Georgia: Fueling Logistics Competitiveness
A flourishing transportation and logistics sector keeps Georgia on the business community’s mind.
A mild climate. Southern hospitality. The birthplace of Martin Luther King Jr. The 1996 Summer Olympics. The Home Depot, Delta Airlines, UPS, and Coca-Cola.
These are just some of the many things Georgia is known for, and that keep tourists and businesspeople flocking to the state each year. Georgia is also turning heads in the business world, thanks in part to its flourishing transportation, distribution, warehousing, and logistics sector. And why not? With the world’s busiest airport, the nation’s fourth-largest and fastest-growing container port, some of the best road conditions in the United States, and the most extensive railroad network in the Southeast, it is no surprise that Georgia has become a logistics hotspot.
"Georgia has it all," says Andy Smith, president and COO of Kenco Logistic Services, a third-party logistics provider (3PL) that operates two warehouse locations in Georgia. "The state is strategically located to large population areas, so shippers can maintain competitive costs."
DEVOTED TO LOGISTICS
Georgia has designated logistics a strategic growth area for the state. To support this effort, the Georgia Department of Economic Development created the Georgia Center of Innovation for Logistics as a resource to help fuel logistics competitiveness. The Center helps attract and expand businesses within the logistics, transportation, and distribution sector, and also helps companies connect to industry leaders, logistics technology providers, and academic experts, explains Page Siplon, the Center’s executive director.
"We help companies involved in logistics become more competitive and grow their businesses, whether they are already located in Georgia or they want to locate here," Siplon says.
The state possesses a variety of natural assets that make it a logistics leader. "One of Georgia’s advantages is its geographic location at the crossroads of north-south and east-west travel in North America," Siplon explains. "We are within a two-hour plane ride, or a two-day truck trip, to deliver cargo to 80 percent of the U.S. market. We’re also a national gateway for international cargo coming in through the deep-water ports of Savannah and Brunswick."
This location, coupled with Georgia’s position in the rapidly growing Southeast U.S. consumer market, has gone a long way toward boosting the state’s logistics competitiveness. But the state is not resting on its laurels—for example, the Center is working to examine how the overall logistics ecosystem, and all of its industry sectors, can increase competitiveness.
That question was the focal point of the Center’s 2010 Georgia Logistics Summit, which took place in Atlanta in April 2010. The Summit drew more than 800 people from across the state’s and region’s business sectors to discuss the theme of "Fueling Logistics Competitiveness." This summit and the associated 2010 Georgia Logistics Report followed a framework the Center calls the "Five Factors of Logistics Competitiveness." These elements were identified as having the greatest influence on competitiveness in the logistics industry. They are: policy, infrastructure, operations, technology, and workforce.
Considering that Georgia’s logistics users and providers employ roughly one million workers statewide, and the state’s logistics sector generated sales of $16.1 billion in 2009, it is easy to see the need to understand these five factors and keep logistics booming in the Peach State.
Georgia has been working hard to craft an environment in which businesses can be innovative and competitive, and its pro-business culture is an oft-cited competitive advantage for the logistics sector. In April 2010, Georgia released its first statewide strategic transportation plan, which outlines a business case for funding transportation priorities. A companion sub-plan focused exclusively on the freight and logistics industry is currently in the works.
"We asked, ‘What can the state do to be a better partner to private industry?’ and one of the many answers was creating a business plan focused directly on freight and logistics," Siplon explains. "Now we are working to help make that happen."
The state also provides favorable job tax credits—ranging from $750 to $4,000 per job created—to businesses in a variety of categories, including manufacturing and warehouse distribution. In addition, companies that show large increases in shipments out of Georgia’s ports are eligible for an additional $1,250 per job bonus as part of a port tax credit program. And, under Georgia’s local option "freeport" law, many counties can exempt up to 100 percent of inventory from property tax. Raw material, work-in-process, and finished goods inventory can all be exempted in these counties.
These tax laws have helped keep logistics and distribution activity strong in northwest Georgia, says Keith Barclift, project manager for the Northwest Georgia Joint Development Authority, an economic development group serving Dade, Walker, Catoosa, and Chattooga counties. "Dade, Walker, and Catoosa counties all have 100-percent inventory exemption, and Chattooga County is increasing to 100 percent over the next five years," Barclift says.
That tax boost, coupled with the automotive production facility Volkswagen is building just across the Georgia border in Chattanooga, Tenn., has Barclift feeling optimistic about the region’s logistics prospects. "We hope this area will become a draw for warehousing and DCs," he says.
