Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
Economic cycles come and go, but geography is forever. For the city of Detroit, whose cycle has followed the "to hell and back" trajectory, its future as a major North American logistics player could hinge on whether transportation and logistics users view its location on the continent's map as a blessing or a curse.
Detroit sits at the nexus of U.S.-Canada trade, with its proximity to Toronto, considered the gateway to Canadian commerce. It is located near four of the five Great Lakes as well as the U.S. transcontinental railroad system that connects with Great Lakes port traffic. It is home to three major U.S. interstate highways: I-75, I-94, and I-96. Between 1,000 and 1,450 acres of land are located near urban areas ripe for industrial development, a rarity among large metropolises, according to WSP| Parsons Brinckerhoff, a New York-based engineering and professional services company that last year prepared an extensive report for the Michigan Economic Development Corp. outlining Detroit's potential as a logistics center.
As the North American hub of auto production, Detroit has a superb automotive logistics infrastructure backed by the highly skilled employees needed to keep the automotive supply chain humming. The city and the state of Michigan are well positioned to attract high-tech investment as vehicles become embedded with more technological features than ever before, according to Walter Kemmsies, managing director, economist, and chief strategist of the ports practice for Chicago-based real estate and logistics services giant JLL Inc. In an era when cars are becoming computers on chassis, a company like General Motors Corp. will find itself competing as much with Microsoft Corp., the Seattle-based software behemoth, as with rival carmakers, Kemmsies said in a phone interview.
Agriculture is one of Michigan's core industries, owing to the rich coal-black soil that naturally occurs statewide. Building a new logistics complex in Detroit could help support growing U.S., North American, and global demand for foodstuffs, experts said.
In addition, the city's core downtown area is thriving, thanks in part to large investments made by Dan Gilbert, founder of mortgage firm Quicken Loans, and Mike Ilitch, founder of pizza chain Little Caesar's. Both firms are headquartered in downtown Detroit.
The core area's resurgence has, to some degree, spilled over into increased demand for all types of commercial and industrial space. As of the end of the second quarter, warehouse and DC space in metro Detroit had a 93.67-percent occupancy rate, according to CBRE Group Inc., a commercial real estate company. Vacancy rates across various categories are at all-time lows, and the metro area represents a prime market for speculative construction, according to CBRE.
LOCATION, LOCATION, LOCATION
But the obstacles for Detroit are as apparent as its possibilities. Michigan, which appears on the nation's map as a mitten surrounded by water, is a headache for motor carriers who use the Detroit River to traverse the U.S.-Canada border. The 86-year-old Ambassador Bridge, which connects Detroit with Windsor, Ontario, and which last year handled more than $120 billion in NAFTA-related trade, is burdened with 14,000 vehicles a day—about 10,000 of them trucks—squeezed into just four lanes of road. The span, which is owned by industrialist Manuel "Matty" Moroun, who built his fortune providing shipping and logistics services to the auto industry, is the busiest cross-border transport link in North America.
Purolator International Inc., the U.S. arm of Mississauga, Ontario-based transport firm Purolator Inc. and a big user of the cross-border infrastructure, stopped using the bridge years ago, according to John T. Costanzo, president of the U.S. arm. Instead, the unit's drivers use the less-congested Blue Water Bridge, which connects the two countries at Sarnia, Ontario, about 68 miles northwest of Windsor. The relatively light vehicle backlogs at Sarnia outweigh the higher costs and the longer transit times to get there, Costanzo said.
Michigan's far northern location makes it unsuitable for handling the east-west traffic through which most U.S commerce flows, experts said. The state's northern locale and peninsula-like configuration also make it a poor choice for nationwide retail distribution and e-commerce fulfillment, which is optimally handled through massive hubs in more centrally located and landlocked states like Ohio. Cities like Chicago and Columbus, Ohio, both not far from Detroit as the logistics crow flies, have well-established logistics hubs that are situated along east-west shipping routes.
Canada's advanced and efficient infrastructure offers a compelling alternative to Detroit and Michigan. Canada has invested heavily to build a world-class shipping network to support its export-driven economy. U.S. exporters, especially in the Midwest, will often bypass the U.S. to connect with Canada's infrastructure, often through Montreal-based rail powerhouse Canadian National Inc., to get their goods loaded onto vessels for delivery to foreign markets, Kemmsies of JLL said.
Though Detroit lies along CN's line between Chicago and Montreal, the railroad doesn't have a major presence there. By contrast, CSX Corp., the Jacksonville, Fla.-based Eastern railroad, uses Detroit as its hub for all of Michigan. Norfolk, Va.-based Norfolk Southern Corp., CSX's main rival in the East, also relies on the Detroit facility.
