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Tales of Three Midwest Dynamos

by Mary Rooney | Sep 06, 2018
Source: Freight Business Journal North America

To hear ports executives from St. Louis, Kansas City, and Chicago tell it, geography is hardly the issue - given, of course that the Midwest's three biggest supply-chain hubs really are in the middle of everything. Talk to any logistics executive in those cities, and they'll tell you they're within a two day's drive of 80 percent of every American consumer. 

These days, time's shrinking thanks to last year's 16 percent increase in e-commerce and forecasts for even bigger  growth, while geography itself is becoming more a technological challenge. 

Increasingly, then, supply chain challenges revolve around space, namely warehousing/distribution capacity, C-suiters say. Congestion after all, adds cost. 

Kansas City

In Kansas City, Logistics Park Kansas City has 17 million-sq.-ft. of space on its 1,700 acres. But even more industrial distribution and warehouse development is on the way. 

"We push the envelope in terms of new spec development compared to any other city," says Chris Gutierrez, president of KC SmartPort, the economic development group for logistics. "We're on track to hit another 7 million square feet of new spec development this year. It's not just LPKC, it's in the region, both sides of the state line."

The area has seen 26 million square feet delivered in the last five years, according to a CBRE industrial real-estate study. "An additional 1200-acre expansion project is in the works," reports Colby Tanner, BNSF's assistant vice president for Economic Development. 

Says Gutierrez: "That park is the fastest-growing intermodal facility. The railroad itself has met all of their goals and continued to expand the industrial park next to it. They were hoping to get to 11 or 12 million-sq.-ft. of distribution space in 10 years, but they're past that in four."

In its "2018 Trends in Kansas City's Industrial Market" report, CBRE says last year's investment transaction topped $500 million, a figure that is quadrupled from the previous year. 

"This was led by the recapitalization at Logistics Park Kansas City, involving 10 fully leased buildings, one of the largest commercial real estate deals in Kansas City history," the report says. "Industrial development in Kansas City has only trailed only Chicago in the Midwest over the last several years." 

Commenting on Kansas City's biggest competitor, Gutierrez says "Chicago's got a lot of congestions issues. We don't at this point. We don't think we're going to get there."

Still, as Tanner says, "Our success depends on finding new ways to extend our services deeper into our customers' supply chain and looking at how we can help shippers minimize the total cost of distribution to their customers."

How? Technological and distribution shifts and what you might call alternative locations. 

"In Kansas City," Gutierrez says, "you see people talking about infill. We need a distribution center right in the downtown corridor to serve that last mile. How do you do that in a downtown setting? By developing buildings and repositioning malls and retail stores."

Gutierrez mentions other technology and last-mile developments that include Amazon's new Delivery Partner Service and a proposed hyperloop between Kansas City and St. Louis. "It's pretty interesting to see multiple different vehicles pull up," he says. 

Other challenges include finding enough workforce and navigating politics. 

"Companies are paying close attention to what's happening, whether it's tariffs, renegotiating NAFTA, and other things," says Gutierrez. "We sit right in the middle of North America, so NAFTA is important to us." 

Kansas City Southern railroad is headquartered in Kansas City, which is the NAFTA railroad. 

"All of these things being closely monitored," he says, "but I would say it hasn't affected our business yet. Where it goes and how it continues - everybody's paying close attention to it and being very cautious about how it moves. But right now we're in a good position."

The best position for Kansas City, however, still remains its location as the "heartland hub with global reach."

"We have an immediate cost advantage when shipping raw materials and finished goods," Tanners says. "By locating distribution centers or warehouses at one of our logistics parks, customers can reduce their transportation cost through lower drayage charges and more truck turns, enabling them to burn less fuel and reduce their carbon footprint."

Summarizing up, Gutierrez says, "I think companies at any level whether they're manufacturing or distribution centers, are looking at the next wave of efficiencies and automation."

Read the full article from FBJNA

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