Northwest Georgia boasts three interstate highways—I-59 and I-24, which connect in Dade County; and I-75, which crosses Catoosa County—plus the benefit of being "on the good side of traffic."
"We’re south of Chattanooga, so businesses shipping goods from northwest Georgia to a large market such as Atlanta don’t have to focus on getting out of the city at any particular time," Barclift explains.
With 21,200 miles of highways, used by more than one million trucks per week, and 5,000 miles of railroad track to deliver cargo valued at $200 billion all over the country, it is no surprise that Georgia’s infrastructure is one of its biggest selling points.
On the road, Georgia hosts Interstates 75, 85 and 20, which all run through Atlanta; as well as I-95, which is the major north-south route for the entire East Coast. The state also connects easily to I-10 to the south in Florida, and going north, to I-40 in Tennessee. And, it is home to six of the top 50 cargo carriers, including UPS.
Georgia also boasts the Southeast’s largest rail network, with service provided by Norfolk-Southern and CSX; as well as Hartsfield-Jackson Atlanta International Airport, which is the world’s busiest passenger airport and is a top-ranking airport in the country for airfreight volumes, handling more than 700,000 tons annually. The airport’s total air cargo warehouse space measures two million square feet and includes a USDA-approved perishables complex and an adjoining 250-acre foreign trade zone (FTZ).
The state also houses 234 million cubic feet of refrigerated cargo storage space. "Our export market includes a lot of poultry and other refrigerated goods, so a significant volume of refrigerated cargo flows into and out of the state," explains Siplon. One Atlanta-based company, AmeriCold, is the largest provider of temperature-controlled food distribution services in North America, according to the International Association of Refrigerated Warehouses (IARW). The firm, which maintains 10 different facilities throughout Georgia, operates 591 million cubic feet of warehouse space in North America. In fact, four of the IARW’s top 10 businesses have multiple facilities in the state.
THE IMPORTANCE OF THE PORTS
Georgia’s ports provide another strong infrastructure asset, helping the state facilitate the growing global trade volume that now comes to the East Coast. The Georgia Ports Authority (GPA) operates the ports of Savannah, Brunswick, Bainbridge, and Columbus, which together handled more than 2.4 million TEUs in 2009 and contributed $55.8 billion in revenue to the state.
The Port of Savannah currently ranks as the country’s fourth-busiest container port and is a hub of activity for warehousing and distribution in Georgia. Seventy percent of the U.S. population, or 215 million consumers, are less than five days from Savannah; more than 20 distribution centers are located within 100 miles of Savannah’s Garden City Terminal, and more than 200 additional DCs lie within five hours of Savannah. "As a strategic gateway, virtually all of the fastest-growing U.S. population centers are effectively served via Savannah," says GPA Executive Director Curtis Foltz.
Savannah operates in an enviable environment, according to Stacy Watson, GPA’s general manager of economic and industrial development.
"What separates Savannah from our competitors is the overwhelming number of port-dependent sites within close proximity of the terminal," Watson explains. "Beyond Savannah, Georgia as a whole has earned a reputation as a magnet for distribution center development. Communities and leadership across Georgia understand the economic impact of port-dependent investment and are extremely proactive in targeting this business."
"The Port of Savannah’s ability to expand infrastructure, increase freight velocity, decrease delivered cost, provide seamless market access, and offer a global carrier portfolio unmatched in the U.S. Southeast, has combined to place the port at the top of site selectors’ lists," says Foltz.
The abundance of state-of-the-art distribution facilities at reasonable lease rates in close proximity to the port is a great lure for retailers and manufacturers importing and exporting products through the Port of Savannah, says Pat Byrnes, a regional vice president for NFI, a New Jersey-based 3PL with four facilities in Georgia.
At its new 400,000-square-foot distribution center in Savannah, NFI offers services such as bulk storage for consumer products, paper, and mass merchant distributors. The Port Wentworth DC is among the newest in Savannah, and one of only a few facilities that boast rail access.
"We locate the right building and provide the 3PL functions—co-packing, warehousing, container unloading, cross-docking, and many others—for shippers that want to utilize the Port of Savannah," says Byrnes.
What drew NFI—which grossed more than $810 million last year and employs some 5,500 people—to Savannah? "The infrastructure here is very good," Byrnes explains. "The port is only five miles from I-95; it also connects directly to I-16, the major artery west to Macon, where it intersects I-75 north to Atlanta, providing a junction with I-85 and I-20."
Savannah also offers plenty of available land for development and a well-trained workforce. "The area is home to a lot of skilled labor with forklift experience, and labor costs are competitive," Byrnes notes.
