With a long history as a center for logistics and transportation, Illinois might be a good spot for your next Midwest DC. Here are three reasons to consider the state ... and one reason not to.
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.
Crisscrossed by 12 major interstates. Served by seven Class 1 railroads. Home to O'Hare International, one of the world's premier aircargo gateways. And a history of investing in transportation infrastructure that stretches back to the 1830s. The state of Illinois has a lot going for it as a hub of logistics and distribution activity.
As Dan Seals, assistant director of the Illinois Department of Commerce and Economic Opportunity, puts it: "Logistics is at the core of what we do."
With that kind of infrastructure and history, it's easy to see why Illinois would make a good location for a Midwest distribution center. But it's not ideal for every company, according to site selection consultants and industrial real estate firms. Here are four factors to consider when deciding whether or not to locate your next DC there: three in favor and one against.
ADVANTAGE 1: LOCATION
One of the most obvious reasons to locate a distribution center in Illinois is the city of Chicago, with its consumer base of 2.72 million people. As the third-largest metro area in the country, Chicago is a market that can't be ignored. "Companies just need to be here to serve this market, whether it is by a warehouse near the metro area or away from the city in more of a regional DC location," says Bill Frain, senior vice president with the industrial real estate firm CBRE. "Our population base compels people to be here."
It is possible to serve Chicago from outside the state. For example, some companies serve the city from regional logistics hubs such as Indianapolis or across the state line in southeast Wisconsin. "But ultimately, service requirements are changing, and as speed to market becomes more critical, more companies are going to make decisions based on proximity to market," says Frain.
Adam Roth, director of NAI Global Logistics, a real estate and supply chain solution firm that focuses on distribution and warehouse companies, says a "reurbanization" trend is under way in Chicagoland that will compel companies to bring their distribution facilities within the city limits.
Illinois also has the benefit of being located in the middle of the continent, with excellent connections by rail, truck, air, and barge to East and West Coast ports as well as the Gulf of Mexico and Canada. As a result, some companies use their area DCs to serve not just the state or region, but also national and even international markets. In 2012, Illinois' exports to Canada and Mexico exceeded $25 billion, according to John Greuling, president and CEO of the Will County Center for Economic Development, a nonprofit development organization for Will County, located 35 miles southwest of Chicago.
"We're a natural hub geographically," says Greuling. "Illinois really meets the needs of just about any company looking to import/export to serve a good part of the North American market."
ADVANTAGE 2: INVESTMENT IN INFRASTRUCTURE
Since the early 1800s (almost as soon as Illinois became a state), the Illinois legislature and business community have tried to take advantage of the state's prime location by building a superior transportation infrastructure. This commitment has continued into the 21st century, with more than $43 billion being poured into its infrastructure since 2010, according to Seals.
For example, the "Chicago Region Environmental and Transportation Efficiency Program" (CREATE), a partnership between rail companies and federal, state, and city government, is investing $3.8 billion in 70 projects to improve freight and passenger rail efficiency in the city. Another public-private partnership is looking to create the "Illiana Expressway," which would link Illinois and Indiana, and allow trucks to bypass Chicago.
Perhaps the century's most successful infrastructure investment so far has been the CenterPoint Intermodal Center (CIC) in Will County. Opened in 2001, CIC is the largest master-planned inland port in North America, situated on more than 6,500 acres just outside Chicago, according to Michael Murphy, CenterPoint's chief development officer. Located near the interchange of Interstates 55 and 80, the center has access to the BNSF Railway's Logistics Park in Elwood and the Union Pacific Railroad Co.'s intermodal terminal in Joliet. By allowing companies to avoid the rail congestion that occurs at older rail yards inside the city limits, the intermodal facility helps shippers reduce dray costs and cut their carbon footprint, says Murphy.
"I think the investment that CenterPoint Properties made in the intermodal facility in Joliet and Elwood is paying enormous dividends for the region," says Frain, noting that retail giants Wal-Mart Stores Inc. and Home Depot Inc. have located 5 million square feet of DC space there.
Growth in and around the intermodal center looks to continue apace as trucking costs rise, capacity tightens, and more companies turn to rail, according to Roth. "I'm seeing a migration more toward boxcar and spur service, and I'm seeing more of a gravitational pull toward intermodal centers," he says.
ADVANTAGE 3: SKILLED WORKERS
Another factor working in Illinois' favor is its strong labor pool, according to Chris Lydon of the industrial real estate firm Cushman & Wakefield. Overall, Illinois has a labor force of more than 6.5 million workers and ranks third in the nation for transportation and material moving occupations. Looking to the future, the state expects to add nearly 20,000 jobs across the transportation, distribution, and logistics industries by 2020, according to Murphy.
Not only is the labor base large, it is also highly skilled. According to Seals, Illinois' population is among the most educated in the country. And if the skills aren't there, the state has several workforce development programs to help fill the gaps. "States across the country are grappling with the skills gap concern within the manufacturing and distribution sector, especially as older generations retire," says Murphy. "In response, a number of public- and private-sector organizations in Illinois have introduced various workforce development programs and grant initiatives to ensure the strength and volume of local skilled workers in the future."
The one drawback to the labor force in Illinois, at least in some companies' eyes, is the strong union presence in the state. "Unlike in Indiana and parts of Wisconsin where you can get away with nonunion labor, here in the Chicagoland area, you have to go union for the most part," says Lydon. "Obviously, those costs can have an impact and are sometimes a [liability] for us when competing against neighboring states."
STRIKE 1: TAXES AND INCENTIVES
If there is a disincentive that keeps companies from situating a DC in Illinois, it's the state's taxes and onerous regulatory environment. "Some businesses have called out Illinois' tax and regulatory policies for increasing the cost of doing business compared with nearby states," says Murphy.
For companies engaged in e-commerce, one big drawback to locating in Illinois is sales tax. Companies with a physical presence in Illinois must charge their customers in that state a sales tax on the goods and services they buy online, while those without a physical presence in Illinois are exempt from that requirement. "Companies without a physical brick-and-mortar presence in Illinois try to stay out of the state to avoid those taxes," says Eric Stavriotis, senior vice president with CBRE. For example, Amazon.com built two distribution centers to serve the Chicago market in nearby Kenosha, Wis.
Not surprisingly, neighboring states like Indiana, Wisconsin, and Missouri have capitalized on those liabilities, offering incentives and real estate tax rebates to lure business away from Illinois.
"Illinois has lost projects to places like Indianapolis, which have fairly aggressive incentive programs," says Stavriotis. "But on a gross basis, companies must determine whether it's better and more cost efficient to be outside of the state, rather than being close to their service area, where their transportation costs are going to be different."
Roth agrees, saying that while incentives can be an important factor in site selection decisions, they are often a secondary consideration. "They're typically not as much of a factor as transportation costs because transportation is forever," he says.
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."