Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
The legendary Illinois senator Everett McKinley Dirksen famously quipped that "a billion here, a billion there, pretty soon you're talking real money." The Home Depot Inc., which was poised to crack the $80 billion annual sales mark in its 2013 fiscal year that ends in January, knows of what Dirksen spoke.
At the Atlanta-based home improvement retailer, the law of large numbers almost decrees that any operating efficiencies, no matter how trivial they seem on the surface, will yield big savings. So when the company in September relocated operations from two stocking distribution centers (SDCs) near Interstate 55 about 25 miles south of Chicago to a single 1.6 million-square-foot facility adjacent to Union Pacific Railroad Co.'s (UP) intermodal facility in Joliet, Ill., about 40 miles southwest of the city, it raised nary an eyebrow in the mainstream world. But for a huge intermodal user like Home Depot, the ability to avoid the cost of draying products between the highway locales and UP's lines was no small matter.
Home Depot would not disclose container volumes or specific cost savings. Michael Murphy, chief development officer for CenterPoint Properties, a Chicago-based industrial property developer active in the intermodal arena, estimates the typical dray move costs between $125 and $150. Multiply that by a hypothetical number of 100,000 twenty-foot-equivalent containers a year, and the annual dray savings alone hit $12.5 million or higher. That figure doesn't include other synergies that come with a large user's being a three-iron golf shot or so away from the train and the boxes on or in it. Murphy said he had no concrete numbers on Home Depot's activity.
Home Depot's new SDC sits next to a 643,000 rapid deployment center (RDC), which opened in January 2012. The centers represent the company's largest U.S. supply chain operation, serving 345 stores in 13 states.
SPACE NEAR THEM THAR RAILS!
Welcome to the next logistics land rush. As demand increases for intermodal transportation—total third-quarter 2013 traffic rose 4.7 percent from the 2012 period, according to the Intermodal Association of North America—businesses are taking a hard look at locating or relocating their DCs near intermodal yards. Of the 225 million square feet of DC space under development in the U.S., about one-third is at or close to an intermodal facility, according to John H. Boyd, head of The Boyd Co. Inc., a site selection firm in Princeton, N.J. Boyd said that is about twice the ratio of several years ago, though he didn't have hard numbers to support the estimate.
Boyd said among the factors driving property demand near intermodal yards are Canadian companies searching for bargains in U.S. real estate and e-commerce players like Amazon.com, which operates a DC in Tracy, Calif., close to a line served by the Burlington Northern Santa Fe Railway (BNSF). Another is the rail industry's success in promoting intermodal's environmental virtues, an approach that Boyd said has been successful with his firm's clients.
According to a soon-to-be-completed study by Chicago-based real estate services and logistics firm Jones Lang LaSalle, the six Class I railroads—BNSF, UP, CSX Corp., Norfolk Southern Corp., and the U.S. operations of Canadian National Inc. and Canadian Pacific Corp.—operate 164 intermodal facilities in the U.S. and 19 in Canada. The study, which will quantify the growth of distribution centers and other real estate attributable to intermodal facilities, is to be published in early 2014.
In eastern Pennsylvania's Lehigh Valley; the Kansas City suburb of Edgarton, Kan.; Joliet and Elwood, Ill.—the latter being home to a BNSF intermodal yard where Wal-Mart Stores Inc. has two DCs totaling 3.4 million square feet—the Dallas/Fort Worth Metroplex; Memphis, Tenn.; and the "Inland Empire" east of Los Angeles, land is being snapped up for intermodal development. In the Lehigh Valley, a straight rail shot to and from New Jersey's Port of Elizabeth and a gateway to the densely populated New York, New Jersey, and Philadelphia metro areas, there are 45 million square feet of industrial property within 15 miles of an Norfolk Southern intermodal yard, according to Jake Terkanian, Wayne, Pa.-based vice president of development giant CBRE's Global Industrial Services Group. Of that acreage, only 5 percent sits vacant, Terkanian said.
In Bethlehem, Pa., on the Lehigh Valley's eastern side, Wal-Mart has two buildings, totaling 2.4 million square feet, that are so close to the tracks that trucks can shuttle boxes on a private road without ever treading on public infrastructure, Terkanian said.
In Fairburn, Ga., 25 miles south of Atlanta, 5 million square feet of DC space has, over the past 14 years, been erected near a CSX intermodal terminal. That is a far cry from the 1990s when the DC operation consisted of two or three buildings clustered around an interchange off Interstate 85, according to Carl Warren, director, integration project planning for CSX Intermodal terminals, a unit of Jacksonville, Fla.-based CSX.
