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Logistics: A Booming Business

Central Ohio has numerous assets that make it an ideal logistics hub. The sector is growing rapidly, with increased demand for workers and training.

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From the March 2013 issue of Columbus CEO

In layman’s terms, “logistics” might make you think of a UPS ad campaign: Simply getting a package delivered to your door.

But the logistics sector nowadays is quite sophisticated. And it’s driving a good-size chunk of Central Ohio’s economy.

Fundamentally defined as the management of resources and their distribution, the industry of logistics has been around for as long as resources have needed to get from point A to point B. Ohio State University has offered a logistics major since the 1940s, says Walter Zinn, a logistics professor who chairs the OSU Fisher College of Business marketing and logistics department.

Logistics is increasingly specialized and globalized. This has led to a growing number of training and education programs, including at several Central Ohio colleges and universities (See “Education Programs”).

“Logistics is a very competitive business. It’s as competitive as it’s ever been,” says Zinn. And technology has become a critical factor. “Technology has changed logistics,” he says. “It’s changed business in fundamental ways.”

The strategic, detailed management of a business’s supply chain must successfully deliver efficiency and economy to costs such as labor and transportation. Customers must be satisfied, whether it’s ensuring the Christmas gift you ordered for Mom arrives on time or the widgets needed at the factory are delivered on schedule to avoid production delays.

It’s up to logistics “to make the supply chain faster for retailers,” says James Miller, executive vice president at the Pizzuti Companies, a developer of industrial and warehouse facilities, including projects at the Rickenbacker Inland Port.

The area around Rickenbacker is home to major air, road and rail transport companies as well as third-party logistics providers. Its existence is one key factor in the region’s distinction as a superior spot to locate logistics services.

“Our large buildings are in and around the Rickenbacker area,” Miller says. Among Pizzuti’s biggest is its 1.6-million-square-foot Whirlpool Regional Distribution Center.

 

Speed to Market

Evolving consumer habits are likely to fuel even more growth in Central Ohio’s logistics industry—a sector that already has enjoyed double-digit growth for several years. Speed to market, says Miller, is a driving force.

Today’s consumers are an impatient lot. Increasingly enamored with shopping online, many expect instant gratification: They want to receive what they’ve ordered almost as quickly as when they headed to the store to buy it off the shelf. That means retailers must find faster, more efficient ways to ship products without hurting their margins. The same is true for manufacturers.

Logistics touches virtually every product that consumers buy—the food we eat, the clothes we wear, the vehicles we drive, household appliances, cell phones and laptops.

Everything that consumers use, purchase and own “has traveled to us through a logistics path and process,” says Jeff Zimmerman, director of the Columbus Region Logistics Council, an advocacy group with the Columbus Chamber that addresses issues of business environment, workforce, infrastructure and technology for Central Ohio’s logistics industry.

The chamber, the logistics council and Columbus 2020, an organization focused on economic development, hope to continue to raise the area’s profile as an ideal location for logistics operations and jobs. “It’s not a right-now phenomenon,” Zimmerman says. “It’s a growing sector. It’s foundational.”

The 11-county Columbus region (Delaware, Fairfield, Franklin, Licking, Logan, Knox, Madison, Marion, Morrow, Pickaway and Union counties) boasts about 80,000 experienced logistics workers and at least 4,400 distribution and logistics centers.

Job growth in the local logistics sector, says Zimmerman, is projected at more than 20 percent through 2016. The industry’s regional employment grew by nearly 22 percent from 2001 to 2011—nearly seven times the U.S. rate.

“It’s an industry that we know is going to continue to grow jobs,” says Kenny McDonald, chief economic officer for Columbus 2020. “And it’s going to continue to grow good jobs.”

 

Local Advantages

Already, the region’s logistics sector thrives on the tried-and-true maxim of location, location, location. “None of it matters if we don’t have a [premium] location.” Zimmerman says.

