Kansas City wants to take advantage of more than its strategic location
Site selection consultants agree that location is still at the top of their list when siting a distribution center or other logistics facility. Access to market and cost continue to drive that decision, says Chris Gutierrez, president of the Kansas City SmartPort (http://www.kcsmartport.com).
Just back from a national conference of economic developers focusing on logistics, Gutierrez is pleased with how this focus on location will play out for the Kansas City area (Kansas City is currently ranked # 12 nationally in Logistics Today's Site Selector index).
Sitting at the center of the continental U.S., Kansas City, Mo., can argue good location. But another factor shippers are looking at is the freight balance, says Gutierrez. Major retailers and manufacturing companies are looking at how carriers will balance loads when they consider a site. This will have a dramatic effect on transportation costs, so shippers are looking at whether a carrier can get a backhaul from an area as part of their site selection criteria.
From that point, questions turn to available sites. Most large retailers are looking for 100- to 150-acre sites that are “site ready,” explains Gutierrez. They want utilities in place and ownership issues already resolved because when they get to this level, they are ready to move on a site, he says.
Additional factors include transportation providers and logistics services in the area. Labor tends to fall lower down the list. Labor is a concern because more logistics jobs involve use of technology. “These are not low-skilled jobs,” Gutierrez continues, “but finding a workforce doesn't appear to be a problem.”
Globalization is a driver for the SmartPort and the Kansas City area. Its location along the I-35 corridor linking Canada and Mexico makes it a vital link in NAFTA trade. It is also along I-49 — known as High Priority Corridor 1 — which runs south from Kansas City to Shreveport, La. There, it joins High Priority Corridor 37 to link with the Port of New Orleans.
The entire route will require over $4 billion in infrastructure funding, with $400 million required for the state of Missouri. Congressional members in Louisiana and Arkansas are aggressively supporting the highway reauthorization funding necessary for the project. Missouri is less aggressive due to some internal concerns at its Department of Transportation, but support is there, says Guterriez.
The corridor follows State Route 71 south from Kansas City, already the area's second largest freight transportation corridor. (The highest density corridor currently is I-70 east to St. Louis.) Retail giant Wal-Mart Stores Inc. recently located a major distribution center (DC) south of the city on S.R. 71, and other DCs have located or are planning to locate there.
Growing congestion on the nation's Class I railroads spells opportunity in Gutierrez's mind. With the NAFTA connection well established, Gutierrez is looking at the East-West link — and in doing so, he's talking Far East.
SmartPort board members will meet with West Coast shippers and port authorities to try to convince them to move containers directly to Kansas City via rail and clear Customs and perform breakbulk operations there. The objection that comes up is this is already being done in Chicago. “But Chicago's getting saturated,” Gutierrez says. In building an intermodal facility, Burlington Northern Santa Fe (BNSF) (http://www.bnsf.com) moved west of Chicago to Joliet to avoid congestion and delays.
The railroads are going to start reaching capacity at many of those sites, Gutierrez explains. “We want to be that option. We have available land and buildings and the labor market to support a more cost-effective location.”
Kansas City is the second largest rail hub in the U.S. behind Chicago, points out Warren Erdman, vice president of corporate affairs for Kansas City Southern Railroad (KCS) (http://www.kcsi.com). He feels that connections with Mexico will enhance Kansas City's position as an interchange point, and KCS is well positioned to fill that role.
Four railroads offer intermodal service in the Kansas City area: KCS, BNSF, Union Pacific (http://www.up.com) and Norfolk Southern (http://www.nscorp.com). KCS' principal market is between the central U.S. and the Gulf Coast via Port Arthur, Tex.; New Orleans and Lake Charles, La.; and Gulfport, Miss. In addition to a number of interchange agreements and marketing partnerships with other railroads, KCS also is the holding company for three other railroads that, together, form the NAFTA Railway: Transportacion Ferroviaria Mexican (TFM), Texas Mexican Railroad (Tex Mex) and the Panama Canal Railway Co.
The KCS acquisition of the Mexican railroad TFM from its Mexican holding company received approval of the Mexican Federal Competition Commission, and KCS has recently received a ruling by the AAA International Centre for Dispute Resolution Arbitration Panel, which found the acquisition agreement remains in force and is binding (see related story).
Inland trade processing is a major initiative of the SmartPort, says Erdman. Gutierrez explains that the group has made some progress in attracting interest from Mexican brokers who could perform consolidation and help facilitate Customs pre-clearance in Kansas City. He understands the idea has the support of Mexican President Vincente Fox, but there is still an issue of putting a Mexican Customs officer in Kansas to perform the inspection and clearance. Mexican law does not permit its officers to be stationed beyond the border area, so some basic laws will have to be changed if Kansas City is to have its own inland trade processing center. LT