Kentucky Cabinet for Economic Development: Another Banner Year for the Bluegrass

Another year, another round of logistics success stories for Kentucky. Not that anyone should be surprised, really. After all, when the world's largest package-delivery company operates its global air hub in your state, good things happen.

Having the nation's third-busiest cargo airport (and the ninth-busiest in the world) tends to be conducive to business growth. And manufacturing and shipping interests also like having access to the Ohio, Mississippi, Tennessee, and other rivers, an excellent network of interstates and parkways, and top-notch rail service.

Kentucky's central location and lower costs are just icing on the cake. Logistics announcements for the Bluegrass state over the past year include:

• Brightpoint Services LLC announced in December 2006 a 239,000-square-foot distribution and fulfillment center for Louisville. Brightpoint specializes in wireless distribution and services in the direct-to-consumer, direct-to-store, and national retail channels.
• GSI Commerce, Inc., a leading provider of e-commerce solutions, announced in late October its fifth Kentucky fulfillment center. The new 540,000-square-foot facility in Richwood joins the company's other facilities in Louisville and Shepherdsville. GSI partners with retailers, branded manufacturers, entertainment companies, and professional sports operations to sell their goods online without enormous investments in technology.
• Western Rivers Boat Management, Inc. announced in May 2007 it was moving its headquarters from Arkansas to the river city of Paducah, Kentucky. The operation, which provides crewing and management services for the inland marine towing industry, includes a distribution and warehouse and a repair facility for towboats and barges. The Western Rivers news marked just one of several major recent announcements in Paducah's bustling maritime industry.

The UPS Effect
Much of Kentucky's burgeoning importance as a logistics center can be traced to the ongoing growth of UPS.

UPS revealed in May 2006 that it was undertaking its second $1 billion expansion of UPS Worldport in Louisville, just four years after an equally massive expansion. The latest expansion increases sorting capacity by 60 percent and adds 5,000 UPS employees to the 22,000-plus already working in Kentucky.

The spinoff effect of UPS is phenomenal. A 2006 study showed that UPS had served as a catalyst for approximately 90 companies to either locate in Kentucky or expand their operations here in the previous five years, investing more than $1.2 billion and bringing more than 13,800 new jobs.

A leading world trade magazine said in July that many supply-chain business leaders are choosing Kentucky because of UPS and other factors, such as lower costs than those found on the coasts. Louisville is seeing "tremendous growth," the article said, "attracting attention from shippers who want affordable, first-class distribution facilities with exceptional infrastructure and proximity to key markets."

A perfect example of the UPS effect can be found in Louisville-based FCI.

Founded as Fulfillment Concepts, Inc. in 1988, the company started with three employees, a truck, 10,000 square feet of warehouse space, and no customers. Nowadays, it has 15 times the space and a staff of 90, handling warehousing, managing inventories, processing product orders, and related tasks.

As with other logistics and order-fulfillment companies in the area, FCI can get its packages into the stream of commerce later in the day than just about anywhere else in America - and still get them to their destinations faster. FCI can take an order as late as 8:00 p.m. Eastern time (5:00 p.m. Pacific), process it, and deliver it to UPS by 11:00 p.m. for shipment that night.

"That 8:00 p.m. really helps us when you talk about West Coast clients," Tina Brown, marketing director for FCI, told The Courier-Journal newspaper in July.

Another Kentucky logistics success story is Zappos.com. This Web-based shoe retailer, based in Las Vegas, decided to put its distribution center in Shepherdsville, Kentucky, in 2002 in large part because it's just 15 minutes south of the UPS hub.

Zappos has seen explosive growth, with sales soaring from $70 million in 2003 to $600 million in 2006, with a huge expansion of its distribution center to accommodate it.

Rather than stick to packages, UPS is increasingly becoming its corporate customers' strategic partner. In many cases, UPS boosts companies' margins while managing their supply chains, repairing their products or even answering their phones.

An economic impact study by the Kentucky Cabinet for Economic Development shows the latest UPS expansion will have a tremendous effect on Kentucky's economic pulse. The direct annual economic impact of new full- and part-time jobs alone will be approximately $344.8 million, plus an additional $400 million in indirect and induced jobs.

