Ohio's transportation assets have always underpinned its economic progress. In the early years of statehood, the National Road through Ohio carried settlers westward. That wagon-rutted road later evolved into Interstate-70.
The Ohio River carried a hefty load of people and goods in the pioneer days. Today, it is a main artery for moving tons of raw materials and finished products from mine to mill to distribution center. The sizable ports on Lake Erie at Toledo and Cleveland have long been the movers of steel and rubber -- products that became the state's signature.
Ohio was always a rail hub and thus the beneficiary of the latest in railroading technology. Today, its several large intermodal yards and container shipping centers marshal products for distribution to the nation and the world.
In air transport, Ohio has long been synonymous with flight. Wright-Patterson Air Force Base, the development, engineering and logistics center for the U.S.Air Force, is still one of the largest employers in Ohio and a big economic engine in southwest Ohio. Former military air bases at Wilmington and Columbus are now air cargo superports.
Much of Ohio's distribution industry developed around the transportation products sector. Ohio produced the first gasoline-powered auto, the Wright Brothers' experiments in a Dayton bicycle shop launched the aerospace industry, and today Ohio is the leading producer of auto components and parts in the nation, as well as a world-class assembly site for Chrysler, Ford, General Motors, Honda, and truck-makers Navistar, Kenworth and Volvo GM.
Logistics experts say there is an "envelope" of opportunity where shippers have access to the greatest market, at the lowest cost. Ohio is in the "envelope."
Ohio is about equidistant from the huge markets of the Northeast and the Midwest. This bulls-eye location means shippers can easily serve two concentrated industrial and consumer markets, instead of just the one convenient from surrounding states.
Sixty-one percent of the U.S. population and 63 percent of the nation's manufacturing facilities lie within 600 miles of Ohio, a larger market than can be served from any other state. Over 50 percent of the Canadian market is in the same range.
Ohio itself is a large consumer market of 11.1 million people housed in eight metro areas, a dozen or so micropolitan communities and countless rural communities.
The internal industrial market is enormous. Ohio is the second largest manufacturing state, leading production of steel, plastics, trucks and industrial machinery.
Ohio is also the nation's second largest exporter. Canada is Ohio's major trading partner, receiving 43 percent -- or about $9.2 billion -- of Ohio's exports. Observers see this facet of Ohio's export picture coming into sharper focus in coming years as more companies tap the possibilities of NAFTA. Other major trading partners are Japan, France, Mexico and the United Kingdom.
Supporting Ohio's dominance in world trade is an integrated transportation network that efficiently channels goods around the globe. Ranking 35th in land area among the states, Ohio has the 10th longest highway network and fourth largest amount of interstate mileage. The state has 700 miles of navigable waterways and more railroad track per square mile than any other state. Over 180 public airports, including international hubs at Cleveland, Columbus and Cincinnati, put Ohio travelers within an hour of two-thirds of the U.S. population.
A look at the map of Ohio readily reveals Ohio's distribution advantages over surrounding states. Two-thirds of the state is bordered by navigable waterways -- the Ohio River for low-cost inland waterborne traffic and Lake Erie for regional and international shipments. Ohio has more interstate mileage than any abutting state. It has three dozen viable railroads. And it has some of the most innovative air-cargo related transportation projects in the nation.
The state has invested substantial seed money in projects to support its distribution advantages. Major projects include Rickenbacker, a former military base turned distribution complex just south of Columbus, and a new air cargo superport at Youngstown-Warren.
These projects and others are prompting an infusion of capital into private transportation projects. Among the biggest:
And these private transportation projects are in turn sparking increasing interest in Ohio as a distribution location. As centers of population and sophisticated services, Ohio's big cities get the lion's share of distribution facilities. However, many of Ohio's outlying areas are capturing an increasing share. For example, the little town of Jeffersonville in southern Ohio bagged one of the distribution plums of 1995. Advanced Auto Parts is locating its 200-employee, 393,000-sq. ft., $13 million distribution center on 30 acres in the town of 1,300.
