Intermodal Infrastructure Drives Regional Growth and Expansion
Without a solid logistics infrastructure, a company could not efficiently and cost-effectively serve its customers and grow their business as well as its own.
Jim Romeo (Fall 2012)
In Columbus, Ohio - as in other places across the nation - companies need the essentials of an intermodal infrastructure to enable them to supply their customers within and outside the region and to maintain efficient operations.
For example, the Honda plant in Marysville, Ohio, operates the leanest of supply chains and relies extensively on a network of strategic suppliers to provide just-in-time assemblies and goods for its Honda Civic production lines. Columbus' Rickenbacker Inland Port is one part of a multi-modal logistics hub known for its expansive network of freight forwarders, cargo airlines, and trucking companies, as well as rail siding to support companies like Honda. The vitality of this region depends on the logistical infrastructure that supports it.
A Win-Win Situation
Logistics firms are expanding and locating to regions where they are in demand, i.e., where firms seeking an efficient time-to-market would also like to expand and relocate. When such a marriage occurs, both benefit, as does the economy of the entire region.
In June of 2012, the Murphy Warehouse Company, one of the Upper Midwest's largest asset-based logistics companies, sets its sights on expansion beyond its Minnesota presence. The company leased a 50,000-square-foot logistics facility in North Kansas City, Missouri. The expansion represents a strategic move to expand its own growth while enabling customers in this new area to be supported and also grow and expand.
"We've worked hard as a company to be able to grow our business at this time," says Richard Murphy, Jr., president and CEO of Murphy Warehouse and fourth-generation business leader. "This expansion will allow us to serve existing customers with a presence in the Kansas City area and reach new customers."
According to Murphy Warehouse, the new facility will serve customers in the apparel recycling, food, and telecommunications industries throughout Missouri, Kansas, Iowa, and Nebraska. Its part of the company's strategy to meet an anticipated increase in demand for its warehousing services. The firm also expects to expand the new facility to 135,000 square feet by the end of 2012 and add 12 employees to manage the facility.
Murphy Warehouse is also considering upgrades to the company's North Kansas City logistics site. It hopes to integrate a connection to rail access. Rail access is available at its existing Minnesota-based logistics campuses. For many firms, rail access is as important as truck access, highway access, and other transportation modes and arteries in designing strategic distribution for globally competitive companies throughout the country. The services that a rail carrier offers can greatly benefit a location.
Shortline Railroads Complement Other Services
Murphy Warehouse also recently purchased a 350,000-square-foot warehouse facility in Eagan, Minnesota, to serve the food, medical, retail, paper, and home construction industries. The company plans to invest $3 million in improvements. Part of its vision is to facilitate smoother truck movement in and out of the campus, as well as re-establishing rail connections to bring rail cars indoors. "By re-establishing the Progressive Rail connection, we complete our goal of having our facilities on all railroads serving the Twin Cities," said Murphy in a statement released by the company.
Progressive Rail is a shortline railway, as is Illinois Railway. "As a shortline rail carrier, Illinois Railway [a division of OmniTRAX] serves a diverse base of customers [who] are seeking to transport their products within Northern Illinois communities," says Patrick Black, director of marketing and sales for OmniTRAX's Chicago region. "OmniTRAX owns and operates a total of 113 miles of trade and interchanges and provides many specific benefits to its customers including flexible pricing, customized service based on the destination, local decision-making, and the ability to link communities and companies that otherwise would not have access to rail service."
Class 1 rail carriers are those whose revenue exceeds $398.7 million and operate more than 95,000 miles of the U.S. rail network; they can transport products in an efficient method from point A to point B across the country with no stops in between. "For example, if a company needs [its] product to go from Chicago to Los Angeles without any stopping points, the Class 1 railroads provide excellent efficiency in that transportation," Black explains. " However, in many cases, companies need to transport their products in short distances via shortline rail carriers, and this provides competitive options to companies that don't have the capability to locate on Class I lines."
