Logistics-intensive clusters and regional

economic development: a review of the

current evidence

Bill Anderson , Director

Cross Border Institute, University of Windsor

Prepared for

Exploring Freight Hubs, Mississauga, ON

November 29, 2013

Logistics Intensive Clusters

• Serve a variety of functions– Intermodal transfers– Consolidation / deconsolidation– Customs administration– Value added activities

• Prominent target of regional development agencies

– Success stories– Strategy to replace lost manufacturing jobs

2 questions for economic planners

• Is the region a suitable location for a logistics intensive cluster

• Are the net economic benefits of attracting such a cluster positive and significant

Transformation of freight systems

• Containerization• Intermodalism• Globalization

– Growth of ports on both coasts and gulf– Growth of intermodal rail service– Need for large inland centers for intermodal

transfers

• Logistics revolution– Just-in-time inventory

Transformation of freight systems

• e-commerce– Large scale fulfillment centers

– Substitution of freight for personal transport

• Environmental concern– Calls for more local sourcing– Increasing incentives to move freight as far as

possible by water or rail

Logistics Intensive Clusters

• Member firms– Logistics service provider

– Major users of logistics services– Firms providing inputs to logistics services

• Emergence of hubs– Providing transportation / logistics services to

non-local demand

– Regional specialization

Economic rationale for logistics hubs

(Sheffi, 2010)

• Economies of scope: balanced freight, avoid empty backhauls, lower rates

• Economies of scale: full loads, large conveyances, long double stacked trains

• Economies of density: significant demand close to hub

• Economies of frequency: reduces the time freight spends at rest

Inland Ports

• Transshipment point for marine containers• Locational requisites

– Access to a major container port,– Intermodal facilities served by a Class I railroad– At least 1000 acres of total land– Status as a Foreign Trade Zone (FTZ)– Access to major highways– Access to a large metropolitan market– Access to a large, qualified labour force

• Some of most successful close to Cargo airports

Importance of large local market

• Large number of DCs and other destinations within a short dray

• Ability to generate backhaul– Export industries– Opportunities for domestic repositioning– Ability to generate paper and ferrous scrap

• Disadvantage of small local market may be offset by containerized agricultural exports

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US Locations of inland ports

• Dallas / Ft Worth*• Chicago• Kansas City• St Louis• Atlanta• Memphis*• Inland Empire (Riverside and San Bernardino, CA)• Columbus*• Charlotte• (Front Royal, VA)• *Cargo airport connections

Chicago

• Six Class I Railways

• Most important center for intermodal transfers• Rapid growth due to Asian imports, congestions

• 2 responses– CREATE project

– Inland port projects in periphery

Centerpoint Intermodal Center

Jolliet, IL

• On site of former Jolliet Arsenal, 6000 acre site

• 50 miles SW of Chicago, BNSF and UP lines

• Designated FTZ• 600,000 lifts per year• Major Clients

– Wal-Mart, Georgia Pacific, Bissell

– Schneider, J.P. Hunt, Maersk

• Walmart DC is 3.4 million sq feet

Alliance Global Logistics Hub

• Developed in 1990s by Ross Perot’s Hillwood Co.

• Originally anchored on Fort Alliance Airport (cargo only)

• 2 Class I intermodal facilities

• 243 tenants, 68 from Fortune 500

• 27 million sq ft warehouses

• No. 1 US FTZ

Other prominent examples

• Rickenbacker Global Logistics Park, Columbus OH

• KC SmartPort• Memphis

– Busiest cargo airport– 5 Class I railroads, 2 million intermodal lifts

2,507,032 TEUs2,507,032 TEUs

Regina

Vaughn

Canada’s Ocean Ports

Prince Rupert

750,000 TEUs750,000 TEUs

410,649 TEUs410,649 TEUs

Halifax

1,375,327 TEUs1,375,327 TEUsPrince Rupert Port Authority, Prince

Rupert, BC

Prince Rupert Port

Authority, Prince

Rupert, BC

Port Metro,

Vancouver, BC

Port Metro,

Vancouver, BC

CN Montreal Intermodal

Terminal,

Montreal, QC

CN Montreal Intermodal

Terminal,

Montreal, QCPort of Halifax,

Halifax, NS

Port of Halifax,

Halifax, NS

Prince George

Source: Map Data - Google 2013

Canada Port Authorities, Transport Canada

Intermodal Centres in Canada

• Prince George (British Columbia)• Port Alberta (Edmonton, Alberta)

• Calgary Logistics Park (Calgary, Alberta) , 500K lifts• Global Transportation Hub (Regina, Saskatchewan),

250K

• CentrePort Canada (Winnipeg, Manitoba)• CN Brampton Intermodal Terminal (Ontario) 1,455K

• CP Vaughan Intermodal Terminal (Ontario) 700K

• CN’s Montreal Logistics Park (Quebec) 1,375K

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Calgary Logistics

Park, Calgary, AB

Calgary Logistics

Park, Calgary, AB

Brampton Intermodal

Terminal, Brampton, ON

Brampton Intermodal

Terminal, Brampton, ON

Prince George Port

Authority, Prince

George, BC

Prince George Port

Authority, Prince

George, BC

Port Alberta,

Edmonton, AB

Port Alberta,

Edmonton, AB

Centre Port Canada,

Winnipeg, MB

Centre Port Canada,

Winnipeg, MB

Prince George

Brampton

CN Inland Intermodal Terminals - Canada

500,000 Lifts500,000 Lifts

1,455,000 Lifts1,455,000 Lifts

Regina

Source: Map Data - Google 2013

Canada National Railway

Port Alberta,

Edmonton, AB

Port Alberta,

Edmonton, AB

CP Inland Intermodal Terminals- Canada

Vaughn

CPR Vaughn, Vaughn,

ON

CPR Vaughn, Vaughn,

ON

Global Transportation HUB,

Regina, SK

Global Transportation HUB,

Regina, SK

700,000 Lifts700,000 Lifts

250,000 Lifts250,000 Lifts Centre Port Canada, Winnipeg, MB

Centre Port Canada,

Winnipeg, MBRegina

Source: Map Data - Google 2013

Canada National Railway

Logistics Intensive Clusters as Regional

Economic Drivers

• Traditionally, transportation and logistics activities seen are “residentiary” rather than

“basic” drivers of economic growth

• At present, few regions in North America show strong specialization in transportation

and warehousing activities

• This may change

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Figure 1. Top 20 US Metro Areas by Location Quotient,

Transportation and Warehousing, 2008

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Figure 2: Top 20 US Metro Areas by Location Quotient,

Manufacturing, 2008

Job Creation

• Total employment in cluster (NCFRP 13, 2011)– Alliance: 28,000

– Centerpoint Joliet: 28,000(14,000 more projected)

• Employment depends on ability if intermodal facility to attract related industries

– Rickenbaker Intermodal Terminal, Columbus, OH• 175 jobs in intermodal facility• 20,000 projected at freight industrial park

Employment Controversies

• Are these good jobs?– Replacement for manufacturing?

– Logistics becoming information intensive.

• Are these new jobs?– Competed away from other commercial

locations?

• Do logistics intensive clusters increase total industry employment?

Other notes of caution

• Low employment and income per unit of land (