Other small cities are proving to be big attractions for distributors: Best Buy bought into Findlay, AutoZone zeroed in on Zanesville and Chrysler selected Streetsboro for a $20 million parts distribution center.
Five interstate highways slice through the state. In the west, I-75 is such an important carrier of auto components parts that it has been nicknamed "auto alley." In the east, I-77 serves Appalachian Ohio, passes through the nation's plastics and rubber capital at Akron, then moves on to Cleveland and Lake Erie.
For east-west travel, I -70 bisects Ohio's mid-section, and I-80/90, the Ohio Turnpike, tops off the state.
Slicing diagonally across the state from Cleveland to Cincinnati is I-71. The interstates form a perfect bulls-eye in the middle of the state at the fast-growing capital of Columbus, where I-70 and I-71 converge.
In between the interstates, there is a good system of four-laned, limited-access highways. An important artery across the southern end of the state is State Route 32, the Appalachian Highway.
Major transportation improvement projects are under way in all quadrants of the state, erasing impediments to movement of goods. For example, a top priority road project in Southeast Ohio's Appalachian region is the four-laning of Route 33 to West Virginia. This will allow Southeast Ohio to hook into I-77 and improve access from Columbus to Charleston, W. Va.
In middle Ohio, the upgrading of U.S. 23 to interstate status is in the offing. That road is scheduled to become I-73/74, which will run from Michigan to South Carolina.
The Ohio Turnpike (I-80/90) used to be just a road to funnel people through the state. Gov. George Voinovich's administration turned it into an economic development tool, building many more exits to entice business travelers off the interstate to look at the sites.
Access Ohio, the state's long-range, multimodal transportation plan developed with input from several thousand citizens, identifies critical corridors.
Under a mandate from Gov. Voinovich's office, Ohio is improving access along regional lines. One of the newest and most ambitious projects is in Northeast Ohio, where six counties have created an economic and trade consortium centered on multiple modes of transportation (see page 6). The mission is to allow the region to function as one market by weaving it together through new transportation linkages.
Ohio is served by three Class I U.S. lines -- Conrail, Norfolk Southern and CSX -- plus Canadian National and a bevy of aggressive short lines. If the Class I carriers are the iron arteries, the nearly three dozen short lines that serve Ohio are the all-important capillaries.
Key to Ohio's multimodal transportation development is the state's long-standing commitment to insure that no area is isolated from rail service. The Rail Acquisition Program helps public entities and private investors acquire rail lines threatened by loss of service and encourages short lines to continue service. The Rail Rehabilitation Program provides funding to refurbish deteriorating tracks and construct improvements, such as passing tracks, turn-outs, yard and loading facilities. The Rail Construction Program funds rail siding construction for new or expanding industry.
The programs started several years ago when, after deregulation, the nation's major railroads were allowed to deselect routes, retaining only the most lucrative routes and customers. This left many areas without rail service and in jeopardy of losing their industries.
The commitment to provide rail service in the more rural areas of Ohio has saved many an industry for the state. It also provided the impetus for the launching of a set of successful, entrepreneurial railroad companies that are doing a bang-up job of customer service.
The Class III lines may be a little short on track but they are long on service.
Short lines provide several benefits for shippers. In addition to regular, dependable schedules, they are often willing to provide "extras," like additional switching or special cars as a customer service.
Local management is another benefit. Managers are empowered to make quick decisions on customer requests without having to check with a regional center or headquarters.
Another advantage is competitive access to multiple Class I railroad connections, thus opening more markets for shippers. This also means shippers are not captive to one line and can often negotiate lower overall rates.
Don't discount the capabilities of these little lines: they seem to have recaptured the time when railroads were synonymous with service.
"The classic image of a short line railroad is one with maybe 10 to 15 miles of track that sends a train out through the weeds once a day," says Mike Connor, executive vice president of Ohio Central, which serves 13 counties in East Ohio, "We have trains moving 100 or more coal cars on a regular schedule."
