A winning distribution tradition

The Southeastern states have earned a world-class reputation in distribution, both domestically and abroad.

By Jim Thomas -- Logistics Management, 6/1/1998

The Southeastern states have their share of winning traditions. In sports, there are the Atlanta Braves and last year's Major League world champions, the Florida Marlins. The Duke Blue Devils and the North Carolina Tarheels make a mad run at the NCAA men's basketball championship each March. Two of college football's perennial powerhouses, the Gators and the Seminoles, reside in the Sunshine State. And for golfers, there is a place called Augusta.

The region boasts a winning lineup of businesses as well. Fifty-five of the Fortune 500 companies make their headquarters in the region, including Mobil, Home Depot, Coca-Cola, and Georgia-Pacific, along with transportation giants Delta Air Lines, US Airways Group, Ryder System, Norfolk Southern, and United Parcel Service. UPS learned about the lure of the Southeast first hand a few years back. When the company moved its corporate headquarters to Atlanta from the Northeast in the early 1990s, 96 percent of its management chose to relocate along with it. "It blew the lid off the consultant's estimates," says Susan Rosenberg of UPS. "They never dreamed so many would move."

The Southeast attracts distribution sites for many of the same reasons it attracts top corporations, including mild weather, proximity to key markets, favorable economic climate, low operating costs, extensive transportation networks, tax incentives, and availability of skilled labor. In addition, the region has emerged as a global trade leader through its many distribution centers and the ports of Virginia, Charleston, Georgia, and Miami, the gateway to Latin America.

Where Latin America Does Business

One state that has aggressively pursued a role in international commerce is the Sunshine State. More than 60 countries have located consular or trade offices in Florida, which boasts a gross state product of $368.9 billion. One-third of U.S. exports to the Caribbean and Latin America (excluding Mexico) exit via Florida ports and airports. In 1996, the top export destinations were Brazil ($4.85 billion), Venezuela ($2.37 billion), and Colombia ($2.35 billion).

"Latin America has been extended into Miami," says Harry Drajpuch, executive vice president and general manager of USCO Distribution, which operates a facility in the Miami Foreign Trade Zone. "You can use any Gulf port for transportation, but Miami is where you find the people who are involved in the business of Latin America. It's where Latin American companies set up their offices. If you want to be a global player, you have to be in Miami."

In fact, the Port of Miami, aptly known as the "Gateway of the Americas," has grown to be the seventh-busiest containerport in the world, handling 6.7 million tons of containerized and rolling cargo in 1997. Between 1990 and 1997, the port's annual tonnage doubled. It supports 45,000 jobs and has an estimated economic impact of $8.3 billion on Southern Florida.

Turning to the roadways, the state's 100,000-mile highway system is anchored by Interstate 75 (which runs from Fort Myers to Michigan's Upper Peninsula), I-95 (from Miami through the Northeast Corridor to New Brunswick, Canada), and I-10 (from Jacksonville across the southern United States to Los Angeles).

At the northern end of the state, Jacksonville is the center of a robust economy. The Port of Jacksonville handled 6 million tons of cargo in 1997. In automobile imports and exports, Jacksonville is the third-largest port in the nation, handling about 12 percent of the domestic automobile market each year.

The transportation infrastructure supports a number of growing industries, including microelectronics, aviation/aerospace, and health technology. Florida ranks third behind Texas and California in share of the nation's health technology, an industry that includes medical devices, pharmaceutical drugs, and healthcare services. The state's top exports are industrial machinery, computer equipment, electronics, transportation equipment, and chemical and allied products.

Florida attracts new business through incentives for job creation, job training, and infrastructure development. The state imposes no personal income tax. There is no tax on property or goods in transit, and no annual franchise tax levied on stock or equity. Florida's corporate income tax is among the lowest in the country, and exemptions from sales and use taxes may be granted for electricity, machinery, and equipment used in manufacturing. The top exported commodities are fruits, vegetables, and textiles.