"We have the unique ability to help grow the region and serve the region," says Black. "More consistently, we are finding that companies are seeking to move their product by rail - and within a shorter distance. So by offering the short-rail service line and providing competitive pricing, we are providing a competitive advantage for those companies locating and/or growing in our region and seeking to transport their products efficiently and cost-effectively." He further explains, "Companies that are sensitive to logistics need to know that you have globally competitive logistics infrastructure available in the local market. In addition these companies want an efficient access to their markets and suppliers, a relatively lower costs of operations location, and an area with a favorable business climate."
Black notes that OmniTRAX owns and operates a total of 113 miles of trade and interchanges and provides many specific benefits to its customers including flexible pricing, customized service based on the destination, local decision-making, and the ability to link communities and companies that otherwise would not have access to rail service. This provides competitive options to companies that don't have the capability to locate on Class I lines.
Intermodal to the Rescue
Other companies - both logistics and industrial firms - are expanding their logistics capabilities as well. For example, Continental Transportation Solutions of Bensenville, Illinois, recently expanded its operations with a new 134,000-square-foot facility with more than 20 exterior docks to quickly receive shipments, sort and segregate product, cross dock various material, and quickly prepare for final delivery. Continental provides transportation solutions for firms in the financial, healthcare, marketing, and food industries.
Amazon recently broke ground on its latest fulfillment center in Jeffersonville, Indiana - its fifth in the state as the company is growing, moving, and expanding its fulfillment operations to afford a more competitive offering with its products often arriving on or about the next day. Such an offering is only possible with a very strategic and carefully selected mix of fulfillment centers and supporting modes of transport.
Companies within certain industries will target regions where the logistics infrastructure is developing to meet the transportation and intermodal demands of companies. Black uses the example of his locale in Rockford, Illinois.
"Industries that should consider the Rockford area because of its rail assets are those that ship much of their product by rail, such as plastics, steel manufacturing, building products and materials, automotive manufacturing and support, agricultural product processing and shipping, heavy equipment manufacturing, and food products processing," he says. "As a shortline rail carrier, OmniTRAX serves a diverse base of customers that are seeking to transport their products within Northern Illinois communities."
This very topic is ripe for discussion among the many members of critical supply chains. Recently, Transplace, a provider of transportation and logistics technology, held its Shipper Symposium in Phoenix, Arizona, which focused on the trends in transportation and logistics technology and the industry's outlook. Transplace President George Abernathy served on a discussion panel with Richard Hyland, president of Celtic International, an intermodal brokerage service that joined forces with Transplace in 2011, to discuss what they call the three essential elements of a successful supply chain: transportation management, intermodal, and brokerage.
"When the economy rebounds and truck drivers begin to retire or leave for higher paying jobs that are closer to home, intermodal can come to the rescue," said Hyland. "The growth of intermodal has caused the length of haul for drivers to become shorter and shorter. Additionally, intermodal is continuing to become an attractive option for companies as it is a cheaper alternative to over-the-road transportation. It is estimated that converting 10 percent of trucking shipments to intermodal would save hundreds of millions of gallons of gas."
This aligns with Starbucks International's decision to expand its operation with a facility in the Southeast. In mid-2012, Starbucks International broke ground on one of the first company-owned production plants in Augusta, Georgia. The facility will produce products currently manufactured abroad, including Starbucks VIA® Ready Brew, as well as the coffee base for Frappuccino® blended beverages and many of Starbucks® ready-to-drink beverages.
Why Augusta, Georgia? According to the company, not only did the community offer the ever-important attributes of strong work force and technology support for the new facility, but it also had a transportation and logistics infrastructure that was akin to what Starbucks needs to sustain its business goals and visions.
"During such challenging economic times, I am thrilled that we are creating jobs and building something special right here in Georgia," says Peter Gibbons, executive vice president of Starbucks Global Supply Chain Operations.
"Starbucks has long believed that there is a direct link between our success and the vitality of the communities in which we do business. With access to a skilled labor force, advanced technology, and critical transportation and logistics infrastructure, Augusta is a great example of how building high-tech manufacturing facilities in America makes good business sense while supporting the communities where our customers and partners live and work."