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

Boasting UPS, central location and low costs, Kentucky delivers the whole package.

Logistics Distribution Warehousing 2007
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 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.

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