for new sourcing and manufacturing locations to expand production capacity, leverage labor economies, and seek out new sell-to markets. But its impact is equally apparent on the demand side of the chain.
With congestion and capacity concerns recurring, and Asia-origin volumes expected to triple by 2020, consignees and shippers are tasked with engineering distribution networks that are elastic enough to accommodate fluctuating demand, unforeseen exceptions, and global expansion.
Inevitably this begins with site selection and channel management. Businesses wary of present and future bottlenecks are exploring new places and spaces to better align demand to supply.
"Different companies have different priorities for 'siting' locations," says Matt McCollister, vice president of economic development, Columbus Chamber of Commerce. "It's often about location—where a business wants to be relative to where its customers are."
Transportation costs, finding a feasible place to reach final destinations via multiple modes, workforce availability, and operating costs also make the list of considerations.
"A company's philosophy depends on how it rationalizes and prioritizes these factors," adds McCollister. "An e-commerce fulfillment center, for example, might require more attention to labor and operating costs than other considerations."
Regardless of intention, businesses more deliberately project where they need to be—both in terms of strategy and geography—to balance the volatility of consumer demand with global ebbs and flows.
Globalization invariably forces companies to cast U.S. transportation and distribution in a new light. Calculating total landed costs across the supply chain presents further incentive to explore different transportation and distribution options and perhaps consider longer, reliable channels over shorter routes through unstable chokepoints.
In turn, and given other contingency and capacity concerns, the quest for intermodal flexibility is steering site selection due diligence.
By necessity, stateside manufacturers and retailers cast furtive glances beyond developed hubs and congested distribution clusters, paying attention to where railroads, real estate developers, and transportation companies are migrating, and identifying new satellite locations for pulling and pushing product to market.
Local, regional, provincial, and state economic development interests and port facilities are playing their own part in this budding space play. From the Pacific Northwest to the Gulf Coast, an emerging crop of "familiar places with forgotten faces" and "sites yet seen" raise the curiosity of wandering minds.
They also raise the bar for customer service and financing, and developing transportation infrastructure and logistics resources—all in an effort to help bring U.S. businesses and freight to and from the outer limits of global supply chains. Welcome to the new frontier of site selection.
The Rocket City Thrust, Huntsville, Ala.
When International Paper rolled into the Port of Huntsville in 1986, it was among the few businesses that recognized the inland port's emerging potential. The port was in the process of developing its International Intermodal Center, while creating a footprint beyond its traditional air cargo capabilities—and the paper manufacturer was a willing partner.
"We were one of the first two shippers on the port's first day of operation and have been using it ever since," says Glen Wright, traffic manager, International Paper. "We have done all that we could over the years to support this facility because we realized that in the long run it could become a big asset for us—and it has."
The Memphis, Tenn.-based company is the largest white-paper producing company in North America. Located 35 miles away from the Port of Huntsville, its Courtland, Ala., mill sources raw wood from a primary 75-mile radius.
In its manufacturing process, the production facility uses a high volume of bulk chemicals that come in via rail tankers, tanker trucks, and pneumatic tank trucks; oxygen from a plant in Decatur, Ala.; and two large natural gas pipelines.
International Paper manufactures product in rolls or cuts it into copy paper, then packages stock for companies including Staples, Hewlett Packard, and Office Depot. Its average production is about 3,100 tons per day, and approximately one-third of that is cut into copy paper.
The company initially began looking at the intermodal center as a more economical way to serve customers on the West Coast. At the time, intermodal consolidators were calling on International Paper to try and get its business.
"We decided we were going to ship our West Coast cargo over Huntsville and if the consolidators wanted a part of our business they would have to make containers available there," says Wright. "It was the opportunity the port needed to prove to naysayers that it could be a player in the inbound international business."
Today, the Courtland facility moves product to California, Washington, Oregon, the Vancouver area, Arizona, and New Mexico through the Port of Huntsville, primarily using 40-foot steamship containers.
