April 28, 2014
strategic insight | Site Selection

Locate a DC in Missouri? Show me why

There are four reasons why you should consider locating a distribution center in the "Show-Me State." And one good reason why you shouldn't.

By Susan K. Lacefield

If you knew next to nothing about the United States and were handed a map and asked to pick one state to locate a distribution center in, chances are you'd choose Missouri. That's because the state is close to the geographic center of the country. Simply put: It's in the middle of it all.

"It's just the perfect location," says Billy Cartwright, senior director of operations for Con-way Truckload, which has been located in Joplin, Mo., since 1951.

But it's not just about Missouri's central location. The state offers other logistics-related advantages as well. What follows are four additional reasons why companies should consider locating a DC in Missouri (and one reason why they might want to take a pass).

1. Kick-ass infrastructure. It's not enough for a distribution center to be centrally located. Companies must also be able to move goods in and out easily. "You have to have well-connected, high-quality infrastructure, preferably with multiple transportation modes," says Chris Chung, CEO of the economic development organization Missouri Partnership.

Missouri certainly has that. The state boasts one of the largest road systems in the U.S., containing no fewer than seven major interstates: I-70, I-64, I-55, I-44, I-35, I-25, and I-49. Trucks traveling those highways can reach their destinations quickly: The majority of the country is within a two- to three-day drive of Missouri, and 50 percent of the country's manufacturers are only a day's drive away.

Furthermore, the state is served by all seven Class I railroads, offers rail access to both the East and West coasts, and houses not one but two of the country's largest rail centers. According to the Association of American Railroads, Kansas City is the second largest rail center by number of railcars, and St. Louis is the third largest.

The state also offers robust intermodal connections—a plus for companies looking to broaden their transportation options beyond trucking. For example, there are two intermodal facilities near Kansas City that are currently undergoing expansion: a Norfolk Southern facility run by the Rockefeller Group and the CenterPoint-Kansas City Southern Intermodal Center.

As for air-freight options, both the Kansas City and St. Louis airports offer international service, and the Springfield airport has a U.S. Customs port of entry. From Missouri, air freight can reach most cities in the United States and Canada in three hours or less, according to Chung.

While the landlocked state has no seaports, its inland waterways are hard to match, as Missouri is served by both the Missouri and the Mississippi rivers. "Something not every state has," says Chung dryly.

The Port of Metropolitan St. Louis is the second largest inland port by tonnage and moves 33 million tons of mostly bulk commodities annually. The St. Louis port is also the northernmost "ice free" port on the Mississippi River.

"All four modes are here, with not only great physical infrastructure but also the services themselves to support the movement of a distribution center's freight in and out," says Chris Gutierrez, president of KC SmartPort, an economic development organization that focuses on the Kansas City area.

These services include not only offices and regional facilities for all major third-party logistics service providers, warehouse operators, and motor carriers but also the headquarters of several key logistics companies. For example, Joplin, Mo., is the home of Con-way Truckload; Kansas City Southern Railway is located in Kansas City; and the major 3PL Graybar is headquartered in St. Louis.

All of this adds up to what CNBC rates as the fifth best transportation infrastructure in the country.

2. A business-friendly environment. Missouri also boasts a tax environment that's favorable to business. The state has a low personal property tax and no inventory tax, according to Chung. Forbes magazine ranks Missouri as having the ninth-best business regulatory environment in the country, and the Tax Foundation rated the state seventh best in terms of corporate taxes. According to Pollina Corporate Real Estate Inc., which compiles an annual ranking of states based on how well they've positioned themselves to create and retain jobs, Missouri is the ninth most "pro-business" state in the country.

"The state aggressively rewards companies that invest in the state and create jobs," says Chung.

On top of that, the state has low energy costs. According to Chung, it offers some of the lowest industrial electricity prices in the country, which makes it particularly attractive to companies needing cold storage facilities.

The one area where Missouri can't match its Midwest neighbors is tax abatement. Illinois, for example, offers a property tax reduction or exemption to DCs that locate in one of the state's large distribution parks. There are few such facilities in Missouri where companies can receive similar breaks, says Geoffrey R. Orf, senior director for the industrial real estate firm Cushman & Wakefield in St. Louis.

