Susan Lacefield has been working for supply chain publications since 1999. Before joining DC VELOCITY, she was an associate editor for Supply Chain Management Review and wrote for Logistics Management magazine. She holds a master's degree in English.
It used to be that communities were less than eager to see a distribution center locate within their borders. But these days, things have changed, according to John H. Boyd of the Boyd Co. Inc., a consulting firm that specializes in site selection. "Instead of 'not in my backyard,' communities are now courting DCs to come to their area," he says.
That attitude adjustment stems partly from a realization that the types of jobs associated with a distribution center have changed, says Boyd. Chambers of commerce and economic development authorities have come to understand that DCs bring more than just low-paying manual labor jobs to the area; they also provide employment for technical and support personnel.
As a result, more and more regions are touting their strengths as centers of logistics activity. Massachusetts Institute of Technology professor Yossi Sheffi, who recently wrote a book on the subject, calls these hubs "logistics clusters," which he defines as areas where many logistics activities take place in close proximity. According to Sheffi, in a logistics cluster, both logistics service providers and the logistics operations of manufacturers, retailers, and distributors congregate around a port, airport, rail facility, or a location close to major population centers.
This is the first in a series of articles looking at some of these emerging logistics clusters. While most logistics professionals are familiar with hubs like Memphis, Tenn.; California's Inland Empire; and Columbus, Ohio, our series will look at locations that may not be on their radars yet. (For more on Ohio's role as a logistics hub, see the article "High on Ohio.")
The first article in our series looks at three emerging logistics clusters in the Midwest: the bistate Kansas City area, St. Louis, and Will County, Ill.
For more information ...
Want to learn more about the logistics clusters mentioned in this article? Here's where to find more information:
Kansas City
KC SmartPort: This not-for-profit group is an excellent source of information about logistics opportunities in the 18-county bistate Kansas City region.
"Kansas City: Logistics powerhouse?": Senior editor Mark Solomon's online article looks at the city's efforts to become a supply chain success story.
St. Louis
St. Louis Regional Chamber: This group connects business and civic communities in the 16-county bistate region. The chamber has identified "transportation and distribution" as one of the five industry clusters that the region is committed to strengthening.
Will County, Ill.
CenterPoint Properties: The property management company and developer of the CenterPoint Intermodal Center provides information on the center—including a drayage calculator—on its website.
Will County Center for Economic Development: This organization brings together public and private groups to encourage business development in the county. Its website offers detailed information about the inland port.
KANSAS CITY
Kansas City has long been known as a transportation hub. That's no surprise given that the city is crisscrossed by major highway, rail, air, and barge routes.
Now, the city is pushing to become known as a center of international trade as well. Located in the geographic center of North America, Kansas City is situated midway between Mexico and Canada. It has an aggressive foreign trade zone (FTZ) program and ranks first in the country in FTZ space, according to the development group KC SmartPort. It also has one of the largest U.S. Customs presences in the country in terms of fiscal clearance, says Chris Gutierrez, president of KC SmartPort.
Furthermore, the existing transportation infrastructure has been undergoing expansion in recent years. For example, the Norfolk Southern, BNSF, and Kansas City Southern railroads have all opened major intermodal facilities in the area. BNSF is set to open an additional one in the third quarter of 2013.
In the past five years, Kansas City has also made a concerted effort to strengthen its workforce's supply chain skills. In addition to the degree and certificate programs offered at local four-year universities and community colleges, the city has reached out to local high schools. KC SmartPort and local community colleges have collaborated with the city's "Prep-KC" program on efforts to go into high schools and spread the word about college and job opportunities in the supply chain. Students can then take a two-week course post-graduation and become a certified logistics associate, which qualifies them for an entry-level warehouse position.
While the city may not boast as many mega-distribution centers as you'll find in Chicago or Dallas, almost all of the major retailers operate DCs or warehouses here, including Wal-Mart (which has two distribution facilities), Home Depot, Target, and JC Penney. The city is also attracting more e-commerce and consumer goods companies. Camping and outdoor product company Coleman, for example, recently opened a 1.3 million-square-foot DC in Kansas City.