"Our use of 40-foot steamship containers is a win-win situation for us and the stack-train and steamship operators," says Wright. "We enjoy lower rates by stacking containers on trains; and the stack-train/steamship operators are paid for the use of their equipment."
Realizing An Intermodal Dream
When International Paper began operations in Huntsville, small rail facilities and ramps in the area were beginning to grow obsolescent, observes Richard Tucker, executive director of the Port of Huntsville. The railroads then began closing down some of these ramps in favor of bigger cities.
"These circus ramps were inefficient, messy, and expensive to operate. They weren't integrated in any organized way," he says.
Ed Mitchell, then executive director of the Port of Huntsville and formerly the first director of the Alabama Development Office, saw an opportunity to expand the port's capabilities beyond its air cargo strength. So he began addressing ways it might be able to fill these emerging infrastructure and transportation gaps.
"I remember meeting Ed Mitchell when he was hauling around a tabletop model of his dream for the Huntsville area and trying to sell people on his ideas," recalls Wright. "At the time, few believed his dreams could become reality. But in that first meeting I was convinced he would make it happen."
Mitchell did—and then some. He was instrumental in overseeing the development of the International Intermodal Center; assuring Huntsville received Port of Entry designation by U.S. Customs; securing 23 miles necessary to build the I-565 connector; as well as overseeing the land acquisition leading to the development of the Jetplex Industrial Park—which today houses more than 60 tenants.
"Ed Mitchell recognized the big picture of all transportation needs, not just air," says Tucker. "He envisioned a total transportation complex, looking out beyond where things were to where they needed to go. He translated the speed of air cargo operations to the intermodal facility."
What's SOP: Service-Oriented Port
Today the Port of Huntsvillecomprises the Jetplex Industrial Park, Huntsville International Airport, and the International Intermodal Center. In 2007, the port processed 45,468 intermodal containers, its sixth consecutive year of record growth.
Strategically, the intermodal center's proximity to International Paper's mill is advantageous in expediting deliveries between the two locations.
"Infrastructure from the mill to Huntsville is good, with little congestion. One driver can turn four or five daily loads to Huntsville. If we go through Memphis, a driver can only deliver one load," says Wright.
The facility operates 24 hours a day, seven days a week, as far as Wright is concerned, and it assists draymen in allocating space to set empty containers for movement after hours. This type of collaboration is important for International Paper as it creates a level of service that permeates the entire transportation process.
"We maintain a close relationship with this facility and in turn it maintains a good relationship with our intermodal provider, drayman, steamship container provider, and Norfolk Southern Railroad," he adds.
This altruism has been a key factor in the port's development. Its focus on addressing the needs of the beneficial owner has allowed it to get the steamship lines and railroads to work collaboratively in everyone's best interests.
"The Port of Huntsville has made it a priority to sell to the consignee," says Mitch Bradley, director, International Intermodal Center. "We reach out to these companies and ask: What do you need? Where are your service lanes? What are your volumes?"
A Helping Hand
The port has also received a helping hand from the railroad.
"Norfolk Southern and the Port of Huntsville are inseparable," says Bradley. "Clearly, without the intermodal component, the port would not be as successful as it is now. In turn, we have brought a new perspective to the railroad, providing a model for how other intermodal facilities should operate."
Shippers such as International Paper value the attention to detail that the Port of Huntsville and its partners bring to the table—something that is difficult to find at other facilities.
"Major ports are big and bureaucratic and difficult to deal with, especially in a crisis," says Wright. "Huntsville can and does handle crisis situations for us. U.S. Customs and the Department of Agriculture are tremendous to work with—they schedule their workforce around the needs of the customers and carriers they serve."
This level of service, in essence, is the value proposition that lured International Paper to the port in the 1980s and remains a primary incentive for businesses today.
"If nothing else, we are creating an environment that allows us to capture some volume, while keeping everyone else competitive," says Bradley. "But we want to be a change agent and intermediary so end users can look at it all—a total system for domestic and international transportation needs."