When most people think of Starbucks, they think of coffee. With a diverse product portfolio and thousands of retail locations scattered throughout the world, though, coffee is far from the only thing on the Seattle-based company’s mind.
Just getting its product to market represents a huge logistics challenge.
After all, Starbucks Coffee Co. is the leading retailer, roaster and brand of specialty coffee in the world, with more than 7,500 retail locations in North America, Latin America, Europe, the Middle East and the Pacific Rim.
In addition to its retail operations, the company’s brand portfolio provides a wide variety of consumer products, which also includes innovative premium teas, compact discs and a variety of other coffee flavor profiles.
| With 21 percent of its work force employed in distribution-related industries, Memphis is home to more than 130 million square feet of distribution space. |
Earlier this spring, the company announced its intention to establish a 125,000 square foot distribution center in suburban Nashville. The distribution center will provide logistics and shipping services to 900 Starbucks locations from Wisconsin to Florida. The facility will be operated by Ozburn Hessey Logistics (OHL), a leading third-party logistics provider that operates warehouse and distribution facilities in 25 cities across 13 states. Nashville was selected over three other states.
Just as the Starbucks brand is top of mind when most people think of coffee, Memphis — Tennessee’s westernmost city — has successfully branded itself as North America’s Logistics Center. With 21 percent of its work force employed in distribution-related industries, Memphis is home to more than 130 million square feet of distribution space. Memphis is also home to both Federal Express Corp., the world's major overnight cargo handler, and Ingram Micro, one of the nation's largest distribution companies.
FedEx is not the only overnight courier to set up shop in Memphis. In mid-September, DHL announce it would open a $3 million sorting center in Memphis as part of a $1.2 billion effort to upgrade its U.S. package delivery operations and increase its market share from less than 10 percent to roughly 20 percent.
DHL, which bought most of the assets of Seattle-based Airborne Express last year in a $1.05 billion merger, is owned by Germany's Deutsche Post World Net.
DHL also announced a major consolidation and expansion of its Wilmington, Ohio, operations. The project is expected to create 900 full- and part-time jobs and retain 6,000 positions. Ohio was in competition with Kentucky for the expansion and consolidation project.
DHL plans to expand the Wilmington operation to accommodate the addition of ground sorting operations. These updates include new building construction, airport ramp improvements, and the purchase of new machinery and equipment.
Logistics providers are not the only ones expanding their distribution facilities.
The nation’s leading retailer, Wal-Mart Stores, Inc., will expand its James City County distribution facility in James City County, Va. The $28.5 million investment will result in 125 new jobs.
The James City County facility is used as an import storage facility. Products are imported there and stored or distributed on a seasonal basis to Wal-Mart’s regional distribution centers. The company will construct a separate one million square foot building on 243 additional acres for this project.
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“The expansion of the James City distribution center will provide Wal-Mart the opportunity to better serve the growing number of Wal-Mart customers who shop at our stores in the Mid-Atlantic region,” said Rollin Ford, executive vice president of Logistics and Supply Chain. “This is a significant project that represents our continued commitment to Virginia as a partner in both economic development and community.”
Wal-Mart Stores employs more than 1.3 million associates worldwide through more than 3,200 facilities in the United States and more than 1,100 units in Mexico, Puerto Rico, Canada, Argentina, Brazil, China, Korea, Germany and the United Kingdom. More than 100 million customers per week visit Wal-Mart stores worldwide.
States are not only aggressively recruiting these types of facilities, they are willing to put their money where their mouth is.
In the case of Wal-Mart, the Virginia Economic Development Partnership, with help from Rockingham County and the Shenandoah Valley Partnership, prepared the state’s proposal and negotiated an incentive package to secure the project for Virginia. Gov. Mark Warner approved a $400,000 performance-based grant from the Virginia Investment Partnership (VIP) program to close the deal.
The VIP program offers financial assistance to existing Virginia companies proposing significant expansion projects. The Virginia Department of Business Assistance will support the project through its Workforce Services program.
A LOOK BEHIND THE NUMBERS OF THE LOGISTICS QUOTIENT™
For the past four years, Expansion Management and Logistics Today magazines have combined to produce what we call our annual Logistics Quotient™ ranking of the most logistics friendly cities in the United States.
As in years past, the 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 wide variety of public sources.
Although metro areas that generally had a broad range of logistics-supporting infrastructure (ground, air, water/sea, and rail) in place did well, the quality and strength 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.
In 2003, 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™ (LQ) study. Beginning with next year’s study, however, the LQ will expand to include all 370 metro areas.
In the transportation and warehousing (T&W) industry climate 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).
In the work force and labor category, we looked at the cost and availability of labor in the various T&W 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 next five categories involve road transportation.
Road infrastructure and spending attempts to gauge the road infrastructure in proportion to the metro area's population.
Road density/congestion/safety attempts to measure the adequacy of a metro's highway network. 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.
In the interstate highway network 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, etc.).
In the final road-related category, we 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 gas and diesel taxes. The primary source for this data was Nauset Hill Inc. of North Easton, Mass.
The final three categories are rail, water and air.
In the railroad service category, 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.
The water ports category included both ocean-going vessel ports and river ports, which 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.
The final category we looked at is air service. 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.
5-STAR & 4-STAR LOGISTICS METROS
Let’s face it. Even though the computer ranks metros in each category from one to 331, the difference between, say, No. 1 and No. 15, is probably negligible. Both are pretty darn good.
That’s why the editors of the two magazines — Expansion Management and Logistics Today — decided that grouping the metros was more appropriate. The top 50 metros were designated as “5-Star Logistics Cities”, while the next 50 were designated as “4-Star Logistics Cities.”
Another factor to remember is that, like politics being local, logistics is regional. When you look at these rankings, what matters is not a metro’s overall ranking, but rather its ranking in comparison to other metros in the particular region you are considering.
Finally, pay particular attention to the categories that are most important to your company. If you don’t ship by air or water, rankings in those categories really don’t matter and should be discounted. Likewise, if you do ship mainly by rail or air or sea, discount the road-related categories.
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