Philly's Home Run
Greater Philadelphia wants to be the freight hub of the American east. It’s attracting business from Australasia, and teaching lessons on logistics-led economic recovery.
Jason Whittaker reports for
Supply Chain Review, Australia
As SUPPLYCHAIN Review lands in Philadelphia, the forgotten metropolis on the United States east coast, this likeable city is captivated by World Series fever. America’s baseball championshipis in the fi nal stretch, the ‘Phillies’ have captured game fi ve and are heading north to New York City to square up the best-of-seven series.
The Yankies, as they so often do, broke the city’s heart in that game to claim the trophy. Of late, though, it was a rare loss for a region on the move.
Philadelphia is entirely sick of being in the long shadows of Manhattan, a 90-minute Amtrack train ride up the rails. It wants to be known for more than the Philly cheese steak (a sickening local delicacy) and as the birthplace of the federation (it was the US capital after the American Revolution).
And business leaders are banking on the logistics sector leading the charge. The Philadelphia region is setting itself up as the new east-coast hub for freight movement, transforming its economy to weather the recession and the impacts of globalisation which have local manufacturers shutting up shop.
Australian companies are being asked to do business in the region as a launching pad to the United States market — the Select Greater Philadelphia group, an economic marketing organisation, has an office in Sydney and arranged for a group of journalists from around the world, including SupplyChain Review, to tour its key logistics facilities.
But there are also lessons here in the collaborative supply chain network being built, and the role logistics operators can play in repositioning a local economy in a global world.
Logistics is already big business. About 180,000 people work in the sector within Greater Philadelphia’s footprint; 90-odd trucking companies are based in the region along with some 250 distribution centre installations. Container trade alone grew some 20 percent in the six years to 2006.
The reliance on logistics has helped shelter the region from the economic storm. It enjoys the highest growth rate for the north-east corner of the United States and unemployment is lower than the national average.
Volumes on key imports — including oil and fuel products, coal, furniture and automobiles — are down. Rail provider CSX Transportation reports a 20 percent recessionary decline in overall goods (though the growth of rail is tracking a percentage point ahead of the economy).
But a booming perishables market is keeping logistics operators busy. Leo Holt, the President of one of the largest local providers in Holt Logistics, says his firm has “barely felt the bump” on the economic road due to increasing reefer volumes.
The gateway to the region, and the key to unlocking its logistics potential, lies south of these United States in Panama. Businesses in the region are banking on plans to dig out the all-important shipping canal dissecting North and South America, which will allow the world’s largest shipping liners passage from Asian markets to America’s east coast.
The Philadelphia region wants to capitalise. Its network of port infrastructure is stealing business from New York and New Jersey, and once the Panama dredging is complete is eyeing the freight business currently restricted to ports on America’s west coast.
There is intense competition between the region’s ports — Philadelphia, South Jersey and Wilmington in neighbouring Delaware — for business. But as the ports of New York and New Jersey reach capacity, the pie is big enough for all.
The facilities generate a combined US$19 billion in annual economic activity and, under the Greater Philadelphia umbrella, are collaborating to drive more business to the region.
Work has begun on accommodating the larger vessels, with dredging of the Delaware River set to raise clearance from 40 to 45 feet. Governments are investing $300 million in the project, to start early this year.
All the ports have planned significant expansion works to capitalise, connected to three existing Class 1 railroad operators in CSX, Canadian Pacific and Norfolk Southern — one of the few metropolitan areas in the United States to boast that level of rail connectivity.
It’s the strategic location as much as the infrastructure that makes the region an important freight hub. It is the fifth-largest US metro area by population, and some 46.1 million people live within 200 miles (322km) — 100 million within a day’s drive, with Canada an overnight train journey away.
Significantly, the location offers same-day service as far west as Chicago and east to Europe. A giant UPS facility just outside of Philadelphia is the second-biggest of the player’s global network.
LOCAL OPERATORS
Leo Holt’s father borrowed US$200 in 1926 to buy a truck and start his business. Holt Logistics is now one of the largest businesses in the region, employing some 1,500 people in its transportation and wharf services operations.