TRADE-OFFS WORTH THE RISK
For intermodal users, there's a trade-off in making a DC investment at or near a yard. Because of the increased demand for space, the cost of land near an intermodal facility can be anywhere from 10 to 20 percent higher than a comparable facility elsewhere. On paper, however, the numbers seem to support the sacrifice. Transportation accounts for 40 to 50 percent of a company's supply chain costs. By contrast, real estate clocks in at between 4 and 5 percent. The cost of a dray can run as high as $1.75 a mile. A user who negotiated a good deal on the land will find those savings eaten up quickly with each mile they are away from the yard.
The tipping point comes in the volume projections. Cozying up to an intermodal yard makes sense if a DC is handling at least 1,000 40-foot-equivalent-unit containers a year, said Murphy of CenterPoint. Anything above that volume threshold becomes gravy; anything below that may not work, Murphy said. The strategy is "not a value proposition for everyone," he said.
Experts caution that factors such as a trained and motivated labor force, a tolerable taxing climate, and economic incentives need to align with the transportation benefits when selecting a site. "Sometimes we have to hold back our clients from making a decision" to locate a DC near an intermodal yard based solely on transport considerations, said Tim Feemster, a long-time real estate and logistics executive and now head of a Dallas-based company bearing his name.
Terkanian of CBRE said proximity to an intermodal facility is not the engine of a typical customer's site selection strategy. "We don't have clients telling us they have to be near an intermodal yard," he said.
One unsurprising roadblock to locating at an intermodal yard lies in the long-standing organizational divide between a company's real estate and supply chain operations. Supply chain folks say the real estate side is more interested in closing a land deal at the best possible price than in taking the operation's holistic costs into account. The chasm is widened by the growth of intermodal itself, which is a recent phenomenon and whose implications might not yet be understood by real estate professionals accustomed to working with on-highway facilities.
Logistics experts are split on this issue. Feemster said that "intermodal is a concept [real estate brokers] don't understand and [that] hasn't been on their radar screens." Warren of CSX Intermodal Terminals said the interaction between the real estate and supply chain groups is "closer to being suboptimized as opposed to being harmonious." However, Murphy of CenterPoint believes real estate brokers are far more sophisticated about supply chain issues—including intermodal—than they were five years ago. Moreover, he sees deeper and more effective interaction between an organization's real estate, supply chain, and finance groups than in the past.
According to Boyd, industrial real estate powerhouses are catching on to the value of intermodal, and, perhaps more importantly, its staying power. "The national firms are going to develop dedicated intermodal units," he said. "They are playing catch-up, but they will catch up."
States across the Southeast woke up today to find that the immediate weather impacts from Hurricane Helene are done, but the impacts to people, businesses, and the supply chain continue to be a major headache, according to Everstream Analytics.
The primary problem is the collection of massive power outages caused by the storm’s punishing winds and rainfall, now affecting some 2 million customers across the Southeast region of the U.S.
One organization working to rush help to affected regions since the storm hit Florida’s western coast on Thursday night is the American Logistics Aid Network (ALAN). As it does after most serious storms, the group continues to marshal donated resources from supply chain service providers in order to store, stage, and deliver help where it’s needed.
Support for recovery efforts is coming from a massive injection of federal aid, since the White House declared states of emergency last week for Alabama, Florida, Georgia, North Carolina, and South Carolina. Affected states are also supporting the rush of materials to needed zones by suspending transportation requirement such as certain licensing agreements, fuel taxes, weight restrictions, and hours of service caps, ALAN said.
E-commerce activity remains robust, but a growing number of consumers are reintegrating physical stores into their shopping journeys in 2024, emphasizing the need for retailers to focus on omnichannel business strategies. That’s according to an e-commerce study from Ryder System, Inc., released this week.
Ryder surveyed more than 1,300 consumers for its 2024 E-Commerce Consumer Study and found that 61% of consumers shop in-store “because they enjoy the experience,” a 21% increase compared to results from Ryder’s 2023 survey on the same subject. The current survey also found that 35% shop in-store because they don’t want to wait for online orders in the mail (up 4% from last year), and 15% say they shop in-store to avoid package theft (up 8% from last year).
“Retail and e-commerce continue to evolve,” Jeff Wolpov, Ryder’s senior vice president of e-commerce, said in a statement announcing the survey’s findings. “The emergence of e-commerce and growth of omnichannel fulfillment, particularly over the past four years, has altered consumer expectations and behavior dramatically and will continue to do so as time and technology allow.
“This latest study demonstrates that, while consumers maintain a robust
appetite for e-commerce, they are simultaneously embracing in-person shopping, presenting an impetus for merchants to refine their omnichannel strategies.”
