“This is the next step in optimizing our U.S. distribution network,” said Bill Turner, vice president for logistics and customer service for Hershey Foods. “A number of months ago, we set out to redefine the supply chain network strategy for our products and markets. After an extensive network modeling and site selection effort, it became clear that the St. Louis area ... would be the optimal site for our facility.”

The $65 million facility, which will open in March 2004, will join three other high-performance warehouse sites as part of the chocolate maker’s strategy to improve customer service and implement a low-cost supply chain. The other centers are located in Hershey, Pa., Atlanta and Redlands, Calif.

Located on the Interstate 255/Interstate 270 bypass loop of Interstate 70, the site affords easy access to the four major highway networks radiating from St. Louis. The Gateway Commerce business park is served by rail and is adjacent to an inter-modal facility. It is also located within 8 miles of a barge-docking center on the Mississippi River, and within 20 miles of three airports. In addition, the developer is working to obtain foreign trade zone status for the park.

GENCO Distribution System, a Pittsburgh-based third-party logistics provider will operate the facility for Hershey Foods.

The new Hershey Foods facility is just one of many distribution centers sited and built throughout the United States every year. Some are larger, most are smaller, but all are chosen by their parent company after an extensive site location search.

Clearly, market factors are the most important consideration driving the ultimate choice of a location. Sometimes, the company wants the new facility to be closer to its market. Sometimes, the critical factor is being close to suppliers. In any case, business priorities will often dictate the general geographic region (e.g., Southeastern U.S., Central America, Europe). Once that’s decided, though, transportation becomes the dominant factor in selecting the best possible site for the new distribution facility.

Most large companies, such as Hershey Foods, either have site selection people on staff or can afford to hire consultants to help them navigate the site selection process. For most of our readers, who tend to come from companies with fewer than 500 employees, neither of those options is viable. For them, finding the best location for their next distribution facility will become an in-house operation, generally falling in the “extra duty” category.

It is for them that, for the past three years, Expansion Management and Logistics Today (formerly Transportation & Distribution) magazines have combined to produce what we call our annual Logistics Quotient™ ranking of the most logistics friendly cities in the United States.

This year’s study takes a look at the 331 metropolitan statistical areas (MSA) established by the Office of Management and Budget, and compares them according to 10 major categories: the overall transportation & distribution industry climate; work force/labor costs/availability/skill levels; road/highway basic infrastructure and spending; road density/congestion/truck safety; road conditions; fuel taxes & fees; railroad access; water ports (both river/lake and ocean); air service; and interstate highway access (both main and auxiliary routes).

The data comes from a variety of public sources, as described below.

Although the metro areas that tended to score the best generally had a broad range of logistics-supporting infrastructure (ground, air, water/sea and rail) in place, the quality and diversity of the road and highway network was the most important transportation factor.

Granted, if your business is built around 24-hour nationwide turnaround, then being next to a major FedEx or UPS air hub is more important than how many highway lanes there are going in and out of the metro. For most American businesses, though, highways are the most common mode of transportation.

Just a note to any government data junkies out there reading this: Earlier this summer, OMB expanded the number of MSAs to 370, including eight in Puerto Rico. Unfortunately, there is insufficient data available to include these new MSAs in our Logistics Quotient™ study. Hopefully, this will not be a problem in the next year or two.

Information on the transportation and distribution industry climate came from the Bureau of Economic Analysis (BEA) and the Census Bureau.

In this category, we tried to get a feel for the overall strength and vitality of the transportation and distribution sectors within the various MSAs. We looked at things such as the number of establishments, the amount of revenue, and the amount of revenue per employee (as a rough measurement of productivity). If you’re going to establish a distribution facility in one of these cities, this — and the work force/labor category below — will give you a feel for the type of business climate, as well as the work force you’re likely to encounter.

The top five cities in terms of industry climate are Omaha, Neb., Louisville, Ky., Houston, Des Moines, Iowa, and Nashville, Tenn.

