Space Exploration: New Frontiers in Site Selection

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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."

All Aboard The Heartland Express, Columbus, Ohio

Building on its air cargo transportation legacy, Columbus, Ohio, is fast becoming an intermodal hub thanks to rapid expansion at Rickenbacker Airport.

When the government turned over the Rickenbacker Air Force Base to the city and county in the late 1980s, the transition laid the blueprint for a cargo-dedicated multimodal hub that today serves as the focal point of Columbus' transportation infrastructure.

Rail/intermodal portends to be a major stimulus for the facility and the area as well. Aside from its existing air cargo capabilities and proximity to Interstates 270, 71, and 70, Rickenbacker will benefit from Norfolk Southern's new intermodal hub, which is being developed on 300 acres southwest of the airport.

The new intermodal center is expected to handle more than 300,000 container transfers annually, increasing truck and rail freight throughput.

Norfolk Southern is also partnering with the Federal Highway Administration to develop the Heartland Corridor project, a $150- million plan to increase rail cargo capacity and facilitate freight movement between Virginia ports and Chicago.

The potential for bringing double-stack capabilities on line between Virginia's ports and Ohio will have a major impact on Columbus' growth as a major distribution hub, says Matt McCollister, vice president of economic development, Columbus Chamber of Commerce.

When the corridor is complete, consignees can clear customs in Rickenbacker's FTZ zone, provided cargo is carried via bonded rail or truck carriers. Together with Rickenbacker Airport's current expansion plans, the promise of increasing volumes through the heartland will be a major boon to the area's economic prospects.

"When Norfolk Southern's intermodal facility is up and running we will have a convergence of transportation—an epicenter for intermodal," notes McCollister.

Cajun Fever, Louisiana

"Logistics is a boundary-spanning activity playing a significant role in both traditional and fast-growing industries," says Don Pierson, assistant secretary, Office of Business Development for Louisiana Forward.

So in resource-rich Louisiana—long a center for energy exploration and production, petrochemicals, forest products, and, more recently, manufactured goods—it'slittle wonder focusing on transportation and logistics is a foregone conclusion.

Given Louisiana's location in the fastest-growing region of the United States and at the center of Western Hemisphere trade, its transportation infrastructure and capabilities are well-developed.
Shippers have access to 31 states via the Mississippi River and its tributaries.

From a maritime perspective, Louisiana's six deepwater ports handle more than 457 million tons of U.S. waterborne commerce annually. Four of the 11 largest U.S. ports (in foreign commerce tonnage) are in Louisiana, and the presence of six Class I railroads augment intermodal capacity and throughput.

Despite the devastating paths of Hurricanes Katrina and Rita, Louisiana is moving forward to help spur economic growth, diversify its industries beyond natural resources, and create incentives for businesses to locate distribution operations in the region.

"The outgoing administration was proactive in promoting business activities," says Pierson. "And the new leadership has been equally aggressive in moving to secure more private sector investment. "

Businesses such as Seffner, Fla.-based Rooms to Go, the largest furniture retailer in the United States, are taking advantage of the state's location and resources to expand their distribution operations.

With about 135 stores in nine states throughout the Southeast, including three stores in Louisiana, the company plans to build an 850,000-square-foot distribution center and outlet store in Pearl River, La.

The retailer was using a temporary DC in Mobile, Ala., and was considering options in Mississippi but decided to take advantage of a $50-million Gulf Opportunity Zone (GO zone) bond to finance the new facility on a 60-acre site off Interstate 59.

"The decision to locate in Louisiana is based on where our volumes are coming from and this site's proximity to our stores and consumers," says Peter Weitzner, vice president of Rooms to Go.

The GO zone bond, a federal business incentive levied in the aftermath of Katrina, also weighed favorably in Rooms to Go's decision. "It allows us to finance the building with tax exempt bonds," notes Weitzner.

The retailer currently brings in most of its product from Asia and South America through Southeast and West Coast ports. Cargo is then delivered via rail and drayed to the DCs. Moving forward, Rooms to Go would like to consider shifting some volume through the Port of New Orleans if the opportunity presents itself.

Aside from several state and federal tax incentives, Louisiana's fiscal health also bodes well for courting new business. "Going into 2008 we have a $1-billion budget surplus, so we are not concerned about government reaching out for new tax revenue," says Pierson.

A New World Port:

Prince Rupert, British Columbia

Tucked between the Coastal Mountains and the Queen Charlotte Islands lies the future of North American trade. Long a destination for intrepid tourists, the Port of Prince Rupert is cruising for cargo of a different sort these days.

Historically, Prince Rupert has been a regional export facility serving coal, grain, and forest products industries. Ten years ago, the port recognized that this cargo base was slowly eroding and it needed to shift attention to containerization. Prince Rupert's present and future plans are centered on this import-focused paradigm.

"We are building Prince Rupert as a gateway for transpacific trade—pulling, then pushing product into central Canada and the U.S. Midwest," says Shaun Stevenson, vice president of marketing and business development at Prince Rupert.

"We have transitioned away from breakbulk capabilities to container facilities. In turn, our focus has shifted from regional export to continental import."

Because it is the deepest natural harbor in North America, and the closest port to Asia, shippers are beginning to tap Prince Rupert's potential as a major circumvent to the U.S. West Coast. Its newly opened Fairview Terminal has the capacity to move up to 700,000 TEUs annually, enabling seamless transshipment of containers to Canadian National's (CN) rail line.

CN is currently developing a transload operation and intermodal terminal in Prince George, B.C.—500 miles east of the port—to facilitate container movement to and from Asia.

Last May, the railroad signed a contract with COSCO Container Lines Americas to become the first steamship company to route Asian freight through the port's container terminal and over CN's North American rail network.

"On Oct. 31, 2007, the first train arrived in Chicago from Prince Rupert in 92 hours, beating our estimate of 106 hours. That attracted a lot of attention," says Stevenson.

So did the fact that CN is running at 20-percent capacity on the line, has double-stack train capabilities throughout its system, and can run trains up to 14,000 feet in length through the lowest elevation crossing in the Rockies.

Moving forward, the port plans to triple the size of the terminals, add two new berths, and expand capacity to 1.5 million TEUs. The promise of cutting four days from the supply chain has already captured the attention of major retailers including Target and Ashley Furniture.

Recognition of the port's capabilities and growing demand from stateside consignees will continue to drive the port's investment plans.

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