NFI’s customers also benefit from the ongoing improvements the port is making to its cranes, unloading facilities, and gantries. In addition, the state plans to deepen and widen the Savannah River in order to accommodate the post-Panamax ships that will be sailing to the East Coast once the Panama Canal expansion is complete in 2014, which bodes well for the port, its shippers, and 3PLs that service them.
"There is demand here, it will continue to increase, and we are in a good competitive position to meet that demand," Byrnes says.
BRUNSWICK’S BUSINESS BOOM
Specializing in bulk, breakbulk, and RoRo cargo, the Port of Brunswick is Georgia’s second-largest port, comprising four terminals. The port ranks as the fourth-largest vehicle processing port on the East Coast and is the site of Mercedes Benz’s new 70,000-square-foot vehicle processing center. Some 15 different automakers, including Jaguar, Porsche, Kia, Volkswagen, Mercedes, and BMW, currently ship product into or out of the Port of Brunswick, says Nathan Sparks, executive director of the Brunswick and Glynn County Development Authority.
But the port is not the only asset the Glynn County area offers to companies in need of logistics and distribution efficiency. "We are a total modal community," explains Sparks. "In addition to the port, we have Brunswick Golden Isles Airport on the site of the former Glynco Naval Air Station. And two Class I railroads—CSX and Norfolk Southern—and the shortline railroad RailLink offer service into the Port of Brunswick."
Glynn County is just three hours from Charleston, S.C., and Orlando, Fla., and only one hour from Savannah and the Port of Jacksonville in Florida.
"Because we are equidistant between two of the larger container ports on the East Coast, we are an obvious location for businesses that wish to have redundancy of service," Sparks explains. "If there were a natural disaster or some type of labor issue, businesses with distribution facilities here would have the option to utilize either port."
One place companies can take advantage of this flexibility is the Coastal Logistics Park at Tradewinds, a 687-acre property located off I-95 in Glynn County that is currently being developed by Lincoln Property Company. The site is zoned for distribution, light manufacturing and assembly, and warehouse facilities; offers 8,000 feet of frontage on I-95; and is part of Foreign Trade Zone 144, one of three FTZs in Georgia.
Sparks believes the FTZ benefits are key for attracting tenants to the build-to-suit location. "When companies are looking to cut costs in this challenging environment, the opportunity to defer customs duties when importing material to the United States is significant," he explains.
Logistics firms and businesses using logistics services must look closely at their operations to find ways to gain competitive advantage.
"Operational efficiency begins with how businesses compete on basic cost and rates, then sustain that with accessing new markets and customers, then being flexible and incorporating new technology and innovation into their operations," says Siplon.
Helping Georgia’s logistics industry find ways to do that is part of the Center’s mission. "Whether it is new regulations or changing market climates, companies that understand the operational challenges and situations they have to deal with are going to be more competitive—both in the short and long term," Siplon explains.
One major factor that impacts operational competitiveness is the cost of doing business—and in that category, Georgia shines. "Land is reasonably priced, taxes are favorable, and incentives are abundant," notes Siplon.
"When companies decide where to locate or expand their businesses, they look at all kinds of costs, and Georgia stacks up favorably, especially when it comes to power costs," adds Joe Riley, manager of economic development for the Georgia Electric Membership Corporation (Georgia EMC), a trade association representing 42 private utility cooperatives throughout the state.
Georgia’s unique set-up for electrical service helps to keep power costs low for area businesses. "Georgia has three statewide electric utilities—the private cooperatives; an investor-owned utility; and 48 municipalities that supply electricity," Riley explains. "And while we are competitors, we are also partners."
The three utilities jointly own the state’s transmission system as well as several power plants, which gives them all equal access and promotes healthy competition. "When you jointly own the transmission and some of the generation, it takes out costly duplication of services and infrastructure, and helps us all keep our costs lower," Riley adds.
As a result, Georgia’s industrial costs are less than in many other parts of the country. The average cost per kilowatthour for Georgia’s industrial sector in January 2010 was 6.25 cents—less than the South Atlantic region’s average of 6.49, and much less than areas such as New England, which averaged 13.18, according to the U.S. Energy Information Administration.
"Power and energy costs in Georgia are very attractive, which helps reduce overall business costs and improve competitiveness," Riley says.
Companies in Georgia—and across the globe—use technology to improve efficiency and service, reduce costs, and remain competitive. "For the logistics sector in our state to thrive, we must have a good understanding of, and good access to, technology, both off-the-shelf and off the academic lab bench," Siplon notes.