The family runs the largest container terminal on the Delaware River out of the Port of Philadelphia, with plans to expand capacity to 3 million TEUs over the next two decades.
Holt has invested in the Greater Philadelphia campaign for logistics success. He believes the region is now ideally positioned.
“More all-water services will come to the east coast,” he says of the Panama Canal dredging. “It used to be they only delivered to the west coast. “The race to catch up on infrastructure has already been won by Philadelphia.”
Port facilities are successfully carving out new niches, away from manufacturing exports. The South Jersey Port Corporation, across the Delaware from Philadelphia at Camden, is successfully importing fresh fruit, cocoa beans, cement products and plywood (it is the largest plywood port in the US) among its 4 million tonnes of breakbulk and bulk cargo annually.
And as the clean energy business gathers momentum, the wharf is eyeing off predominantly German-made wind turbine pieces as a significant business.
Management there is conscious of the gloomy economic predicament of many. “The area has lost 300 jobs lately — we want to be a job creator,” one manager says.
Food manufacturer Del Monte is a major tenant with its largest US facility located at Camden. It generates some 700 truck movements in peak season, processing mostly imported product in its 10,000-pallet capacity store for markets across the American east.
Further up the Delaware at the Port of Wilmington, the port boasts of being the number-one fresh fruit gateway in the US and the world’s largest banana port. Juice concentrate is significant, too, with major producer Citrosuco importing concentrate from Brazil through Wilmington for the production of juice at an impressive, fully-automated port-side facility.
Gene Bailey, the Executive Director of Wilmington’s Diamond State Port Corporation, sees the potential of the Panama Canal deepening. Shipping lines say they don’t want to be “boxed in” on the west coast, he says.
“Most of the Asian cargo goes to the west coast,” he says. “Maybe that now comes east.”
Australasian businesses are significant players on the waterfront. The Port of Philadelphia has a long-standing relationship with New Zealand diary producer Fonterra as its import hub, while Australian beef producers put significant volumes through the region’s ports.
Much of Australia’s exported beef goes through the Mullica Hill Group’s massive refrigerated and freezer facility in south Jersey. The centre is the largest receiver of imported meat in the United States, offering value-add and distribution services to companies including McDonalds which uses significant quantities of Aussie meat.
Arthur Mitchell, a Vice President with the Group, says the family company has moved away from meat production into a successful niche in logistics (it runs its own trucking fleet nation-wide). And, he says, it is the largest US player for a reason.“Nobody handles meat better than us,” he boasts. “Ask anyone.”
Australian beef is particularly prized, he says, because it is organic, grass-fed and anti-biotic free, while still cheaper compared to domestic product for mass mince users like McDonalds.
A CHANGING ECONOMY
Deeper into New Jersey journalists meet with State Senate President Stephen Sweeney. He talks of the need to transition his economy in the face of declining domestic manufacturing.
As a supporter of the Select Greater Philadelphia collective of businesses, and of the vision of a largerAs a supporter of the Select Greater Philadelphia collective of businesses, and of the vision of a larger logistics hub, Sweeney says the project is about wider economic transformation.
“The US is a consumer now, not a manufacturer,” he says bluntly, an admission most politicians — particularly in Australia — would be reluctant to make.
Governments have realised the potential of logistics operations and are investing in the necessary infrastructure. “We’ve done it smart,” he says.Some of his communities have been devastated by factories closing. But he’s urging constituents to stick around, offering retraining programs while partnering with local schools to funnel more workers into the logistics sector.
“We’re going to train people to get jobs in ports,” he says. They are largely blue collar communities, he says, and are welcoming transport and logistics companies to town.“The excitement in these towns is overwhelmingly positive,” he says. “They’re very excited.”
He points to a new project from the South Jersey Port Corporation at Paulsboro across the Delaware from the Philadelphia International Airport, a 175-acre general cargo terminal set for completion in 2012. Some 2,500 jobs could potentially be created.
The Democrat wants to hit a home run for his region. Rounding first, the lessons to other political leaders are obvious.
The author travelled to the region courtesy of Select Greater Philadelphia. |