Kansas City does have one type of facility that no other location can offer: large underground warehouses. Scattered across the region, these warehouses, which total approximately 20 million square feet, were created from old limestone mines. Because they are situated underground, they're able to maintain a constant temperature all year long. "This leads to higher productivity rates and lower cost to operate, because you don't need heat and air conditioning," says Gutierrez.
ST. LOUIS
For many years now, St. Louis has marketed itself as the geographic center of the country, making it a logical location for a distribution facility. "We are the largest metropolitan area that is closest to the geographic center of the United States as well as the population center of the United States," says James Alexander, vice president, global client solutions, for the St. Louis Regional Chamber of Commerce. "We are also within 600 miles of about half of the manufacturing plants in the U.S.; that's a little more than a day's truck drive."
As further evidence of St. Louis' central location, consider this: The city is the westernmost terminus of the major Eastern railroads (CSX and Norfolk Southern), and the easternmost terminus of the major Western railroads (BNSF and UP).
If location is the number one reason why companies choose the St. Louis area for their DCs, the city's transportation infrastructure is second. In addition to the four railroads named above, St. Louis is served by the Kansas City Southern and Canadian National, making it the third-largest rail center in the country.
St. Louis is also the nation's third-largest inland port. Alexander notes that it's not only the northernmost "ice free" port on the Mississippi River, but that it also offers some advantages from a barge operator's point of view. "There are no locks and dams between St. Louis and New Orleans, so the barge operators can build very large tows," he explains. "Anywhere north or west of here, you have to deal with locks and dams, so the size of your tows is restricted."
On top of that, the city is bisected by four major interstate highways (I-55, I-44, I-70, and I-64) and is served by five regional airports (although three of them deal mainly in personal and corporate aircraft).
St. Louis also benefits from competitive labor costs. Approximately 80,000 people in the area are employed in transportation or material movement jobs, and the median hourly wage is $13.83, compared with the national median of $14.06. "So we've got a very skilled workforce, and we also have a workforce that is very competitive in terms of wages," says Alexander.
Currently, there are roughly 5,400 warehouses and DCs located in the St. Louis region, totaling 245 million square feet. Companies that operate facilities in the area include Unilever, Hershey's, Procter & Gamble, Anheuser Busch, Graybar, and Walgreens.
WILL COUNTY, ILL.
When you think of ports, Will County, Ill., probably is not the first place that pops to mind. But the county, located 40 miles southwest of downtown Chicago, is home to the nation's largest inland port, which is also the third-busiest port in the United States, according to Brian McKiernan, senior vice president of CenterPoint Properties, which manages the sites.
The inland port contains two large intermodal facilities: the Union Pacific Joliet Intermodal Terminal in Joliet, Ill., and BNSF Logistics Park-Chicago in Elwood, Ill. The two facilities are minutes away from I-80, which runs from San Francisco to the New York metropolitan area, and 1-55, which runs from Louisiana to Chicago.
Opened in 2003 (Elwood) and 2010 (Joliet), the two intermodal centers boast state-of-the-art facilities and roads. The intermodal center currently has approximately 17 million square feet of warehousing space and serves companies such as Wal-Mart, Home Depot, Georgia Pacific, Honda, and McKesson.
As for what makes Will County an appealing location for warehouses and DCs, it's all about efficiency. According to McKiernan, it takes 70 to 100 hours for freight to travel from the West Coast to rail facilities in Joliet and Elwood, Ill., on the western edge of Chicago. It takes another 70 to 100 hours for freight to travel by rail from Joliet or Elwood to the eastern edge of Chicago, he says.
By locating their distribution facilities at the intermodal center, which is just a quarter mile from the rail yard, companies can bypass the congestion in Chicago. Plus, the yard is designed for easy access, according to McKiernan. "You don't have any residential development off of the rail yard," he says, "so you are able to get through the yard and out on the highways as efficiently as possible."