Kentucky's Incentives and Other Advantages Two
Kentucky incentive programs are expected to provide UPS up to $51.6
million in tax benefits for the expansion. Most will come from the
Kentucky Jobs Development Act, or KJDA, aimed at increasing technology-
and service-related employment in the commonwealth, with the remainder
expected to come from the new Kentucky Enterprise Initiative Act, which
allows approved companies investing $500,000 or more to recoup Kentucky
sales and use tax on the cost of construction materials, building
fixtures and equipment used for research and development. Innovative
incentives have long played a key role in keeping the UPS hub humming
in the Bluegrass. For example, a program called Metropolitan College
has provided some 10,000 UPS workers a free college education since its
inception in 1998. Kentucky's incentive programs can be tailored to help much smaller companies as well. Of
course, it's more than just tax incentives that keep UPS here.
Kentucky's central location is another big factor, along with a high
quality of life, a culturally diverse work force that's readily
available and productive, and excellent rail and river transport. With
these factors to help it along, UPS has grown its Louisville operation
from a small ground-only facility in 1964 to the company's only
all-points air hub today. And now the hub is a magnet for other
development. The UPS hub is headquartered at Louisville
International Airport, one of two major international airports in the
state. The other is Cincinnati/Northern Kentucky International (CVG),
which serves as a major hub for Delta and is the base of operations for
the Delta subsidiary Comair. Annual passenger volume at CVG has doubled
in the past decade, now exceeding 20 million. Commercial airports are also located in Lexington, Owensboro, and Paducah. Kentucky's Rivers - A Great Alternative for Shipping With
ports on the East and West Coasts getting more and more congested, many
international shippers are looking for alternative routes into - and
out of - America's heartland. Kentucky provides that alternative. Kentucky
has about 1,100 miles of commercially navigable waterways, providing an
expedient two-way route between inland markets and major ports on the
Gulf of Mexico. Barge shipment is far less expensive than truck
or rail. "We [barges] move 12 percent of all cargo in the country, but
represent less than 2 percent of the total transportation bill for the
country," says Kentuckian Ken Wheeler, the retired vice president of
Midland Enterprises and a longtime authority on the maritime industry. The
Ohio River alone flows 664 miles along the northern border of Kentucky.
Seven public riverports operate facilities at Henderson, Hickman,
Louisville, Lyon County, Owensboro, Paducah, and Wurtland. The
busiest port is in Paducah, situated on the Ohio and within close
proximity to the Mississippi, Tennessee, and Cumberland Rivers. Paducah
has always been a river town, but within the past year the pace has
quickened, with several barge companies (including the Western Rivers
announcement mentioned earlier) making major moves. Another big
story comes from Ingram Barge, the largest inland towing company in the
United States, which opened a new operations center in Paducah in early
2007, employing more than 200. Crounse Corporation, another major barge
company, announced it would build a new headquarters there. And a
regional carrier, Hunter Marine, announced a new operations center. Back
on land, Paducah is served by Interstate 24, part of an exceptional
highway system in Kentucky that also includes Interstates 65, 75, 64,
and 71, four interstate bypass loops, and a network of limited-access
state parkways. Numerous railroads serve Kentucky with 2,760
miles of track, including 2,299 miles of Class I track. Railroads
operating in the state include CSX, Norfolk Southern, Canadian National
Railway Company, and the Paducah and Louisville Railway. By
highway, river, rail, or air, Kentucky offers unique advantages for
transportation, distribution, and export, and provides new
opportunities for capitalizing on North American markets and global
trade. The increasing level of partnership among trucking, rail, and
other shipping firms, and the development of efficient, integrated
transportation systems throughout the industry, makes the Bluegrass
state a leader in global transportation opportunities. Kentucky
has much more to offer as well, including one of the top work force
training programs in the nation, the lowest industrial electric power
costs in the United States, and an attractive quality of life. Come to Kentucky and write your own success story. J.R. Wilhite, Commissioner, New Business Development Kentucky Cabinet for Economic Development Old Capitol Annex 300 West Broadway Frankfort, KY 40601 Phone: 800-626-2930 Fax: 502-564-3256 <a class="adArticleLink" target="_blank" href="https://www.ThinkKentucky.com%20">www.ThinkKentucky.com </a>