He cites several advantages the region brings to the logistics table:

  • Columbus is within a day’s drive of 50 percent of the U.S. and Canadian population.
  • Local infrastructure features major east-west and north-south transportation access, with roadways considered to be in good shape.
  • The region boasts the intermodal inland port, Rickenbacker International Airport and Foreign Trade Zone No. 138, as well as millions of square feet of distribution space, including facilities in prime locations such as near Rickenbacker.
  • Double-stack freight trains can travel directly from the Port of Virginia at Norfolk to Rickenbacker’s inland port. Additionally, the CSX National Gateway Corridor connects to some East Coast ports.
  • An excellent workforce is available to fill industry jobs, ranging from entry-level to executive roles. Many employees come from the region’s 54 colleges and universities.

 

What’s more, Zimmerman says the Columbus region offers relatively low unionization and a competitive wage scale. “We’ve also got a lot of space for development,” he says.

Many leading logistics companies are located here, as are companies whose operations include a strong logistics element. That includes major players in the retail industry with headquarters in Central Ohio, such as Limited Brands, Abercrombie & Fitch and Big Lots. Distribution and fulfillment centers keep merchandise stocked in stores. For example, DSW’s website says the shoe retailer ships more than 240,000 pairs of shoes daily from its 660,000-square-foot fulfillment facility in Columbus.

Additionally, a growing number of strictly online retailers are setting up local operations to improve their speed to market, including zulily, which recently opened an Obetz fulfillment center that employs nearly 600 people. The Seattle-based online-only retailer sells mostly deep-discounted boutique clothing for children via 72-hour “events” and daily website deals. It has limited inventory and no warehouse stock.

“You see more and more companies bypassing the retail storefront and selling direct,” says McDonald, though he adds there are products for which it isn’t a good business model.

 

Seizing Opportunities

As a third-party logistics company, Zipline Logistics doesn’t have its own trucks and distribution facilities. Instead, it partners with thousands of trucking and warehouse companies across North America, says CEO Walter Lynch, to help clients outsource shipping when they have product to move.

“We deal primarily in good goods? going into retail outlets. If you are a small or mid-size beverage producer and you finally got space for your product on the store shelf, it’s very important that your product show up on time and the driver is courteous,” Lynch says.

Zipline has a mandatory screening process for driver safety and compliance, he says, so that clients’ products “get there on time and also get there safe.”

Lynch and his three business partners credit their success to sticking to their business model and providing superior customer satisfaction. “Clients are hungry for this high-end service,” he says. “We grew our staff about 30 percent in calendar year 2012. We’ll probably grow another 30 percent in 2013.”

Pizzuti develops warehouse and manufacturing sites to suit e-commerce and other distribution needs, including a mix of single-tenant, build-to-suit and multitenant facilities. The market has improved lately. “The margins have picked up over the past six months,” Miller says. “Some of the existing inventory that was vacant or did not fill up is now filling up.”

Some Pizzuti projects, says Miller, are speculative to capitalize on anticipated logistics growth. The company recently opened a spec facility in New Albany capable of housing several manufacturing companies that don’t need standalone operations.

“The big picture is how quick the retailer can react to consumer behavior,” Miller says. Say, for example, one color of a particular product is suddenly in high demand. The manufacturer wants to ensure it can quickly get that item to market and into consumers’ hands.

Efficient management of inventory relies on many factors and company decisions, Zinn says: “In what order do you ship product? How fast? How do you minimize errors? For shippers, you have to design a network.”

That includes determining if you’re shipping nationally and internationally, where you should locate distribution and warehouse facilities for efficient routes and good customer service, and which products you should store where, he says.

Industry officials say education programs are vital to sustaining and expanding the sector’s role in Central Ohio’s economy. “Training is imperative for the logistics industry,” Miller says. “As the industry grows, it needs more management-type people. Certainly it’s intensive in workers.”

Lynch and others laud the chamber and the logistics council for taking a proactive role promoting the region as a shipping and distribution hotbed. “Other cities aren’t doing that. They’re just not making that effort,” he says.

Debbie Briner is a freelance writer.