In addition to three international airports, Ohio has several superior air cargo facilities.
Port Columbus International Airport is a fast-growing passenger airport with substantial cargo handling capabilities.
Emery Air Freight maintains a hub at Dayton International, giving that airport a rank of seventh largest cargo handling airport in the nation.
In the southwest at Wilmington, Airborne built its central sorting facility, aircraft maintenance complex and Commerce Park for companies that want same-day shipment of inventory. ABX Air Inc., the airline division and wholly owned subsidiary of Seattle-based Airborne Freight Corp., runs the largest privately owned airport in the country at the former Strategic Air Command airbase.
The availability of the surplus military airbase, plus the proximity of southern Ohio to a large industrial and consumer base, originally caught the eye of ABX Air, says Carl Donaway, president and CEO. "But more importantly," he says, "we looked at the business climate -- the quality of the people, the work ethic. Our experience in Ohio has been that the work ethic is outstanding, and the business environment is first rate."
Airborne operates some 250 offices and freight terminals around the country. "The business environment varies from state to state and from community to community," says Donaway. "In Ohio, where we've invested more than $100 million, we had to have a stable, cooperative environment."
Airborne is currently spending $20 to $25 million on site expansion in Wilmington and just finished a $120 million investment in a second runway,
Airborne is also an excellent example of trends in value-added logistics, offering a large menu of services. For example, Xerox uses Airborne's Sky Courier service to pull parts off the shelf any time of the day or night and arrange for immediate delivery. The system allows Xerox to cut several hours off repair times and provide better service to customers. It also saves expense because Xerox no longer needs to staff parts distribution centers around the clock.
Airborne's Advanced Logistics Service gives companies a way to streamline operations and shorten delivery cycles by maintaining inventory at the Stock Exchange in Wilmington, a critical parts warehouse and rapid response delivery system. Eastman Kodak, for example, has set up an "end-of-the-runway" repair center so products can be returned to customers as quickly as possible.
Orders forwarded to the Stock Exchange across the street from the Airborne Express airport by 2 a.m. receive same morning delivery nationwide. There are also international distribution capabilities, with a Foreign Trade Zone, on-site customs services and direct flights to Canada every night.
Services such as these allow companies to save on taxes, rent, manpower, insurance, warehousing and storage charges, plus the costs of carrying redundant inventory. The result is more efficient management of assets, faster turns on inventory and overall savings in time and money.
The 400-acre, master-planned Airborne Commerce Park, a partnership between the package carrier and Miller-Valentine Group, is the only privately owned hub warehousing and distribution center in the world located at the central airport/sort complex of a major air express carrier. A high quality telecom network is provided by GTE SmartPark Services.
In the center of the state just south of Columbus, the 5,000-acre Rickenbacker project has become an air cargo shipping center of enormous proportions. Fifteen years of public investment is paying off handsomely with the location of some of the state's biggest distribution projects.
| A former Air National Guard base, Rickenbacker has seen some $250 million in construction since 1993. The 12,000-ft. parallel runways, the more than six million sq. ft. of warehouse space and the 1,600-acre Foreign Trade Zone are key attractions for such companies as Spiegel, which moved its Chicago catalog distribution center to a 2.5 million-sq. ft. Rickenbacker cargo facility. |  |
| Spiegel moved its catalog distibution center to Rickenbacker from Chicago. The company has since consolidated distribution for its Eddie Bauer subsidiary at Rickenbacker. The facility represents an investment of $100 million. |
KLM Airlines has made the Columbus Rickenbacker stop its sole North American cargo destination.
In northwest Ohio, Burlington Northern has a major air cargo facility at Toledo Express Airport. A division of the air freight company also operates a Logistics Center, valued by companies that need short-term warehousing and global transport of goods.
"From a geographic point of view," says Glenn Beecher, senior vice president of Air Operations, "Toledo's location in the heart of industrial America puts us in good proximity to the majority of our customers. And certainly the surface transportation capabilities of this area are ideal."