Georgia: The Center of Activity

Atlanta is the hub that connects the Southeast with the rest of the United States. Seven interstate highways run through the metro Atlanta area. I-85 links up with I-95 and I-10; I-75 runs northwest to Chicago; I-20 connects the deepwater ports of the East with the West; and I-285 loops the city.

Atlanta's Hartsfield International Airport brings world markets to the metropolitan area through 2,000 flights per day from nearly 40 airlines. About 80 percent of the U.S. market can be reached within two hours. Hartsfield's Concourse E is the world's largest international aviation terminal, complete with in-house customs offices. The airport handled 163,917 metric tons of cargo in 1996, a 210-percent increase from 1987 levels.

Georgia's ports offer another connection to the international community. In 1997, the Georgia Port Authority and private terminals handled 10.8 million tons of cargo, an 11.8-percent increase over 1996 levels. The Port of Savannah alone was responsible for 8.4 million tons, including 5.3 million tons of containerized freight, or 695,000 twenty-foot equivalent units (TEUs) of throughput.

Savannah's Garden City Terminal is the largest single-terminal facility on the East Coast. It provides port users with 1.3 million square feet of warehousing space and 7,726 feet of berthing. The port can accommodate the largest container vessels, and it plans to complete construction of an intermodal container transfer facility this year.

Georgia continues to foster economic growth through a number of tax credits and exemptions. Businesses engaged in manufacturing, warehousing, or distribution may receive a tax credit for research and development conducted within the state. Computer software that is not prewritten or off-the-shelf is exempt from sales taxes. Exemptions also exist for materials-handling equipment, goods delivered out of state, manufacturing machinery, and electricity.

Nothing Could Be Finer...

South Carolina promotes itself as the neighbor of the Southeast's fastest-growing metropolitan area--close enough to conduct business, but far enough away to avoid traffic, congestion, crime, and high real-estate prices. Over the last five years, about 4,500 companies invested $19 billion in the state. South Carolina leads the Southeastern states in per-capita capital investment and in the number of expanding plants.

Seventy-eight percent of the U.S. population lives within 1,000 miles of the Palmetto State. Another 78 percent of the nation's retail sales occur within the same radius. The state's 64,000-mile system of toll-free highways (I-85, I-26, I-77, I-20, and I-95) supports commerce in the state. Norfolk Southern and CSX Transportation operate much of South Carolina's 2,500 miles of railroad tracks.

The three ports at Charleston, Georgetown, and Port Royal handled 8.7 million tons of cargo in 1997. They were second only to New York/New Jersey in handling container cargo on the East Coast. No South Carolina location is more than four hours from the ports, which offer intermodal service to Atlanta and Charlotte, N.C. South Carolina's three major airports--Greenville/Spartanburg, Columbia, and Charleston--have been renovated recently. UPS chose Columbia as a regional cargo hub in 1994.

The state boasts a non-union work force and low labor costs. It has maintained one of the nation's lowest work-stoppage rates for more than 30 years. A state-supported program, "Special Schools," provides businesses with pre-employment recruitment and customized training at little or no cost. Since 1961, more than 150,000 trainees have served South Carolina manufacturers through the program.

South Carolina's cost of living consistently falls below the national average in areas such as food, health care, taxes, utilities, and housing. The state collects no property taxes on inventory, intangibles, or pollution-control equipment. There is a five-year moratorium on county ordinary property taxes for manufacturing, distribution, corporate headquarters, and office facilities. There is a tax exemption on manufacturing equipment and electricity, and the state collects no wholesale sales or value-added taxes. South Carolina also provides tax credits for new jobs, child-care programs, and infrastructure investments.

Due north, the Tarheel State is the 10th-largest export state in the nation. Though the traditional industries of tobacco, textiles, and paper products rank high on the list, North Carolina's leading exports are industrial machinery and equipment, chemicals and allied products, electronic equipment, and transportation equipment. In 1996, the total value of all exports amounted to $17.5 billion. Canada, Japan, Saudi Arabia, and Mexico were the leading destinations.