Coming up: In the May issue, DC VELOCITY will look at emerging logistics hubs in the U.S. Southeast.
Most of the apparel sold in North America is manufactured in Asia, meaning the finished goods travel long distances to reach end markets, with all the associated greenhouse gas emissions. On top of that, apparel manufacturing itself requires a significant amount of energy, water, and raw materials like cotton. Overall, the production of apparel is responsible for about 2% of the world’s total greenhouse gas emissions, according to a report titled
Taking Stock of Progress Against the Roadmap to Net Zeroby the Apparel Impact Institute. Founded in 2017, the Apparel Impact Institute is an organization dedicated to identifying, funding, and then scaling solutions aimed at reducing the carbon emissions and other environmental impacts of the apparel and textile industries.
The author of this annual study is researcher and consultant Michael Sadowski. He wrote the first report in 2021 as well as the latest edition, which was released earlier this year. Sadowski, who is also executive director of the environmental nonprofit
The Circulate Initiative, recently joined DC Velocity Group Editorial Director David Maloney on an episode of the “Logistics Matters” podcast to discuss the key findings of the research, what companies are doing to reduce emissions, and the progress they’ve made since the first report was issued.
A: While companies in the apparel industry can set their own sustainability targets, we realized there was a need to give them a blueprint for actually reducing emissions. And so, we produced the first report back in 2021, where we laid out the emissions from the sector, based on the best estimates [we could make using] data from various sources. It gives companies and the sector a blueprint for what we collectively need to do to drive toward the ambitious reduction [target] of staying within a 1.5 degrees Celsius pathway. That was the first report, and then we committed to refresh the analysis on an annual basis. The second report was published last year, and the third report came out in May of this year.
Q: What were some of the key findings of your research?
A: We found that about half of the emissions in the sector come from Tier Two, which is essentially textile production. That includes the knitting, weaving, dyeing, and finishing of fabric, which together account for over half of the total emissions. That was a really important finding, and it allows us to focus our attention on the interventions that can drive those emissions down.
Raw material production accounts for another quarter of emissions. That includes cotton farming, extracting gas and oil from the ground to make synthetics, and things like that. So we now have a really keen understanding of the source of our industry’s emissions.
Q: Your report mentions that the apparel industry is responsible for about 2% of global emissions. Is that an accurate statistic?
A: That’s our best estimate of the total emissions [generated by] the apparel sector. Some other reports on the industry have apparel at up to 8% of global emissions. And there is a commonly misquoted number in the media that it’s 10%. From my perspective, I think the best estimate is somewhere under 2%.
We know that globally, humankind needs to reduce emissions by roughly half by 2030 and reach net zero by 2050 to hit international goals. [Reaching that target will require the involvement of] every facet of the global economy and every aspect of the apparel sector—transportation, material production, manufacturing, cotton farming. Through our work and that of others, I think the apparel sector understands what has to happen. We have highlighted examples of how companies are taking action to reduce emissions in the roadmap reports.
Q: What are some of those actions the industry can take to reduce emissions?
A: I think one of the positive developments since we wrote the first report is that we’re seeing companies really focus on the most impactful areas. We see companies diving deep on thermal energy, for example. With respect to Tier Two, we [focus] a lot of attention on things like ocean freight versus air. There’s a rule of thumb I’ve heard that indicates air freight is about 10 times the cost [of ocean] and also produces 10 times more greenhouse gas emissions.
There is money available to invest in sustainability efforts. It’s really exciting to see the funding that’s coming through for AI [artificial intelligence] and to see that individual companies, such as H&M and Lululemon, are investing in real solutions in their supply chains. I think a lot of concrete actions are being taken.
And yet we know that reducing emissions by half on an absolute basis by 2030 is a monumental undertaking. So I don’t want to be overly optimistic, because I think we have a lot of work to do. But I do think we’ve got some amazing progress happening.
Q: You mentioned several companies that are starting to address their emissions. Is that a result of their being more aware of the emissions they generate? Have you seen progress made since the first report came out in 2021?
