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It pays to be neighborly

Relocating a plant or DC next to an airport might not sound appealing. But for companies that need fast transit times, it`s paying big dividends

By Toby B. Gooley, Senior Editor -- Logistics Management, 7/1/2001

How would you like to receive orders until early evening and still be able to deliver them to your customers the next morning?

For most companies, that's just wishful thinking. But for some shippers, freight forwarders, and third-party logistics companies, it's reality. These fast trackers are cutting delivery times by many hours by locating their manufacturing or distribution facilities next door to their primary airfreight providers.

Of course, such a move doesn't make sense for everyone. But for companies that need to keep transit times to a minimum, moving in next to their transportation providers can offer important cost and service benefits. For them, being neighborly is paying big dividends.

Speed: The Top Priority

Locating manufacturing and distribution facilities near airports is not a new idea, but changing business demands in recent years have made it a more attractive option than ever before. The prevalence of just-in-time manufacturing systems, online retailing, and rising expectations regarding time-definite delivery have made speed a top priority for logistics managers in many industries.

The integrated air carriers - companies like Airborne Express, BAX Global, DHL Worldwide Express, Emery Worldwide, and FedEx Express that operate integrated air and ground transportation networks - certainly have benefited from these trends. Industrial parks that cater to distribution, logistics, light manufacturing, and assembly have sprung up around the sortation hubs these carriers operate.

FedEx Express, for example, has received so many inquiries from shippers about locating near its main hub in Memphis, Tenn., and its four regional hubs that the company has hired a site-selection specialist to assist them. Managing Director of Hub-Based Services Jo Ferreira has responded to nearly two dozen unsolicited inquiries in the last six months. "This has been a steady request pattern," she says, "so I feel that it is very much a trend."

Of those inquiries, about one-third come from companies in the electronics industry, another third come from the medical field, and the rest from a variety of other industries that require short transit times, Ferreira reports. The majority of the inquiries are for distribution centers, but shippers also have been interested in relocating assembly, kitting, and packaging operations. In addition, more third-party logistics companies are expressing interest because some of their clients want to try out a potential location before they make a commitment. "[Shippers] want to see how a relocation would go for them," Ferreira says. "These are multimillion-dollar investments and they are not done lightly."

When Time Is of the Essence ...

FedEx is not the only company to cater to shippers' need for speed. Airborne Logistics Services (ALS), a subsidiary of Airborne Express, offers a similar service that it calls Hub-Based Warehousing. Under this program, shippers may lease, staff, and run their own distribution centers on the edge of Airborne's airport in Wilmington, Ohio, or at a satellite location in Columbus, Ohio, one hour away. Companies that take advantage of this service can ship as late as 1:30 a.m. Eastern time and still get same-day delivery.

A number of other carriers, including BAX Global, Emery Worldwide, DHL Worldwide Express, and United Parcel Service, also offer such "end of the runway" services, especially for critical replacement parts, through their logistics subsidiaries. Some freight forwarders, such as Associated Global Systems , offer these same services for high-tech clients.

AirNet Express, a Columbus, Ohio-based provider of express package-delivery services, is another carrier that helps shippers use proximity to their best advantage. That was the case for Eastern Isotopes of Richmond, Va., which manufactures a radioactive medical imaging agent used in detecting cancer. The product has a half-life of just 110 minutes; that is, its effectiveness and strength are reduced by half every two hours. The sooner the product is delivered, therefore, the longer it can be used by doctors and medical researchers.

Two years ago, Eastern Isotopes relocated a manufacturing facility next door to AirNet's Chicago-area hub. As a result of that move, the shipper now has access to 25 major U.S. markets within two hours' flying time. An expedited handling process, which includes prescreening and pre-approval of the radioactive shipments, helps speed the products on their way, says Thomas Brennan, vice president of AirNet's medical division. The aircraft are able to leave a few minutes after the shipments arrive, and dedicated couriers make sure they reach their destinations as quickly as possible, he explains. And because AirNet's 120 Lear jets and 250 ground vehicles are not locked into a hub-and-spoke operating system, Brennan notes, shippers with severe time restrictions can greatly improve delivery times and maximize the shelf life of their products.