North Carolina serves global commerce with five Free Trade Zones (FTZs) located within the state's major distribution centers of Wilmington, Charlotte, Morehead City, and Raleigh (Global TransPark and Long International Logistics). In addition, the state's Chamber of Commerce has established the Furniture Export Office and the Japan External Trade Organization.

North Carolina's transportation network includes deepwater port terminals at Morehead City and Wilmington, and inland intermodal terminals at Charlotte and Greensboro. Interstates include I-95, I-85, I-77, I-26, and I-40, which runs from the coast west through Raleigh, Greensboro, Winston-Salem, and Asheville, N.C., and then on to Memphis and the Southwest.

North Carolina's state and local taxes ranked 17 percent lower than the national average of $2,017 in fiscal year 1989-1990. Under the William S. Lee Act, the state offers tax credits for machinery and equipment, research and development, worker training, and jobs. North Carolina has one of the nation's lowest unemployment rates (4.1 percent in February).

Developments in the New Dominion

Like its Southeastern neighbors, Virginia has attracted plenty of new business and industry in recent years. Location and transportation infrastructure are prime factors in this success. The state is located within a day's delivery time of about 60 percent of the U.S. population and 30 percent of Canada's.

Virginia's six interstates are primary arteries of the state's 55,000-mile highway system. Interstates 95, 85, 64, 81, 66, and 77 provide access to Eastern markets. The transportation network includes 3,188 miles of track operated by a dozen railroads. The state's 11 commercial airports schedule direct service to more than 600 destinations worldwide. Washington-Dulles has become the second-busiest U.S. airport for European travel.

Virginia's port complex is built around Hampton Roads, which moves more than 53 million tons of cargo annually. The Hampton Roads Harbor has marine terminals in Newport News, Norfolk, Portsmouth, and Chesapeake. The combined port facilities handled 1.07 TEUs last year. The port trades with more than 100 nations and accounts for about 116,000 jobs throughout the state.

The Virginia Port Authority (VPA) commissioned its "2010 Plan" three years ago, in an effort to maintain its competitive advantage. The study forecasts a possible 250-percent increase in containerized cargo by the year 2010. Additionally, the report predicts intermodal traffic will increase 300 percent, and breakbulk cargo will grow by 200 percent. To accommodate this growth, the port plans to spend $335 million in new facilities, upgrades, and information-technology improvements. The report calls for the VPA to allow multiple rail carrier access to all port facilities.

Warren County/Front Royal, Virginia's inland port, lies 200 miles northwest of Hampton Roads. Its modern intermodal terminal offers a link to ocean-going containers.

International trade has been important to Virginia ever since Pocahontas made the state's first trade mission to Europe in 1615. Some say her spirit has returned because foreign capital investment increased from $335 million to $1.6 billion between 1994 and 1995. Nearly 550 foreign-affiliated firms have located in Virginia. The Old Dominion State ships more than $10 billion in products and provides $4 billion in services annually to destinations throughout the world.

The state's manufacturers ship $66 billion in goods annually and employ more than 413,000, making manufacturing one of the most important sectors of the state's economy. The recent emergence of high-technology operations has led to a new state moniker, "Silicon Dominion." With more than 1,100 firms, Northern Virginia has the highest concentration of computer-related companies in the country.

Many of these firms were attracted by the state's favorable tax environment. Virginia's corporate income tax is 6 percent, one of the lowest in the nation and a rate that has not increased since 1972. Its unemployment rate is 38 percent less than the national average, and in 1996, Virginia had the second-lowest average workers' compensation net insurance costs of any state. There are no taxes on intangible personal property for individuals or businesses.

The labor force attracts industry as well. Approximately one out of every four Virginians holds a college degree, a higher proportion than in any other Southeastern state.