All The Right Moves
When Target announced plans to build a new distribution center near the Port of Savannah – with state and local commercial and governmental leaders assembled beside the waterfront across from the historic district of Georgia’s oldest city – state Senator Eric Johnson stood on the stage and did something that politicians can do so gracefully: He made a small joke that went to the heart of the matter and put everyone in the mood to celebrate.
“My wife is very excited about this. She loves Target, and she asked me if she could skip the store and go straight to the distribution center,” quipped the Republican from Savannah.
He was kidding, of course. But the comment shows that Kathryn Johnson has a better understanding than most people of the process by which goods that we want to buy get from the ships docking in the ports of Savannah and Brunswick to the stores in our own neighborhoods and shopping centers.
That intricate network of highways, rail lines, distribution centers, warehouses, trucks, trains, high-tech computer systems, burly longshoremen, stevedores, drivers, entrepreneurs and computer nerds make up what is called the logistics industry. And with the business of Georgia’s ports growing at a nearly 20 percent annual clip, the logistics industry is moving just as fast.
In fact, Savannah has been named the number one distribution and logistics location in the nation by Expansion Management magazine, a national business monthly. And two other Georgia cities were ranked in the top 10 that same issue: Atlanta, third, and Macon, ninth
“They used to call this warehousing,” says Hugh Buford, general manager of the Dollar Tree Regional Distribution Center in Savannah, a 15-year veteran of the industry who has also managed distribution centers for Wal-Mart and Home Depot. “Warehousing used to be, you’d buy a bunch of stuff and warehouse it. Now, it’s looked at as a way to save money. The more economically you can warehouse, the cheaper you can sell the merchandise. That’s the essence of logistics: getting the right stuff in the fewest number of trips to where it’s going. It’s all about money.”
Since people in Buford’s line of work handle every conceivable kind of merchandise, hypothetical examples help in the discussion. Take bicycles, he says. “It would take forever for a manufacturer’s truck to go to every store that sold bicycles. One bike manufacturer can ship 500 bikes to one place. Then the distribution center can take those bikes – and soccer balls and cabinets – and deliver them all to the stores.”
Thus, distribution centers handle domestically manufactured products in addition to imported ones. “We’re just box swingers,” says Buford modestly. “We can make a lot of stuff get on the road.”
That stuff includes about 8,000 items at any given time just for Savannah’s Dollar Tree distribution center. The items are bound for 469 stores in six Southeastern states. The center has a staff of 170 employees whose job titles include equipment operator, order selector, unloader, quality control manager, clerk, information services specialist, security officer and maintenance.
Buford himself learned the business in the industry’s Ivy League. “Wal-Mart is probably the Harvard of the logistics world – the place to learn the business,” he says. “They have the largest private fleet of trucks in the world. I’m not even sure the army compares to Wal-Mart. And their profitability is bigger than the gross national product of most countries.”
As a single price point retailer – everything in the stores costs $1 – Dollar Tree is a vastly different operation. But along with Wal-Mart and its other neighbors in Savannah’s Crossroads Industrial Park – including Home Depot, Freedman’s and Pier One – this company is part of an industry rapidly growing in size and importance across the state.
On the day of the Target announcement, after Sen. Johnson warmed up the crowd with his anecdote, he went on to introduce Gov. Sonny Perdue. The governor chipped in with a comment about his own wife’s shopping habits. (It seems First Lady Mary Perdue is a fan of Target, too.) But the governor quickly got serious, noting that the new investment they were all assembled to recognize symbolizes Georgia’s continued growth as a logistics powerhouse.
“It does reflect the investment we’ve made in our Georgia ports and our work force,” Perdue said. While that growth emanates from the ports in Savannah and Brunswick, it stretches across the state and beyond. “You can trust this work to Georgia,” Perdue said. “We get business done, and we do it very well.”
Johnson credited the governor’s economic initiatives for the success of the day. “When Governor Perdue took office, he inherited a recession,” Johnson said. “He focused like a laser to make sure that when we came out of the recession that we were in position to benefit from it.”
Speaking The Language
Part of that focus was creation of the Georgia Centers of Innovation, which the governor launched in 2003. The program identified areas of excellence, including aerospace, agriculture, life sciences and maritime logistics..
Operated by the state through Georgia Tech’s Logistics Institute, the Maritime Logistics Innovation Center offers information and expertise from academia to business and back. Says center director Page Siplon, “I go around asking industry, what kind of things keep you up at night?”
For businesses shipping goods through the ports, the answer might be, “If we could just move boxes faster.” Siplon takes those concerns back to the academic world, where the response might be, “We didn’t know that.” He adds, “It helps the professors direct their research efforts.”
Siplon explains his work this way: “I’m an interpreter. I speak the language of business and academia. I’m just looking for the best solution. When you put them all in the same room, you’ll come up with some very creative ideas.”
One of the most important new developments in the logistics industry involves technological advances that allow companies not only to move goods faster but to know where they are at all times. Siplon says retailers need to be able to know where a truck is and what’s on it so they can direct merchandise to the store where it’s most needed. “They have some advance visibility of their supply chain,” he says, adding they want more. “You can really enhance your productivity. But you need information.”