Detroit's aging rail intermodal facility is in dire need of updating. However, a joint bid by CSX and the Michigan Department of Transportation to obtain federal grants for modernization and expansion fell short at the U.S. Department of Transportation, even though CSX was willing to pony up half of the project's projected $42.1 million cost.
Then there is the land itself, a good part of which is, in industrial property lingo, "blighted." "There are buildings, but many of them are obsolete," said Joseph G.B. Bryan, a principal consultant of Parsons Brinckerhoff and the report's primary author. Many parts of Detroit were badly neglected as it withered for years on the economic vine. City and state officials will need to erect "contemporary properties" if Detroit is to attract meaningful shipping and logistics investment, Bryan said.
The 197-page report, issued in March 2015, calls for creating a "Trade, Logistics and Industrial District" (TLI) in Southwest Detroit that would be funded by the public and private sectors to the tune of $1.6 billion to $2.2 billion. Government would kickstart the project with an investment of $400 million to $530 million over a six- to eight-year period, according to the report. The state, which commissioned the study, supports its findings. However, Michigan officials have not signed off on the TLI project because it has not received unanimous support, according to people familiar with the matter.
The TLI project would form a three-legged stool for Michigan to compete in today's logistics market, the report said: First, it creates a portfolio of logistics assets aggregated in one area. Second, it sends a message that the state is committed to the task. Lastly, it produces a "springboard for growth" by cultivating what the report called a "targeted cluster" of industries that would benefit from Detroit's location. The project would generate 15,000 to 20,000 long-term jobs in Michigan, 6,000 to 8,000 of those in metro Detroit, according to the report.
A BRIDGE TOO FAR FROM COMPLETION?
At the heart of the project is a transborder bridge named after Gordie Howe, the late hockey legend who spent most of his career with the National Hockey League's Detroit Red Wings. The proposed $2.1 billion span, expected to open around 2020, would initially have six lanes but could be widened to 10 lanes, and perhaps more. The bridge would create a straight shot between Windsor and the proposed logistics cluster, which would be located about one mile west of the Ambassador Bridge in Detroit's rundown Delray neighborhood.
The Howe Bridge is expected to handle 26,500 vehicles a day by 2025, which will ease congestion at the Ambassador Bridge and provide shippers with more transportation options. Significantly, the Canadian government will fund the span's entire construction, while the U.S. will subsequently contribute revenue collected from tolls.
Getting the Howe Bridge up and running on schedule may not be easy. Unsurprisingly, Moroun, the Ambassador Bridge's owner, has been its most vocal opponent. He has sued the governments of Canada and Michigan to stop its construction and has proposed to build a second span of the Ambassador Bridge, which he would also own. Critics have said Moroun's opposition stems from the prospect of lost profits from duty-free gasoline sales at the Ambassador Bridge.
In July, David Duncan, the Canadian official in charge of the project, told a Canadian paper that the span may not open by 2020 because about 30 properties on the U.S. side have yet to be acquired and may prove difficult to buy.
Andrew Doctoroff, special projects adviser to Michigan Gov. Rick Snyder (R) and the governor's point man on the Howe Bridge project, said the span will brighten the outlook for the city's logistics services, but even if the project runs into trouble, it will not alter the course of the broader TLI initiative. The TLI effort is "not dependent on the Gordie Howe Bridge," Doctoroff said in a phone interview.
Bryan of Parsons Brinckerhoff said Detroit and Michigan—which for the purposes of their logistics outlooks are one in the same—will succeed if officials understand what the metro region is capable of, and what it's not. Detroit's strengths lie in supporting distribution from manufacturing operations, not retail distribution, Bryan said. It can be a key player in serving Michigan, its surrounding markets, and the NAFTA trades, he added. But it cannot and will never be a lead actor in nationwide distribution, he said.
Bryan said the TLI project is critical in leveraging the natural assets that Detroit and the state of Michigan could bring to bear on the logistics market. The initiative would "vault Michigan into a trillion-dollar market with 21st century capabilities, with a marquee site in the midst of the state's largest city, and a package of assets that is rare anywhere in the United States," he wrote.
The project won't guarantee that businesses will choose Michigan for their logistics operations, Bryan said. But it makes Michigan "fully competitive in the game, and that is the game changer the state needs," he wrote.
A version of this article appears in our October 2016 print edition under the title "We heard it through the grapevine ... ."
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.