The Logistics Center is in the Foreign Trade Zone at Toledo Express.
The transportation mode that supported the early industrialization of Ohio was, of course, the Ohio River -- several hundred miles of it from Columbiana County to the Ohio/Kentucky/Indiana border at Cincinnati.
Today the river is essential for shipping bulk raw materials, particularly for the food processing and chemical industries and for utilities that barge in coal.
The availability of river sites and the highly honed shipper relationships that move product up and down the Ohio are major advantages for the state.
Ohio River industrial sites are relatively scarce. One of the best of the remaining tracts is in Meigs County, with 1,266 acres on a peninsula formed by the "Great Bend" of the Ohio River.
Some river sites are being updated into modern distribution complexes. At Columbiana County in East Ohio, for example, the port authority is preparing a barge-train-truck intermodal facility at Wellsville.
Lake Erie forms Ohio's northern border, providing major benefits for international shippers. Main Lake Erie ports are at Toledo and Cleveland.
A tremendous aid to international trade is Ohio's several Foreign Trade Zones, the enclaves where goods can be imported and, for customs purposes, treated as if they were not in the U.S. Access to an FTZ creates a number of benefits for companies that use foreign components in merchandise or that store foreign components in the U.S.
Companies that operate in an FTZ can postpone paying duty on imported merchandise until it leaves the zone, either in its original condition or as part of a finished product. This can be a tremendous benefit for a company's cash flow.
Companies may also benefit from reduced duties on imported components which carry a higher duty rate than the finished article. This is the case, for example, with vehicles, where duty on components may be higher than on a finished auto.
Duty can be eliminated on foreign merchandise which is reexported from the U.S., or which is defective or becomes waste during the production process.
It isn't just the availability of multiple modes of transport that makes Ohio attractive to shippers. It's the integration of those modes that is the key.
That's the premise of the Greater Columbus Inland Port, a distribution model being watched closely by the federal government and by other cities around the country.
| An Inland Port Commission was created in 1991 to develop the infrastructure for shipping and distributing goods from the Columbus metro area. Since that time, companies like Spiegel/Eddie Bauer, Pier One, Wal-Mart, Consolidated Stores, Southern Air Transport, AT&T and others have established or expanded in the city.
The Inland Port is an integrated, metro-wide mix of multiple rail yards, distribution centers, 86 million sq. ft. of warehouses and the Rickenbacker air cargo complex. The mix is strategically placed around the city's 54 miles of outerbelt highway. Supporting the bricks and mortar are over 130 truck lines, 38 freight forwarders, reps of major steamship lines and other services. Columbus is a center of an intermodal rail network, providing connections to every major port in the U.S. More containers are lifted at Columbus each year than any other Midwestern city except Chicago. Conrail operates its Trailvan Terminal in Columbus, processing 8,000 containers a month. In the northwest quadrant of the metro area, Conrail and Honda of America opened the Marysville Intermodal Terminal in 1990 to serve Honda's mammoth manufacturing complex north of Columbus. Norfolk & Southern's Discovery Park Terminal does about 70 percent of its business in containers for international, domestic and steamship operations. The company recently doubled the capacity of the intermodal terminal. CSX's Bulk Intermodal facility in Columbus offers transloading for almost any solid, liquid, pellet, resin powder or granule from railcar to truck. The Inland Port has signed marketing and business development agreements with the Ports of Virginia, the Port Authority of New York & New Jersey and Worldport LA in Los Angeles -- bringing the clout and amenities of the largest ports in the world to central Ohio. Columbus, already one of the fastest growing distribution centers in the Midwest, is preparing for significant growth in the coming years. Industry experts say in the next 20 years, the number of intermodal containers and piggyback trailers handled at the three intermodal rail yards in Columbus will more than double. Air cargo and mail handled at Port Columbus International Airport and at Rickenbacker International Airport will increase almost fourfold. Accelerating its stature as a shipping center are the advantages Columbus offers over East Coast distribution centers. The Columbus Inland Port is less clogged than those in other metro areas, and intermodal linkages allow cargo to go straight onto trucks and the interstate highway system. Moreover, costs of transportation, warehousing, legal and financial support are less than in many "traditional" shipping centers. Shippers are finding they can move containerized cargo from a ship in New York via rail to Columbus, clear customs, unload and ship the containers back to New York in less time than it takes to clear the same cargo through customs in New York. Columbus has few rivals in one-day reach to markets. |
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In Northeast Ohio, a superport project is under way at Youngstown/Warren Airport. This project is expected to draw heavily on the industrial base of Northeast Ohio and Western Pennsylvania. Within a 75-mile radius of the airport are 11,700 manufacturing firms, 6.9 million people and 20 Fortune 500 world headquarters.