Information is the most valuable player behind the scenes at the ports, as well. In the neighborhood of 2 million multicolored containers of merchandise are shipped annually through Savannah’s Garden City Terminal – the largest single container port in the country. On a recent tour of the facility, boxes were stacked five high in neat lines for as far as the eye could see. They looked orderly and overwhelming at the same time.
It was impossible to tell what was inside simply by looking; but the port’s master information system knows.Every box is numbered, as is every space. The boxes are stacked according to which will be moved first. Forklift drivers know the number of the boxes to be moved as well as the row and slot where they’re located. Records are continually updated as containers are moved.
“The system works,” Siplon says. “They have a 98 percent accuracy rate.”
Thus the logistics industry depends not just on heavy lifting, but on the accuracy and detail of information available, says Robert Morris, director of external affairs for the Georgia Ports Authority. Information systems explain “how crane operators know where containers go, how to transfer, how to segregate containers by vessel, carrier, load, export and import. There are so many variables and it all has to work like clockwork. And it does. That’s not by accident. That’s by a lot of hard work by a lot of people with a lot of technical expertise.”
The more containers the port moves, the more jobs it creates. Certainly the bulk cargo coming through the Port of Brunswick – everything from cars to grain – creates jobs as well. But containers require the most workers for packing, moving, repacking and transporting to distribution centers, warehouses and stores.
“Every single container is a little job generator in itself,” Morris says. “Every container has to be moved from the carrier onto a stack, onto a chassis, onto rail, on to a distribution center. Some are packaged for vans, put back out onto the road and sent anywhere from Atlanta to Chicago to Chattanooga or over to Houston. It’s really a large footprint that the Georgia Ports Authority serves and growing larger every day. What we’ve seen in Georgia is many businesses building up around the impact of the ports.”
Indeed, the announcement of Target’s new distribution center – with all the fanfare it drew – was only one of a series of such developments. Home Depot and Wal-Mart already have distribution centers near the port of Savannah. And Target’s announcement was followed by another from the Swedish chain IKEA, the world’s largest home furnishings retailer.
IKEA announced in December that it will build a 1.7 million-square-foot distribution center on 115 acres at the Savannah River International Trade Park. The company expects to create 150 jobs with that investment. The distribution center will provide the inventory for the new IKEA store in Atlantic Station, the city within a city that opened in midtown Atlanta last year. The Savannah center will also supply IKEA stores in Texas.
A New Middleman
Getting goods across the ocean and into the stores involves a lot more people than just those associated with the port and the retailers. This burgeoning logistics industry has given rise to a new kind of middleman. Customers never see him, but their favorite stores depend on him for their stock. He is known as the 3PL – third party logistics provider. He picks up the merchandise when it comes off the ship and gets it to the right places in shape for sale. His customers are Wal-Mart, Target, Home Depot and even John Deere.
A shining example of Georgia’s home-grown success in the 3PL business is Savannah-based American Port Services (APS). Three brothers – sons of a Savannah marine salvage and warehouse businessman – started the company 18 years ago. Today, they have 500 employees in six ports: Savannah, Charleston, Norfolk, Houston, Seattle and Los Angeles. Their customer list includes Wal-Mart, Target, Michaels and a number of other big importers.
“We provide the physical handling service for companies that have goods coming through the port. Our trucks pick up containers, move them to our warehouse facilities at the port, then move them to the distribution center or to the store itself around the Southeast region or beyond,” says George Powers, who until recently was president of APS. He and his brothers sold their business last year to Green Bay-based Schneider International, the largest truckload carrier in the nation. APS now operates as a wholly owned subsidiary of Schneider. Powers is vice president and general manager of the logistics business.
Powers has watched the industry develop over the past two decades, driven by America’s increasing appetite for low-cost imported goods. “Eighteen years ago, we didn’t import nearly as much as we do now,” he says. “Not as much came from China back then.”
The dramatic shift from U.S.-manufactured products to imported consumer goods led to a focus on port logistics rather than manufacturing sites in the big population centers, Powers says. The effect has been to spread jobs and economic development around the country from the coastal cities inland.
Moving all these products from ship to store depends on brains as much as brawn. “The logistics companies who keep up with technology and are innovative in that side are the ones that are successful and that grow,” Powers says. “The growth is tied to the growth in the ports, the growth in global commerce and the growth in information systems – the visibility of global shipments. That would be as important a part of logistics as the actual moving.”
Powers says Georgia has done a standout job of creating the right kind of environment for the industry to grow. “We have to be very vigilant about keeping a business friendly climate in Georgia so we can accommodate the needs of these shippers and have them come through the port of Savannah and generate jobs. Ports have different business climates. Some ports are very negative. Georgia has been very good about promoting it. That’s had an effect.”
Despite his success in the logistics industry, Powers still has to explain to people what he does – “all the time,” he says. “Logistics is a word that is coming into the vocabulary some, but people don’t really understand what it takes to get goods manufactured in China all the way across the world to a Wal-Mart store near you. It’s one of those activities that takes place behind the curtain. But it makes it possible to go to the store and do your Christmas shopping.”
State Sen. Johnson summed up the importance of the logistics industry on the Savannah waterfront when he told the assembled crowd celebrating the new Target distribution center: “It is all about the jobs.”
Some might add: It’s also about the shopping