Highway Accessibility: An On-Ramp to Success
For a majority of durable goods manufacturers, distribution/logistics companies, and warehousing firms, highway accessibility is one of the first on-ramps to success. Area Development’s 26th annual survey of corporate executives (published Winter 2012) found that highway accessibility topped the list of individual site selection factors, with 93.8 percent of those surveyed ranking this factor as “very important” or “important.”
Robert E. Leak, Sr. CEcD, HLM, Partner, Leak-Goforth Co., LLC (November 2012)
Robert Leak, partner in Leak-GoForth Company, an economic development and location consulting firm, acknowledged companies’ traditional dependence on highway accessibility. He says, “If you look at a density map of manufacturing plants, you will find that they are congregated along or close to interstate highways.” Highway accessibility is a vital piece of the global supply chain transportation puzzle, along with air service, rail availability, direct access, multi-modal facility, and ports. Leak notes that some companies have established the position of staff logistician to ensure efficient transportation because “second only to the cost of your work force is the cost of your transportation.”
Leak advises companies that are looking for new sites to pay careful attention to the availability of access roads and to check that the load limits established by the Department of Transportation for the area are sufficient to handle significant truck traffic. Besides the more obvious goal of quick delivery of goods, he says that highway accessibility can also become a part of the marketing plan. “Any company that wants visibility for their product can call attention to its factory by having its signage on a major highway,” Leak explains.
Highway Improvement Plans
States are steering attention to themselves with highway improvement plans. More interstate highways intersect Indiana than any other state, according to Duke Energy, earning it the recognition as the “Crossroads of America.” In 2005, Governor Mitch Daniels launched Major Moves, 10-year transportation plan, to improve and expand Indiana’s highway infrastructure. The plan included the Interstate 69 extension from Evansville to Indianapolis, which is the longest contiguous interstate project in the country, according to the Indiana Economic Development Corporation.
In September, Meyer Distributing Inc., an automotive specialty products marketing and distribution provider, announced plans to expand its headquarters in Jasper, Indiana, creating up to 109 new jobs by the end of 2016. The firm currently employs more than 195 full-time workers in Jasper, Indianapolis, and Elkhart. The investment of $23.37 million will entail centralizing and expanding its operations and warehouse space to support its national distribution network. “Given the state of Indiana’s commitment to improving infrastructure through Major Moves like the I-69 extension, the sky is the limit for future growth of transportation and logistics companies,” says Mike Braun, owner and president of the company.
Ed McCallum, senior principal at McCallum Sweeney Consulting says that the degree of highway access is a direct function of the need to bring goods to market and receive supplies quickly and efficiently, especially for automotive manufacturers. By working with automotive icons like Nissan, Mitsubishi, Mercedes, and Paccar, he has witnessed the need for highway access especially among plants that strive for “lean” manufacturing methods. “For example, automotive assembly plants are keenly attuned to just-in-time delivery from their tier-one and tier-two suppliers,” he says. “The materials have to be at the plant at a specific time and ready to go into the automobile. Timing is critical because they want to hold as little inventory in-house as possible, so that they can take up less warehousing space and need fewer employees to handle it. They have to be right on the interstate.”
States must take the initiative in providing highway infrastructure to attract new projects. McCallum says, “In the past, the states were more in a reactive mode than proactive mode, which is too slow in this competitive economy.” He says that in the past, when it could take several years to design a car, there was plenty of time to configure a plant. “Now, when a car can be ready for production in six months, every day that they are late in building the plant could cost the company millions of dollars.”
McCallum says that years ago he learned much about siting of automotive plants when his company was engaged by Tennessee Valley Authority to help develop a megasite program for their region. He recalls, “They had opportunities for automotive plants but never won. We looked at 26 sites, and several were not ready from an interstate highway access standpoint. Properties need to be identified in advance, and plans for infrastructure improvements constructed so that when an OEM shows up, they don’t just react — they can demonstrate that funds are already appropriated and design and engineering are ready. When the client signs the deal, the plans are put into motion, and the ramp is ready before the plant is completed.”
Positive Economic Effects
A report entitled "The Economic Impact and Financing of Infrastructure Spending 2012" by an economic research team at the College of William and Mary’s Thomas Jefferson
Program in Public Policy in Williamsburg, Virginia, for the Associated Equipment Distributors delved into highways and other infrastructure that affect industry. The report cited, “In the short-run, spending on infrastructure produces twice as much economic activity as the level of initial spending. These effects are most heavily concentrated in the manufacturing and professional and business services sectors, but also accrue to smaller sectors like agriculture. In the long-run, spending on all types of infrastructure generates substantial permanent positive effects across the economy as a whole.”
“Improving highways is good for industry and employment in general,” says McCallum. For obtaining funding, “The federal government doesn’t pick and choose; the funds will flow to whoever is proactive to create sites and infrastructure.” He suggests that now there is a keener awareness of highway infrastructure shortcomings and what areas still need improvement. He sums up, “Over the past 15 to 20 years, we have developed a keener awareness of the necessity for a proactive approach, for thinking in advance.”