A: Yes. When we published the first roadmap back in 2021, our statistics showed that only about 12 companies had met the criteria [for setting] science-based targets. In 2024, the number of apparel, textile, and footwear companies that have set targets or have commitments to set targets is close to 500. It’s an enormous increase. I think they see the urgency more than other sectors do.
We have companies that have been working at sustainability for quite a long time. I think the apparel sector has developed a keen understanding of the impacts of climate change. You can see the impacts of flooding, drought, heat, and other things happening in places like Bangladesh and Pakistan and India. If you’re a brand or a manufacturer and you have operations and supply chains in these places, I think you understand what the future will look like if we don’t significantly reduce emissions.
Q: There are different categories of emission levels, depending on the role within the supply chain. Scope 1 are “direct” emissions under the reporting company’s control. For apparel, this might be the production of raw materials or the manufacturing of the finished product. Scope 2 covers “indirect” emissions from purchased energy, such as electricity used in these processes. Scope 3 emissions are harder to track, as they include emissions from supply chain partners both upstream and downstream.
Now companies are finding there are legislative efforts around the world that could soon require them to track and report on all these emissions, including emissions produced by their partners’ supply chains. Does this mean that companies now need to be more aware of not only what greenhouse gas emissions they produce, but also what their partners produce?
A: That’s right. Just to put this into context, if you’re a brand like an Adidas or a Gap, you still have to consider the Scope 3 emissions. In particular, there are the so-called “purchased goods and services,” which refers to all of the embedded emissions in your products, from farming cotton to knitting yarn to making fabric. Those “purchased goods and services” generally account for well above 80% of the total emissions associated with a product. It’s by far the most significant portion of your emissions.
Leading companies have begun measuring and taking action on Scope 3 emissions because of regulatory developments in Europe and, to some extent now, in California. I do think this is just a further tailwind for the work that the industry is doing.
I also think it will definitely ratchet up the quality requirements of Scope 3 data, which is not yet where we’d all like it to be. Companies are working to improve that data, but I think the regulatory push will make the quality side increasingly important.
Q: Overall, do you think the work being done by the Apparel Impact Institute will help reduce greenhouse gas emissions within the industry?
A: When we started this back in 2020, we were at a place where companies were setting targets and knew their intended destination, but what they needed was a blueprint for how to get there. And so, the roadmap [provided] this blueprint and identified six key things that the sector needed to do—from using more sustainable materials to deploying renewable electricity in the supply chain.
Decarbonizing any sector, whether it’s transportation, chemicals, or automotive, requires investment. The Apparel Impact Institute is bringing collective investment, which is so critical. I’m really optimistic about what they’re doing. They have taken a data-driven, evidence-based approach, so they know where the emissions are and they know what the needed interventions are. And they’ve got the industry behind them in doing that.
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.”
That result showed that driver wages across the industry continue to increase post-pandemic, despite a challenging freight market for motor carriers. The data comes from ATA’s “Driver Compensation Study,” which asked 120 fleets, more than 150,000 employee drivers, and 14,000 independent contractors about their wage and benefit information.
Drilling into specific categories, linehaul less-than-truckload (LTL) drivers earned a median annual amount of $94,525 in 2023, while local LTL drivers earned a median of $80,680. The median annual compensation for drivers at private carriers has risen 12% since 2021, reaching $95,114 in 2023. And leased-on independent contractors for truckload carriers were paid an annual median amount of $186,016 in 2023.
The results also showed how the demographics of the industry are changing, as carriers offered smaller referral and fewer sign-on bonuses for new drivers in 2023 compared to 2021 but more frequently offered tenure bonuses to their current drivers and with a greater median value.
"While our last study, conducted in 2021, illustrated how drivers benefitted from the strongest freight environment in a generation, this latest report shows professional drivers' earnings are still rising—even in a weaker freight economy," ATA Chief Economist Bob Costello said in a release. "By offering greater tenure bonuses to their current driver force, many fleets appear to be shifting their workforce priorities from recruitment to retention."