Developers Fill Shippers' Needs

Developers of logistics facilities also are recognizing the new time pressures that their customers face. Some are responding by opening distribution and cross-docking facilities that allow shippers and forwarders to get as close as possible to their air transport providers.

For example, the increasing demand for shorter cycle times prompted San Francisco-based AMB Property Corp. to shift its focus from retail properties to specialized distribution developments that it calls "High Throughput Distribution" (HTD) centers, says the company's president, Blake Baird. "We didn't start by saying we wanted to operate HTD facilities," he notes. "We looked at changes that were occurring in the supply chain, and it became apparent that ... the movement of goods was a growth business, but the storage of goods was in decline."

AMB's HTD sites are cross-docking facilities that are located adjacent to transportation centers. They are characterized by lots of dock doors - as many as one door per 1,000 square feet - as well as good ingress and egress from the property, a shallow "footprint" to minimize forklift travel time, and an interior design that minimizes obstructions, Baird explains. Another unusual characteristic of the HTD centers is that they are located "on tarmac" at airports nationwide and are designed to accommodate aircraft parking immediately outside. At Dallas-Fort Worth International Airport, for example, AMB owns eight facilities within the airport property, and five of them allow 747-400 freighter aircraft to pull right up outside the loading docks.

Typically, the primary users of these facilities are service providers like freight forwarders or airlines, says Baird, but companies in especially time-sensitive industries such as electronics and pharmaceuticals like the idea of being inside major metro area airports. There's so much demand, in fact, that AMB last year acquired 20 on-tarmac cargo facilities at eight U.S. airports, bringing the company's total airport-based portfolio to more than 100 properties at 10 airports.

The trend toward locating specialized distribution centers at airports is evident in Europe as well. At Amsterdam's Schiphol Airport, companies like Yamaha Motor Europe and its parts distribution subsidiary, the Fujitsu/Siemens joint venture, Mitsubishi Motors, and Renault have located their DCs in the many logistics "parks" that ring the airport. The Europort Vatry multimodal center in France, which opened last year, is another example. There, developers have built distribution centers immediately adjacent to the airport runway, a rail-freight handling facility, and two major highways, allowing shippers and forwarders to move goods quickly by several modes of transportation. The first shipper tenant is Air Liquide , a manufacturer of welding products.

Service Improvements

Not every shipper needs to be so close to its transportation providers. FedEx's Ferreira says she has demonstrated to some shippers that the costs of relocating to an airfreight hub would actually outweigh the potential benefits. But for companies whose business success depends on speed, being neighborly with their carriers can pay off with improved customer service, transit times, on-time performance, and reliability.


                          For more information
                          To find out more about the benefits of locating manufacturing and distribution facilities adjacent to an air carrier, contact the companies mentioned in this article.

                          Airborne Logistics Services.
                          Phone: (800) 637-5502.
                          www.als.airborne.com
                          AirNet Express.
                          Phone: (614) 876-1900.
                          www.airnet.com
                          AMB Property Corp.
                          Phone: (415) 394-4000.
                          www.amb.com
                          Amsterdam Airport Area.
                          Phone: 31-20-405-4777.
                          www.aaarea.nl
                          Associated Global Systems.
                          Phone: (800) 645-8300.
                          www.agship.com
                          BAX Global.
                          Phone: (800) 225-5229.
                          www.baxglobal.com
                          DHL Worldwide Express.
                          Phone: (800) 225-5345.
                          www.dhl.com
                          Emery Worldwide.
                          Phone: (800) 227-1981.
                          www.emeryworld.com
                          FedEx Hub-Based Services.
                          Phone : (901) 818-7413.
                          UPS Logistics, Sonicair Division.
                          Phone: (800) 528-6070.
                          www.sonicair.com

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