Manufacturers and distributors will have airside service, where parts and components can be delivered directly from the taxiway to the factory floor.
With 5,000 acres, the superport will have plenty of space for production and distribution activities.
"We think we have an excellent location, given the mass of industry that is tightly grouped in this region," says Reid Dulberger of the Regional Growth Alliance.
The airport will continue to serve passenger traffic, as well as corporate and general aviation craft. In addition, the military will remain -- the airport is home base of the largest C-130 Air Force reserve unit in the country.
The military has a special interest in seeing development of the superport. The enhanced cargo handling capabilities will boost the military toward its goal of a global, just-in-time parts delivery system.
Distribution firms looking to minimize transportation costs will find Ohio a low-cost business location. Ohio ranks well below the national average in costs of food, housing and health care, as well as overall tax burden.
One reason Ohio usually makes the short list in distribution site selection decisions is a tax policy that is favorable to distribution. The state understands that shippers don't want to pay taxes on goods they're just giving shade and shelter to.
Ohio is a freeport state with no inventory tax on goods in transit. In addition, warehouse equipment used in storing, transporting, mailing or handling inventory distributed outside of the state is exempt from sales tax.
Several other measures, part of Gov. George Voinovich's jobs-creating legislative packages, apply to the distribution industry. They include:
The governor's broad ranging incentives packages also include tax credits against the purchase of manufacturing machinery and equipment.
Several distribution companies have benefited from the "Expedited Highway Funding" program that fast-tracks highway improvements. Cities and counties can receive a grant from the state's Road Work Development Account to improve access or extend roads to serve distribution facilities. In the past year, such companies as SuperValu in Xenia, Cardinal Health in Dublin, Ambrosia Industries in Johnstown and FT Precision in Fredricktown benefited from this advantage.
Distributors can also tap the Ohio Training Tax Credit. The measure allows an income tax credit of 50 percent of the cost (up to $500) of training displaced workers. Companies may also receive training grants from the Ohio Industrial Training Program. The availability of this program was one reason Gordon Foods opted for a Springfield location for a new distribution center.
At the local level are additional incentives. These include Enterprise Zones and revolving low-interest loans. Some counties are also eligible for extended tax credits under Ohio's manufacturing machinery and equipment investment tax credit.
New technology for monitoring inventory and automated picking is having a tremendous impact on distribution. To run the automated equipment, distributors need fewer workers but more skills.
Distribution companies look for a pool of workers who can be trained to manage the automated systems that move product in today's modern distribution centers. Moreover, since distribution can be a 24-hour-a-day operation, companies want workers who are flexible as to shifts.
Again, Ohio measures up.
Rick Doran, plant manager at American Honda's huge parts depot and shipping center in Troy on I-75, summed up the advantage: "American Honda's decision to locate our parts center in Troy rested on more than just the location on I-75. The labor situation was very important. The people here have an excellent work ethic. They're honest and give you all you need. That's the heart of an operation like mine."
The spatial economics are right for distribution in Ohio, That's a fancy way of saying that if you're going to build a million sq. ft. distribution center you need a large, level site. Ohio has the kind of topography that allows such structures.