That’s where companies such as RMI come in. "Having the right technology is key to maintaining control of logistics and transportation activities at any organization," says Dan Vertachnik, executive vice president and CCO of RMI, an Atlanta-based technology company that offers a global, multimodal transportation management system called MTM.
Using MTM, supply chain managers get real-time visibility of cost measures and key performance indicators such as shipment velocity and transportation costs vs. costs of goods sold. RMI’s solution also provides warehouse management, order management, and financial settlements; and can help supply chain managers dynamically plan and re-optimize shipments in transit.
In the industries the company serves—which include chemicals, paper products, building materials, agriculture, and heavy manufacturing—the global visibility that RMI’s technology provides can be a make-or-break factor. "For companies that sell commodities in these industries, sales are usually determined by the cost of goods sold and terms of delivery," Vertachnik says. "Having global visibility, rail visibility, and greater cost visibility can give them access to customers and markets that may have limited them before."
When it comes to serving the Georgia market, RMI’s technologies combine with the area’s logistics prowess to offer a one-two punch. "Our rail and industrial shipper customers in Georgia enjoy access to experienced talent, great universities, easy travel options, and proximity to the Southeast’s largest logistics hub," says Vertachnik.
"Georgia provides us with a well-skilled workforce at competitive wages," says Andy Smith of Kenco Logistic Services. For Kenco and the nearly 11,000 other companies in the state’s logistics sector, access to skilled workers is a key benefit of locating in Georgia.
The state’s strong manufacturing base—in industries from food to paper products, plastics, automotive, and heavy equipment—means an ample supply of workers with warehousing and forklift experience.
In addition, Georgia is home to a robust number of logistics education programs. Offerings range from executive training to the statewide university and technical college system, which boasts more than 100 programs with logistics-related classes, certificates, and degrees. University highlights include Georgia Southern’s Ph.D. in logistics and Georgia Tech’s Industrial System Engineering program, which has held the nation’s top-ranked spot for many years.
"Over the past few years, the number of logistics education programs available has increased significantly," Siplon explains. "It’s key to our workforce training strategy."
This strong workforce has been one of the secrets to Kenco Logistic’s success. Sixty years after its founding, the company is one of the nation’s leading third-party logistics providers, operating more than 100 facilities and more than 25 million square feet of warehouse space in 31 states and Canada. The Kenco family of companies also includes Kenco Transportation, Kenco Toyota-Lift, Kenco Management Services, and JDK Real Estate. Kenco also recently formed a joint venture with Schnellecke of America called Team 3 Logistics to offer logistics solutions to support automotive production in the Southeast.
The company currently maintains two warehouse locations in Georgia that total 1.8 million square feet of space. One facility is dedicated to a major appliance manufacturer, and the other is a multi-client facility that stores products for customers in the food and beverage, perfume, textile, and furniture industries.
In addition to its workforce, Kenco values its Georgia facilities for their strategic location. "Georgia is a large distribution market and is strategically positioned for Southeast distribution," Smith says. "And its infrastructure supports all transportation modes."
A CAPITAL COMBO
This workforce-location combo has proven potent for another company, Capital Transportation Systems (CTS), a non-asset-based 3PL located just outside Atlanta in Kennesaw, Ga. The firm was founded in September 1997 and now employs 126 people. The company’s freight management services solutions include strategic sourcing applications; Web-based rating, bill of lading, order execution, and tracking software; freight audit and payment services; and Web-based management reporting and savings opportunity analysis.
Why does Georgia suit CTS? "This state offers us a diverse and highly skilled workforce and easy access to the rest of the United States," explains John Pas, president and CEO.
Those assets are helping CTS thrive. The company recently launched a full-service brokerage, SROD Express, which leverages equipment availability in the spot market for all transportation types. And this year CTS ramped up its service offering as a 4PL provider of technology with its ShipRite on-demand tool.
"Using our Web-based technology and aggregated buying power, CTS offers a robust, hands-free shipping and order execution service," Pas explains. "This service gives shippers a way to consolidate their shipment execution process and gain internal productivity."
IT’S PLAIN AND SIMPLE
As home to 13 companies on last year’s Fortune 500 list, including The Home Depot, Coca-Cola, Delta, and Newell Rubbermaid; a key distribution hub for big-name retailers such as Target and IKEA; and the headquarters for UPS, one of the supply chain sector’s largest operators, Georgia is the place to be for logistics.
Why? It’s plain and simple, says Siplon: "Georgia has one of the best stories to tell for both logistics providers and users alike. Just as you think of Silicon Valley for computer chips, Georgia is becoming the first thought for companies that rely on a first-class logistics ecosystem to grow their business. Georgia is fueling logistics competitiveness, and it shows."
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