Other findings include:
• Apparel and cosmetics shoppers show growing attraction to buying in-store. When purchasing apparel and cosmetics, shoppers are more inclined to make purchases in a physical location than they were last year, according to Ryder. Forty-one percent of shoppers who buy cosmetics said they prefer to do so either in a brand’s physical retail location or a department/convenience store (+9%). As for apparel shoppers, 54% said they prefer to buy clothing in those same brick-and-mortar locations (+9%).
• More customers prefer returning online purchases in physical stores. Fifty-five percent of shoppers (+15%) now say they would rather return online purchases in-store–the first time since early 2020 the preference to Buy Online Return In-Store (BORIS) has outweighed returning via mail, according to the survey. Forty percent of shoppers said they often make additional purchases when picking up or returning online purchases in-store (+2%).
• Consumers are extremely reliant on mobile devices when shopping in-store. This year’s survey reveals that 77% of consumers search for items on their mobile devices while in a store, Ryder said. Sixty-nine percent said they compare prices with items in nearby stores, 58% check availability at other stores, 31% want to learn more about a product, and 17% want to see other items frequently purchased with a product they’re considering.
Ryder said the findings also underscore the importance of investing in technology solutions that allow companies to provide customers with flexible purchasing options.
“Omnichannel strength is not a fad; it is a strategic necessity for e-commerce and retail businesses to stay competitive and achieve sustainable success in 2024 and beyond,” Wolpov also said. “The findings from this year’s study underscore what we know our customers are experiencing, which is the positive impact of integrating supply chain technology solutions across their sales channels, enabling them to provide their customers with flexible, convenient options to personalize their experience and heighten customer satisfaction.”
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.
As the hours tick down toward a “seemingly imminent” strike by East Coast and Gulf Coast dockworkers, experts are warning that the impacts of that move would mushroom well-beyond the actual strike locations, causing prevalent shipping delays, container ship congestion, port congestion on West coast ports, and stranded freight.
However, a strike now seems “nearly unavoidable,” as no bargaining sessions are scheduled prior to the September 30 contract expiration between the International Longshoremen’s Association (ILA) and the U.S. Maritime Alliance (USMX) in their negotiations over wages and automation, according to the transportation law firm Scopelitis, Garvin, Light, Hanson & Feary.
The facilities affected would include some 45,000 port workers at 36 locations, including high-volume U.S. ports from Boston, New York / New Jersey, and Norfolk, to Savannah and Charleston, and down to New Orleans and Houston. With such widespread geography, a strike would likely lead to congestion from diverted traffic, as well as knock-on effects include the potential risk of increased freight rates and costly charges such as demurrage, detention, per diem, and dwell time fees on containers that may be slowed due to the congestion, according to an analysis by another transportation and logistics sector law firm, Benesch.
The weight of those combined blows means that many companies are already planning ways to minimize damage and recover quickly from the event. According to Scopelitis’ advice, mitigation measures could include: preparing for congestion on West coast ports, taking advantage of intermodal ground transportation where possible, looking for alternatives including air transport when necessary for urgent delivery, delaying shipping from East and Gulf coast ports until after the strike, and budgeting for increased freight and container fees.
Additional advice on softening the blow of a potential coastwide strike came from John Donigian, senior director of supply chain strategy at Moody’s. In a statement, he named six supply chain strategies for companies to consider: expedite certain shipments, reallocate existing inventory strategically, lock in alternative capacity with trucking and rail providers , communicate transparently with stakeholders to set realistic expectations for delivery timelines, shift sourcing to regional suppliers if possible, and utilize drop shipping to maintain sales.
National nonprofit Wreaths Across America (WAA) kicked off its 2024 season this week with a call for volunteers. The group, which honors U.S. military veterans through a range of civic outreach programs, is seeking trucking companies and professional drivers to help deliver wreaths to cemeteries across the country for its annual wreath-laying ceremony, December 14.
“Wreaths Across America relies on the transportation industry to move the mission. The Honor Fleet, composed of dedicated carriers, professional drivers, and other transportation partners, guarantees the delivery of millions of sponsored veterans’ wreaths to their destination each year,” Courtney George, WAA’s director of trucking and industry relations, said in a statement Tuesday. “Transportation partners benefit from driver retention and recruitment, employee engagement, positive brand exposure, and the opportunity to give back to their community’s veterans and military families.”
WAA delivers wreaths to more than 4,500 locations nationwide, and as of this week had added more than 20 loads to be delivered this season. The wreaths are donated by sponsors from across the country, delivered by truckers, and laid at the graves of veterans by WAA volunteers.
Wreaths Across America
Transportation companies interested in joining the Honor Fleet can visit the WAA website to find an open lane or contact the WAA transportation team at trucking@wreathsacrossamerica.org for more information.