Supply Chain Gain: Site Smarts
Where you locate a logistics facility can greatly influence how well your supply chain runs.
All locations are not created equal. Pick two areas with well-priced real estate and attractive tax incentives, and one is bound to be the better choice for your supply chain operation.
A company seeking the perfect site for a factory or distribution center needs to consider all its products and markets, and the cost of moving goods through the entire network, from supplier to consumer. “You also have to understand trade and transportation lanes and the associated costs,” says Bob Heaney, senior research analyst, supply chain management at Aberdeen Group, Boston. By mapping those inbound and outbound lanes, you identify certain nodes that, based on geography, emerge as the best sites for facilities, he says.
For a global supply chain, geography is only one of many factors to consider. In Europe, for example, sites in several countries might be good candidates based on distances from suppliers and markets. You must also consider duties and tariffs, embargoes, political stability, the availability of talent, and the wages and benefits that prevail in individual countries.
Still, geography remains a powerful factor. The right physical location can vastly improve your ability to receive goods and reach customers efficiently.
Its central location on the populous U.S. East Coast makes North Carolina’s Triad region, comprising the Greensboro, Winston-Salem, and High Point areas, a strong lure for some companies.
“The Triad is halfway between New York and Miami, and midway between Washington, D.C., and Atlanta,” says Dave Hauser, vice president of logistics at the Piedmont Triad Partnership and executive director of the North Carolina Center for Global Logistics, both in Greensboro.
An abundance of interstate highways makes the Triad’s position on the map even more attractive. “Sixty percent of the U.S. population is within one day of our location by truck,” Hauser says.
For a facility that conducts much of its business in the Midwest, however, the Houston metropolitan area might make a better choice. The number of companies that import goods bound for mid-America through the Port of Houston is growing, says Jeff Moseley, president and chief executive officer of the Greater Houston Partnership.
Those numbers will only increase after 2014, when the Panama Canal is due to complete its expansion and start accommodating larger containerships. “Houston will begin serving destinations between the Rocky Mountains and the Ohio Valley,” Moseley says.
The Canal expansion represents an example of why companies choosing a site must consider current and evolving needs. As the Canal starts to accommodate containerships with capacities of up to 14,000 TEUs, more vessels from Asia will call on East Coast ports. That could change the siting calculus for many companies.
A site with a strong transportation infrastructure and varied shipping options can help companies gain efficiencies and reduce costs. While many locations are fortunate to have one container port within a 12-hour truck drive, “the Triad has four within a six-hour truck drive,” Hauser says.
Houston’s infrastructure advantages include 2,200 trains serving the region weekly. Kansas City Southern also provides intermodal service through Houston, connecting the American Midwest and Mexico. “Once cargo comes to the Port of Houston, it’s easy to offload and distribute, especially to mid-America,” Moseley says.
Another factor companies consider when they choose a site for a supply chain facility is the workforce. A ready pool of workers with logistics experience, plus local opportunities for training and professional development, can make the difference between an adequate operation and a great one.
Any company looking for a site that will confer a logistics advantage must consider the “personnel pipeline,” Hauser says. “You need individuals who are trained, or are in training, for logistics, manufacturing, and supply chain opportunities.”
To help create that pipeline, the Piedmont Triad’s 11 four-year universities, nine community colleges, and seven public school systems are collaborating to create a logistics curriculum for the region. The effort includes the North Carolina Center for Global Logistics, which Guilford Technical Community College is constructing in Greensboro. The Center will encompass a teaching warehouse, labs, and offices.
Site selection also can become an occasion to develop new logistics strategies. For example, a company might operate one DC on the East Coast and one on the West Coast, each serving its region with a spectrum of products. When opening a third DC, though, the company might consider flowing certain products through only one facility, or using a third party to handle some receiving and distribution.
Site selection is a complex, three-dimensional puzzle built of moving pieces. But line those pieces up right, and you’ll discover significant opportunities to strengthen your supply chain.
Case Study: Greensboro Site Cites Improved Service, Lower Costs
Location: Greensboro, N.C.
Goal: Manage North American logistics in-house, rather than using a 3PL.
Outcome: Lenovo’s logistics operation has become 43 percent more efficient.
A convenient location and access to workers with the right skills were critical factors that led Lenovo Americas to build its first U.S. distribution and assembly facility in Whitsett, N.C., just outside Greensboro.
Created through the merger of China’s Legend Holdings and IBM’s Personal Computing Division, Lenovo makes personal computers, servers, and peripherals in China, Mexico, and Brazil. Before 2008, a third-party logistics provider (3PL) used its own facility in Raleigh to manage Lenovo’s North American logistics.
When Lenovo decided to bring this operation in-house, it evaluated several sites in the southeastern United States. A location in the Greensboro metro area would put the new facility just 45 minutes from Lenovo’s U.S. headquarters in Morrisville, N.C., and provide access to several interstate highways.
“This location positioned us to get product to our customers anywhere within two days by truck,” says Ken Grissom, general manager of logistics for Lenovo, Americas. “We were looking to decrease lead times and improve service in the United States.”
The local pool of employees posed another advantage. Coming from the textile and furniture industries, many workers in the Greensboro area had skills that translated easily into the skills Lenovo required. Also, with relevant training available at local high schools and community colleges, Lenovo could rely on a stream of new employees to meet future staffing demands.
Opened in February 2008, the Lenovo U.S. Fulfillment Center fills orders for North American customers. It also provides value-added services, such as custom-configuring the hardware and software on its computers, and handles reverse logistics.
Since taking logistics in-house and opening the Greensboro site, Lenovo has seen its logistics operation become about 43 percent more efficient. The new location has helped the company make other gains as well. “Our serviceability has improved, costs have improved, and overall lead times have dropped dramatically,” Grissom says.
Case Study: Rooms To Go Goes to Houston
Shipper: Rooms To Go
Location: Houston, Texas
Goal: Achieve faster delivery to Houston-area customers.
Outcome: A one-million-square-foot distribution center in Houston simplified transportation to local customers.
A good network got even better when furniture retailer Rooms To Go opened a one-million-square-foot distribution center (DC) last March in Katy, Texas.
Based in Seffner, Fla., Rooms To Go operates furniture showrooms in nine southern U.S. states and Puerto Rico. Along with Katy, it operates DCs in Lakeland, Fla., Sewanee, Ga., Charlotte, N.C., Arlington, Texas, and Pearl River, La.
When a customer makes a purchase in a Rooms To Go showroom, the company delivers from the nearest DC. “We need a DC anywhere there’s a concentration of customers,” says Peter Weitzner, a vice president at Rooms To Go.
The company first entered the Houston market nearly three years ago, serving those customers from its Arlington facility. But business has grown so much, company officials decided they needed a DC in the Houston area.
“We were looking for large pieces of land with highway frontage,” Weitzner says. “It’s important for our customers to see that we have a lot of product, with a large facility placed prominently on the road.”
Access to suitable labor was also crucial. That made Katy a perfect candidate: with several large DCs already in the area, it boasted a large pool of experienced logistics workers.
After negotiating on several pieces of land, Rooms To Grow closed on an 118-acre parcel that offers room to expand its facility to 1.5 million square feet in the future. While the company could already offer next-day delivery from Arlington to the Houston metro area, it’s easier and less expensive to serve that market from the new DC. “It gives us extra warehousing space and closer proximity to customers,” Weitzner says.