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Companies Optimizing Distribution and Fulfillment Strategies Look to Kansas City

by Mary Rooney | Aug 24, 2020

More and more consumers have turned to eCommerce for their purchases during the COVID-19 pandemic. U.S. retail e-commerce sales for the second quarter of 2020 was $211.5 billion, an increase of 31.8 percent from the first quarter of 2020 and an increase of 44.5 percent compared to the second quarter of 2019.

Many believe the COVID-19 pandemic will have a lasting impact on consumer buying habits, requiring companies to rethink their distribution strategies, specifically for eCommerce and temperature-controlled warehouse space. As more consumers utilize eCommerce and expect faster delivery, this will add pressure on the supply chain and make the location of distribution and fulfillment centers even more important. 

As the crossroads of North America, and located in the center of the United States, the Kansas City region has become one of the nation’s largest supply chain hubs. This offers a strong location advantage for eCommerce, food and distribution operations. 

In the past five years, the Kansas City region has attracted eCommerce and distribution companies pledging to create more than 10,200 jobs, invest $1.8 billion and occupy 16.7 million square feet of industrial space.

Just in the last few months, multiple companies have announced plans to open distribution centers in the Kansas City region, including:

  • Urban Outfitters: 880,000-sq.-ft. omni-channel distribution center, hiring up to 2,000 and investing $350 million
  • Chewy, Inc.: 800,000-sq.-ft. eCommerce fulfillment center, hiring 1,200 over the next several years and investing $143.2 million
  • Boxy Charm: 575,000-sq.-ft. fulfillment center

Additional companies with existing eCommerce and distribution operations in the region include: Amazon, Walmart, Overstock.com, Hostess, Coleman, CVS Health, Dollar Tree, Turn5, TJ Maxx, Guitar Center and more.

The Kansas City region’s central location is not the only reason many eCommerce and distribution companies are looking to locate in the area. Available real estate, skilled workforce, transportation infrastructure and logistics resources are also key to a successful eCommerce  and distribution strategy. 

Real estate options and available space in Kansas City make it an appealing location for many eCommerce and distribution companies. Real estate economists project that every $1 billion of new eCommerce business created will drive an estimated need for 1.25 million square feet of new industrial space.

Kansas City is ready to meet this demand. More than 45 million square feet of industrial development has been built in the region since 2012. Currently, the area has roughly 7 million square feet of industrial space under construction, with an additional 6.1 million square feet expected to commence construction before the end of this year. Kansas City’s move-in-ready, existing building inventory and selection of vertical-ready sites enables eCommerce companies to secure their real estate and begin operations or development of their facility immediately.

The workforce in Kansas City understands the supply chain. Currently, there are several local training programs in the area focused on preparing the labor force for current and upcoming jobs in the transportation and logistics industry. Numerous education institutions around the Kansas City region have supply chain management programs in place.

Transportation infrastructure gives the Kansas City region an immediate advantage for eCommerce operations. The region is known as one of the nation’s top five trucking centers, as 85% of the U.S. population can be reached from a Kansas City location in two days or less.

Kansas City sits at the intersection of four major U.S. interstate highways (I-35, I-70, I-29 and I-49), and has 30% more interstate miles per capita than any city in the nation. Kansas City is served by five Class 1 rail lines and four of those rail lines have intermodal facilities that are significant hubs in the national network. The Kansas City International Airport moves more air cargo each year than any air center in a six-state region. A new airport terminal is also under construction and on schedule to be completed in early 2023. 

As companies evaluate their supply chain to match current demands, many may reconsider inventory on hand, sourcing locations and the need for safety stock. Kansas City has numerous third-party logistics companies located in the region that provide an option for safety stock with flexible warehousing and other services. Additionally, Foreign-Trade Zones provide an option for safety stock and value-added production activities so that inventory is easily accessible. The Greater Kansas City Foreign Trade Zone (GKCFTZ) is one of the largest zone operators in the country with more than 500 million square feet of approved foreign trade zone space that includes general purpose and subzone space on both sides of the state line. The GKCFTZ handles more volume than most Midwest cities. 

With two states, 18 counties and 50-plus communities, the Kansas City region gives companies and consumers the desired benefit of choice. The region boasts two state tax structures, a strategic variety of incentive programs, and urban, suburban and rural location options. It is all centered in one market – OneKC.

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