Work force and labor information also came from the BEA and the Census Bureau. In this category, we looked at the cost and availability of labor in the various T&D sectors. We also looked at the percentage of the overall work force that is engaged in transportation and distribution activities. Since this survey is done from the employer’s perspective, lower wages are considered better, as are larger numbers of workers in the industry. The top five cities in terms of the work force are Little Rock, Ark., Nashville, Knoxville, Tenn., New Orleans and Fort Smith, Ark.

The next four categories involve road transportation. Most of the data came from the Federal Highway Administration.

Road infrastructure and spending attempts to gauge the road infrastructure in proportion to the metro area’s population. We looked at miles of roadway per capita, as well as the percentage of those roadways that are considered freeways. We also looked at capital spending on highways in order to expand or maintain the existing infrastructure. In order to provide better perspective, we also looked at spending both per mile and per lane mile.

Our next category, road density/congestion/safety, attempts to measure the adequacy of a metro’s highway network. We looked at vehicle density per capita, freeway density, traffic density per lane and truck accidents in order to get a good feel for how the actual traffic and the physical infrastructure match up. Four lanes may be good enough to handle traffic in Kansas City or Omaha, but it’s definitely not enough for Los Angeles.

Road conditions are also important because they, too, have a significant impact on traffic flow, not to mention wear and tear. In this category, we looked at the conditions of major roads and interstate highways, both urban and rural, as well as the condition of bridges along those thoroughfares.

Infrastructure maintenance is a popular budget line for politicians to “save” money by deferring spending. The problem with this is that minor maintenance deferred has a habit of becoming major (and expensive) after a few years of neglect.

The final road transportation category we looked at was the interstate highway network servicing that particular metro area. In this category we looked at the actual number of interstate highways servicing that particular metro area, as well as the number of auxiliary routes (otherwise known as loops or beltways).

We also looked at vehicle taxes and fees, in order to measure some of the costs of transiting each of the metro areas, as well as the states in which they reside. In this category, we looked primarily at annual fuel taxes and fees paid for a five-axle tractor semitrailer. These rankings were calculated for private motor carriers. The primary source for this data was Nauset Hill Inc. of East Bridgewater, Mass. (telephone: 877-378-3815).

In the next category, railroad service, we looked at the number of freight and Class I railroads that service the area. We also looked at things like miles of track, tons of cargo carried over those freight and Class I lines, as well as the safety record of railroads within that state. Most of the data came from the American Association of Railroads and the Federal Railroad Administration.

Water ports included both ocean-going vessel ports and river ports. While this is not an option for most cities, it is, in fact, a major transportation resource and, for those cities blessed by nature, these ports account for a tremendous volume of cargo tonnage. And it’s not limited to just the coastal cities, either. Cities like St. Louis and Cincinnati both pass a lot of cargo through their inland ports.

Data on waterborne and air cargo volumes by metro area came from Reebie Associates and Rand McNally.

The final category is air service. Unlike water ports, and to a certain extent railroads, adequate air service is fundamental to a metro area’s transportation infrastructure. Even passenger service is an important indicator because between 70 percent and 80 percent of all air freight shipped in the United States goes in the belly of wide-body passenger jets. The key to that statement is “wide body,” which usually eliminates regional jets.

In this category we looked at things such as major carrier service, enplaned passenger and freight volume, and cargo airports. Data came from the Federal Aviation Administration and the Bureau of Transportation Statistics.

This year we added the latest establishment counts for air freight forwarders for each metro area. This information came from the latest County Business Patterns, a U.S. Census Bureau publication.

While it is mathematically possible to rank metros from one to 331, such a ranking makes little sense. That’s because there’s not a huge difference between a metro that ranked No. 1 and a metro that ranked No. 20. Both will probably meet your needs. For that reason, we grouped the top 50 metros together and awarded them our “5-Star Logistics City” designation. The next 50 metros received our “4-Star Logistics City” designation.

Remember that most logistics site searches usually begin with the particular region (e.g., Midwest, Southeast, etc.) already established. In that scenario, it really doesn’t matter how good Jacksonville or Baltimore is if your business needs dictate a West Coast location.

If you need to be in Texas, don’t worry about Seattle. Focus on the relative strengths of Houston or Dallas or Longview.