Free land! Tax incentives! Payroll assistance! Companies out scouting for DC sites are demanding and getting all this and more. But there's more to finding the right site than squeezing breaks from the locals.
John Johnson joined the DC Velocity team in March 2004. A veteran business journalist, John has over a dozen years of experience covering the supply chain field, including time as chief editor of Warehousing Management. In addition, he has covered the venture capital community and previously was a sports reporter covering professional and collegiate sports in the Boston area. John served as senior editor and chief editor of DC Velocity until April 2008.
It's a deal that would quicken the pulse of even the most jaded real estate broker. To get Todd A. Noethen and Hal Wilson to sign on the dotted line—thus committing their company, Big Lots, to build its fifth distribution center in Durant, Okla.—economic development officials offered them the sun, the moon and the stars—or at least their site selection equivalents. In exchange for locating their new $70 million distribution center on Durant's fertile soil, Big Lots was promised free land—137 acres' worth, to be exact—and a host of infrastructure improvements. What's more, the county would throw in some needed road work and foot the bill for the construction of a one-million gallon water tower.
And that was not all. The city of Durant and Bryan County sweetened the pot with tax incentives. For example, Big Lots gets a five-year property tax abatement, sales tax exemptions on construction materials used at the site, a land tax credit that allows Big Lots to accelerate the depreciation on its investment by 40 percent, and a sales tax exemption on utilities. There's also an annual inventory tax exemption, meaning Big Lots won't be taxed on the products stored in the DC at the end of each year.
But wait, there's more: Big Lots' new employees will be trained at no cost to the company. Its new hosts will pick up the tab. In addition, the city of Durant took the highly unusual step of agreeing to a "quality jobs cash payment." Under the rare agreement, the city will reimburse Big Lots for 5 percent of the DC's total payroll on a quarterly basis for 10 years.
All told, the incentive package from Bryan County and the city of Durant totaled $13.3 million for the sprawling 1.2 million-square-foot DC that opened three months ago. And the tab's still running. Durant officials expect the total incentive package to reach $20 million when the costs for all of the infrastructure improvements are tallied.
Welcome to the world of economic development incentives. In what amounts to a war between the states, counties, cities and even rural hamlets, local economic development authorities are vying with one another to create the most lavish incentive packages. And the breaks aren't just offered to small players and startups, which might actually need the assistance. They're going to the big players, like Big Lots and Wal-Mart, as well. In fact, a recent study estimates that Wal-Mart—the king of retailers—has received more than $624 million in economic development subsidies to build 91 distribution centers, including a whopping $48 million for one facility. The study, conducted by non-profit research center Good Jobs First, states that 90 percent of Wal-Mart's DCs have received government funding of some kind.
Competition is particularly intense for DCs. Unlike retail stores, distribution centers require highly skilled workers, which means the jobs they bring to a community pay higher wages. Big Lots, for example, guaranteed the Durant community a starting wage of $10 an hour, including benefits.
Get the big picture
It's easy to see the appeal of all those handouts to Big Lots, purveyor of everything from cut-price fruit cocktail and tortilla chips to living room furniture. To compete in the white-hot deep-discounter market, the Columbus, Ohio based retailer, which operates 1,400 stores in 46 states and reports annual revenues that exceed $4 billion, has to land not only the best deals on the products it sells—everything from packaged food to sofas to row boats—but the best deals on building new distribution centers as well.
That's not to say that Big Lots made its decision based solely on incentives. Before selecting the Durant location, Noethen, who is vice president of distribution support services, and Wilson, who is senior vice president of logistics, conducted a rigorous search, investigating dozens of sites in several states and analyzing a detailed transportation model. In the end, "Durant met our strategic plan for our existing store base and future growth," says Noethen.
In fact, Noethen cautions that as enticing as they may be, incentives are only part of the site selection picture. "People tend to focus on the multi-million dollar incentive package but overlook the bad news—you need to spend $3 million to make the site usable," he says. "The incentive package can't be the single deciding factor. You need to understand the entire site development impact, and consider how much site work will be involved." A $15 million incentive package might not be such a great deal if excessive infrastructure work is required on the site, resulting in increased construction costs and delays in completing the facility.
For example, almost all sites require soil grading, and it's imperative to rule out sub-soil issues. Noethen suggests hiring geotechnical professionals to assure the site is DC-worthy, with no hidden rock ledges that could require costly blasting. In addition, you need to make sure there are no drainage issues or even protected wildlife in the area that could lead to a costly battle with environmentalists.
Another potential hitch is the availability of labor. In the end, no matter how highly automated the facility, it takes people to make a DC run. And unlike the Field of Dreams, you can't assume that if you build it, they will come. Therefore, it's important to research the potential labor pool before deciding on a location for your next DC.