Much of Ohio is in a flat plain that allows companies to develop today's capacious distribution centers. Bordering states to the east and south are at a disadvantage in this regard because of their hilly or mountainous terrain.
While flat sites are available in states to the west, they are too far west of the double market that can be served from Ohio. Ohio is thus the perfect model for distributing to both Detroit-Chicago-St. Louis and Pittsburgh-Philadelphia-Toronto.
Beyond the big five advantages, Ohio is proving it is capable of measuring up to the demands of the latest trends flowing through the distribution and warehousing industry. Among these are just-in-time delivery, the shift toward centralized warehousing and outsourcing of the logistics function.
The distribution industry is riding a wave of dramatic changes in work processes. Driving the changes is the concept of just-in-time delivery of parts and components.
The just-in-time concept requires a strong, trusting alliance between manufacturers and distributors, plus high-quality communications. JIT produces savings in inventory costs, warehouse space costs and transportation costs. This leads to a situation of warehousing on wheels, as trucks in transit serve as virtual warehouses for a constantly moving stream of goods. The old way was to deliver inventory to a distribution center, rack the goods, then pick and ship them. In the new way, there's always product in the pipeline, and it's always on the move.
Just-in-time is particularly prevalent in the auto industry. Because Ohio is a big producer of transportation products the state has amassed considerable expertise, honing its just-in-time delivery system to a fine edge.
Probably no company has defined JIT more than Honda, the first Japanese automaker to establish operations in North America. At the company's three plants west of Columbus in Marysville, East Liberty and Anna, no inventory is more than 36 hours old,
On the other side of the state in Orrville, all is quiet and squeaky clean after the last assembly team departs the Volvo GM plant in the early evening. But during the wee hours, trucks begin rolling in to offload that day's complete inventory of parts and components.
The Orrville location gives the company superior just-in-time possibilities. Using the truck-to-manufacturing line concept, some $3 million in parts roll into the plant each night. The next day they roll out as completed vehicles, which are distributed to 200 dealerships across North America.
Today all businesses are under intense pressure to improve profitability, lower operating costs and increase the productivity of assets. It has been said that distribution is perhaps the last bastion for realizing significant cost savings.
Recent years have seen the emergence of the hub warehouse concept, which puts distribution in the hands of a centralized facility. Companies can get faster delivery of product, plus substantial cost savings in the consolidation or elimination of separate regional facilities.
That is the thinking of a number of successful Ohio centralized distribution centers, which find they can serve a large part of North America from one center in Ohio.
One of the most dramatic trends in today's down-sizing corporate world is the move toward outsourcing of distribution functions. The availability of qualified logistics suppliers is absolutely critical to companies looking to slash their distribution costs and improve their service to customers.
This is particularly true in the air freight industry where yesterday's freight forwarders and cargo carriers have remodeled themselves into sophisticated logistics suppliers with an emphasis on added value.
One driver for the service-oriented air express industry is high-value inventory. Airborne CEO Carl Donaway explains: "You're moving computer upgrade boards that are worth $20,000 or $30,000 and they've got to be there tomorrow, You're not going to trust the post office and you're not going to ship by ground transport."
Another driver is the just-in-time environment. Says Donaway: "If there's a glitch in a JIT situation, it's got to be fixed quickly. Companies no longer have buffer stocks, and they don't have a lot of back-up parts in inventory, so they've got to use air express to get the parts delivered. And if they look at the cost of air express versus the carrying costs for excess inventory, or the bricks and mortar to house the inventory, clearly air express is a much more economical way to support the JIT environment."
There has been an explosion of companies that now not only transfer product from point A to point B but which are becoming, in effect, a separate workforce.
The big driver in third-party logistics services is the added value that can be brought to the table. Ohio logistics companies tag and press clothes, build store displays, file sharp edges off parts, customize products, process materials and, in some cases, even manufacture the products.
| Cleveland | NEOTEC | NORED | Coshocton | ||
| Perry | Chillicothe | Findlay | West Central | Clinton | Piqua |
| Marion | Allen | Troy | Muskingum |
