Peter Bradley is an award-winning career journalist with more than three decades of experience in both newspapers and national business magazines. His credentials include seven years as the transportation and supply chain editor at Purchasing Magazine and six years as the chief editor of Logistics Management.
The CenterPoint Intermodal Center in Joliet, Ill., faces fierce competition for distribution center business, but it has an edge that's proving tough to beat. And it's not shy about promoting it. Visit the center's website and you'll find a calculator that shows customers what they could save in drayage costs by locating a DC at the 2,500-acre industrial development, which boasts on-site access to Burlington Northern Santa Fe's Logistics Park Chicago.
A drayage calculator might not sound like a killer marketing tool. Yet that's precisely the kind of sales tool CenterPoint used to attract high-profile tenants like Wal-Mart and Georgia Pacific.
To understand why drayage costs would carry so much weight with customers, you have to know a little bit about the new dynamics of DC site selection. The days when companies chose DC sites largely on the basis of cost per square foot are long gone. Today, transportation costs will likely be the principal driver when a company goes to pick a site within its target region. Small wonder developers like CenterPoint are anxious to promote their properties' transportation advantages.
That's not to say that industrial developers haven't played the logistics card in the past. Leasing companies and developers have long touted access to markets and transportation infrastructure in their marketing pitches. Many industrial developments, like the Rickenbacker Global Logistics Park, part of the Rickenbacker Inland Port in Columbus, Ohio, focus specifically on their potential logistics advantages in their marketing. (The Rickenbacker Inland Port even publishes an online newsletter called "Logistically Speaking" that highlights the development's advantages.)
What's different today is the increased emphasis developers are placing on all things logistics. Part of the explanation lies in cost: While real estate expenses amount to 4 to 5 percent of operating costs for most DCs, transportation costs are now close to 50 percent, according to experts in the industry. Another part lies in the transportation challenges facing shippers, like tight trucking capacity, an aging driver workforce, regulations that could reduce carrier productivity, and an increasing focus on carbon footprints. All this has led industrial real estate developers and their transportation and public sector partners to zero in on transportation and logistics when they go to market their properties.
That's mainly good news for those responsible for finding the best sites for their companies' DCs—it means that brokers speak the language better than ever. If there is a downside, it's that they also understand that a site that can offer lower transportation costs than nearby competitors can demand a premium price.
Winds of change
All this comes at a time of flux for the industry. Skyrocketing transportation costs are forcing many businesses to re-evaluate their distribution networks, says Tim Feemster, a senior vice president for industrial real estate giant Grubb & Ellis. In a lot of cases, these companies are seeking ways to reduce less-than-truckload and parcel shipping costs, which tend to rise faster than truckload or intermodal costs, he says. The result could be a shift toward more regional DCs and away from large national facilities, he adds.
Other factors could potentially come into play as well, says Feemster, who joined Grubb & Ellis nearly five years ago after a three-decade career in logistics operations. For example, he believes that the recent supply chain disruptions—in particular, the blows to automotive and electronic supply chains caused by the disaster in Japan—may spur some companies to re-evaluate their business resiliency plans, including their inventory strategies. That, in turn, could affect decisions on DC size. "If you change inventory strategy, that affects the size of the box you need," he says.
Should all this lead to a boom in industrial real estate activity, the challenge for the industry will be bringing its people up to speed. Working with clients on logistics network planning projects requires a great deal of specialized knowledge. "What's important is that an economic development person understand supply chain cost structures and how [they] relate to the [site] decision," Feemster says.
That could prove to be a big adjustment for brokers more accustomed to selling buildings, says Richard H. Thompson, executive vice president for Jones Lang LaSalle Americas Inc. (JLL). In an e-mail to DC Velocity, Thompson noted that historically, "when real estate professionals look to market or sell industrial assets, they are focused on the traditional real estate 'stuff' such as square footage, price per square foot, ceiling heights, etc. They are not able to assess or quantify the critical logistics decision inputs, such as proximity to customers/suppliers, labor costs, supply chain infrastructure, etc."
Gearing up for growth
To prepare their brokers for a new era, some developers are ramping up their training efforts. Grubb & Ellis is a case in point. Feemster says that when he joined the company, one of his missions was to train brokers on what really matters to logistics network planners.
Others are taking the technology route. JLL, for example, has developed a sophisticated modeling tool to analyze properties from a logistics point of view.
Called the "Reverse Location Selection" (RLS) model, the tool essentially flips the traditional site search process on its head. Rather than starting with a target region and zeroing in on specific properties, the RLS approach starts with the property itself. That is, it takes a specific location or property and quantifies its value in logistics and supply chain terms (as well as in more traditional measures).
That approach offers advantages on a variety of fronts, JLL says. For one thing, it saves customers time by doing some of the upfront work they would otherwise have to do themselves. For another, it can help developers evaluate the commercial prospects of their properties.
For example, JLL recently used the model to develop a "logistics profile" of a 440-acre site in Pennsylvania's Lehigh Valley owned by Los Angeles-based industrial property developer Majestic Realty. As part of its assessment, JLL looked at factors like rail and highway access as well as proximity to major markets.
Ed Konjoyan, a vice president of Majestic Realty, says his company commissioned the study after seeing how well logistics-centric marketing worked for the CenterPoint Intermodal Center. CenterPoint, he says, landed some very big customers by promoting logistics-related advantages like reduced drayage costs. Majestic is hoping to emulate that success with the Lehigh Valley site. The JLL process, he says, "confirmed scientifically our gut feeling about the value of this property."
What does that mean for distribution executives looking for a new DC location? When companies like Grubb & Ellis, JLL, Majestic, and CenterPoint parse the logistics advantages of their properties, it likely can accelerate the selection process—although due diligence would demand verifying any claims. And as Thompson points out, there's another potential advantage for distribution executives. When it comes time to shed a company-owned DC, it could reduce their risk of getting stuck with an oversized white elephant.
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.