Big Lots, for example, wasn't content to simply accept verbal assurances concerning the Durant area's labor pool. Because it's so dependent on labor availability (as the chain continues its expansion, the workforce in Durant is expected to double from its current 250 associates to nearly 500), the company contracted with Kurt Salmon Associates to conduct a thorough examination of the employee base in Durant and the surrounding communities. The company contacted 15 other employers and inquired about average wages, the presence of unions, insurance claims, how long it takes to fill job openings, and the overall work ethic of employees. "A dependable labor pool is one of the top issues," says Noethen. "You need a good employee base; it's one of the top decision factors."
A well-educated workforce is essential for operating some of the state-of-the-art material handling equipment installed at the Big Lots facility. Big Lots expects the Durant facility to become the most efficient of the company's five DCs, based largely on the sortation conveyor system from Intelligrated Inc. The system operates at a rate of 630 feet per minute, which Noethen claims is the fastest of its kind when it comes to a carton sortation operation. With 40 shipping lanes, the facility can process 235 cases per minute, or 14,000 cartons per hour. "Nobody is running that fast," says Noethen. "Others will be soon, but nobody is right now."
Despite the rapid throughput that many DCs achieve, site selection experts emphasize that it's important to choose a site that will allow you to expand. Quite often, it's economically advantageous to add on to an existing facility, as opposed to opening a satellite operation. All too often, however, companies purchase sites with existing requirements in mind, only to find they've become land-locked when it comes time to expand a few years later.
2010's closer than it may appear
Stuart Rosenfeld may not own a crystal ball, but he does have an unusually clear vision of the future. Even though automotive parts retailer Pep Boys just broke ground for its fifth distribution center in San Bernardino, Calif., Rosenfeld, the company's vice president of distribution, is already at work determining when another DC will be needed and where that facility should be located.
"When it comes to building a new distribution center, you need to be two to two and a half years ahead of the curve, including construction time," says Rosenfeld. "I'm already looking out as far as 2010."
Rosenfeld is in the process of analyzing Pep Boys' current distribution network, which also includes sites in Atlanta, Dallas, Indianapolis and Chester, N.Y. Aside from factoring in future store expansions, Rosenfeld runs several models to predict how growth at existing stores will affect square footage at distribution centers.
In doing so, Rosenfeld will need to take into account the efficiency gains expected from the DC now under construction in San Bernardino. The 600,240-square-foot leased facility will consolidate three separate sites in the Los Angeles area and provide nearly 175,000 square feet of additional warehouse space. The additional height of the new DC (30 feet versus 24) will equate to a 63-percent increase in cubic capacity. The facility will also have 25 additional loading docks, allowing for a substantial increase in throughput—meaning the facility will service 165 stores, 151 in its existing service area and 14 additional stores in the Phoenix market.
"I factor all of that into my forecast," says Rosenfeld. "You've got to have a clear understanding of where and when you need to expand. To me that's critical."
Nearly one-third of American consumers have increased their secondhand purchases in the past year, revealing a jump in “recommerce” according to a buyer survey from ShipStation, a provider of web-based shipping and order fulfillment solutions.
The number comes from a survey of 500 U.S. consumers showing that nearly one in four (23%) Americans lack confidence in making purchases over $200 in the next six months. Due to economic uncertainty, savvy shoppers are looking for ways to save money without sacrificing quality or style, the research found.
Younger shoppers are leading the charge in that trend, with 59% of Gen Z and 48% of Millennials buying pre-owned items weekly or monthly. That rate makes Gen Z nearly twice as likely to buy second hand compared to older generations.
The primary reason that shoppers say they have increased their recommerce habits is lower prices (74%), followed by the thrill of finding unique or rare items (38%) and getting higher quality for a lower price (28%). Only 14% of Americans cite environmental concerns as a primary reason they shop second-hand.
Despite the challenge of adjusting to the new pattern, recommerce represents a strategic opportunity for businesses to capture today’s budget-minded shoppers and foster long-term loyalty, Austin, Texas-based ShipStation said.
For example, retailers don’t have to sell used goods to capitalize on the secondhand boom. Instead, they can offer trade-in programs swapping discounts or store credit for shoppers’ old items. And they can improve product discoverability to help customers—particularly older generations—find what they’re looking for.
Other ways for retailers to connect with recommerce shoppers are to improve shipping practices. According to ShipStation:
70% of shoppers won’t return to a brand if shipping is too expensive.
51% of consumers are turned off by late deliveries
40% of shoppers won’t return to a retailer again if the packaging is bad.
The “CMA CGM Startup Awards”—created in collaboration with BFM Business and La Tribune—will identify the best innovations to accelerate its transformation, the French company said.
Specifically, the company will select the best startup among the applicants, with clear industry transformation objectives focused on environmental performance, competitiveness, and quality of life at work in each of the three areas:
Shipping: Enabling safer, more efficient, and sustainable navigation through innovative technological solutions.
Logistics: Reinventing the global supply chain with smart and sustainable logistics solutions.
Media: Transform content creation, and customer engagement with innovative media technologies and strategies.