3. A seasoned workforce. With its workforce of 3 million, Missouri has never had a problem providing the labor needed to staff distribution centers, according to Chung. "We are able to serve DCs that just need a dozen people and larger DCs that may need hundreds or thousands," he says.

Missouri's workforce not only has the numbers, but also the skills. Schools such as Missouri State, the University of Missouri, and St. Louis University all have bachelor's and in some cases, master's degree programs in logistics or supply chain management. The state also has 19 community colleges that work regularly with industry to develop the skills businesses seek, according to Chung.

There are even supply chain education programs that reach down into the high schools. KC SmartPort, for example, works with a program called Prep-KC to expose students, guidance counselors, and teachers to career opportunities in supply chain and logistics. Transportation and supply chain professionals are brought into the school to talk about the field, and students can take distribution and logistics classes at the high school for college credit.

On top of that, the Department of Economic Development runs a statewide training program known as Missouri Works. This incentive program is designed to provide training resources and assistance to businesses in order to help them cut training costs and boost productivity.

Occasionally, companies evaluating potential DC sites in Missouri will express concern about the state's strong union presence, says Orf. Those worries are misplaced, he says. Studies have found that worker productivity levels in Missouri tend to be higher than in states with a smaller union presence, according to Orf. "While the wage rate might be higher here than in other Midwest states," he says, "the productivity level of our warehousing and transportation workers is also higher."

Part of the explanation for those high productivity levels may be cultural. Many speak of Missouri's "Midwest work ethic," which can be seen not only in day-to-day operations but also in the face of disaster. As an example, Cartwright of Con-way Truckload cites the way the community of Joplin pulled together to rebuild the city after it was flattened by tornadoes in 2011. "I've been in a couple of tornadoes," says Cartwright. "It's always been interesting how the community bonds together and helps each other. I guess that's part of the feeling of Midwest fellowship."

4. Ability to serve diverse types of businesses. Unlike many other Midwestern states, Missouri's economy isn't dominated by a single industry—think Michigan and the automotive business or Kansas and aircraft manufacturing. Instead, Missouri serves a varied array of businesses. According to Chung, the state's mix of businesses puts it in the top five in the country where diversity is concerned. "As a result, we are able to respond to and accommodate the needs of many types of companies, from retail to industrial products to manufacturing to food companies," he says.

In addition, the state has a wide range of locations that can meet the needs of a distribution center. Kansas City and St. Louis, the state's two large urban areas, provide a large population base and extensive transportation infrastructure. But there are also "second-tier" locations (communities with populations of 20,000 or more) scattered across the state that can provide the staffing levels needed for a DC, says Chung. "All are located on top of at least one major interstate," he says.

As examples, he cites Springfield and Joplin, located in the southwest corner of the state; Columbia and Jefferson City in the middle of the state; Sikeston in the southeast; and Hannibal in the northeast along the Mississippi River.

"With a couple of minor exceptions, almost all communities in the state would be able to provide the workforce needed as well as access to the necessary physical infrastructure and transportation modes," says Chung.

MAIN DISADVANTAGE: BEING IN THE FLYOVER
It would be unrealistic to claim that every distribution network should have a facility in Missouri. Indeed, companies looking to locate close to the country's major population centers, particularly those on the East and West coasts, might want to look elsewhere.

KC SmartPort's Gutierrez puts it this way: Missouri works best for companies that operate a distribution network with an odd number of DCs. Think about it: If you plan to serve the entire continental U.S. from a single distribution center, it makes sense to locate it in the middle of the country. If you want to have two distribution centers, however, it makes more sense to locate one on each coast. If you raise that number to three, you're back to needing a DC in the middle of the country. Go up to four, and the equation once again shifts.

But if a central location is key to your distribution strategy, it's a good bet Missouri will wind up on your short list.

About the Author

Susan K. Lacefield
Associate Managing Editor
Susan Lacefield has been working for supply chain publications for the past nine years. Before joining DC VELOCITY, she was an associate editor for Supply Chain Management Review and wrote for Logistics Management magazine. She holds a master's degree in English.

More articles by Susan K. Lacefield

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