Three winners will be selected during a final event organized on November 15 at the Orange Vélodrome Stadium in Marseille, during the 2nd Artificial Intelligence Marseille (AIM) forum organized by La Tribune and BFM Business. The selection will be made by a jury chaired by Rodolphe Saadé, Chairman and CEO of the Group, and including members of the executive committee representing the various sectors of CMA CGM.
The global air cargo market’s hot summer of double-digit demand growth continued in August with average spot rates showing their largest year-on-year jump with a 24% increase, according to the latest weekly analysis by Xeneta.
Xeneta cited two reasons to explain the increase. First, Global average air cargo spot rates reached $2.68 per kg in August due to continuing supply and demand imbalance. That came as August's global cargo supply grew at its slowest ratio in 2024 to-date at 2% year-on-year, while global cargo demand continued its double-digit growth, rising +11%.
The second reason for higher rates was an ocean-to-air shift in freight volumes due to Red Sea disruptions and e-commerce demand.
Those factors could soon be amplified as e-commerce shows continued strong growth approaching the hotly anticipated winter peak season. E-commerce and low-value goods exports from China in the first seven months of 2024 increased 30% year-on-year, including shipments to Europe and the US rising 38% and 30% growth respectively, Xeneta said.
“Typically, air cargo market performance in August tends to follow the July trend. But another month of double-digit demand growth and the strongest rate growths of the year means there was definitely no summer slack season in 2024,” Niall van de Wouw, Xeneta’s chief airfreight officer, said in a release.
“Rates we saw bottoming out in late July started picking up again in mid-August. This is too short a period to call a season. This has been a busy summer, and now we’re at the threshold of Q4, it will be interesting to see what will happen and if all the anticipation of a red-hot peak season materializes,” van de Wouw said.
The report cites data showing that there are approximately 1.7 million workers missing from the post-pandemic workforce and that 38% of small firms are unable to fill open positions. At the same time, the “skills gap” in the workforce is accelerating as automation and AI create significant shifts in how work is performed.
That information comes from the “2024 Labor Day Report” released by Littler’s Workplace Policy Institute (WPI), the firm’s government relations and public policy arm.
“We continue to see a labor shortage and an urgent need to upskill the current workforce to adapt to the new world of work,” said Michael Lotito, Littler shareholder and co-chair of WPI. “As corporate executives and business leaders look to the future, they are focused on realizing the many benefits of AI to streamline operations and guide strategic decision-making, while cultivating a talent pipeline that can support this growth.”
But while the need is clear, solutions may be complicated by public policy changes such as the upcoming U.S. general election and the proliferation of employment-related legislation at the state and local levels amid Congressional gridlock.
“We are heading into a contentious election that has already proven to be unpredictable and is poised to create even more uncertainty for employers, no matter the outcome,” Shannon Meade, WPI’s executive director, said in a release. “At the same time, the growing patchwork of state and local requirements across the U.S. is exacerbating compliance challenges for companies. That, coupled with looming changes following several Supreme Court decisions that have the potential to upend rulemaking, gives C-suite executives much to contend with in planning their workforce-related strategies.”
Stax Engineering, the venture-backed startup that provides smokestack emissions reduction services for maritime ships, will service all vessels from Toyota Motor North America Inc. visiting the Toyota Berth at the Port of Long Beach, according to a new five-year deal announced today.
Beginning in 2025 to coincide with new California Air Resources Board (CARB) standards, STAX will become the first and only emissions control provider to service roll-on/roll-off (ro-ros) vessels in the state of California, the company said.
Stax has rapidly grown since its launch in the first quarter of this year, supported in part by a $40 million funding round from investors, announced in July. It now holds exclusive service agreements at California ports including Los Angeles, Long Beach, Hueneme, Benicia, Richmond, and Oakland. The firm has also partnered with individual companies like NYK Line, Hyundai GLOVIS, Equilon Enterprises LLC d/b/a Shell Oil Products US (Shell), and now Toyota.
Stax says it offers an alternative to shore power with land- and barge-based, mobile emissions capture and control technology for shipping terminal and fleet operators without the need for retrofits.
In the case of this latest deal, the Toyota Long Beach Vehicle Distribution Center imports about 200,000 vehicles each year on ro-ro vessels. Stax will keep those ships green with its flexible exhaust capture system, which attaches to all vessel classes without modification to remove 99% of emitted particulate matter (PM) and 95% of emitted oxides of nitrogen (NOx). Over the lifetime of this new agreement with Toyota, Stax estimated the service will account for approximately 3,700 hours and more than 47 tons of emissions controlled.
“We set out to provide an emissions capture and control solution that was reliable, easily accessible, and cost-effective. As we begin to service Toyota, we’re confident that we can meet the needs of the full breadth of the maritime industry, furthering our impact on the local air quality, public health, and environment,” Mike Walker, CEO of Stax, said in a release. “Continuing to establish strong partnerships will help build momentum for and trust in our technology as we expand beyond the state of California.”