logistics and supply chain asset study collaborative development council briefing august 20, 2014

Logistics and Supply Chain Asset StudyCollaborative Development Council Briefing

August 20, 2014

Purpose, Vision & GoalsSelected FindingsConsiderations for Development

Agenda

Directions for Development

Create sustainable jobs that can support growing families and help to revitalize Michigan●Assess the logistics and supply chain market opportunity● Identify the factors and actions necessary for successful development●Quantify the benefits, costs, and returns on investments●Create a compelling blueprint for successful action and implementation

Study Purpose

Grow as a recognized North American center for regional and global industry, marshalling and developing infrastructure, technology and human assets for supply chain and logistics functions, to renew and advance the economy of Michigan and the livelihood of its citizens

Vision

Create more and sustainable jobs to support growing families, through better alignment of Michigan’s logistics and supply chain assets with domestic and global opportunities

Organize development to make Michigan the epicenter of a bi-national supply chain economic system with benefits reaching across the state

Foster a 21st Century logistics operating environment

Better leverage Michigan’s natural, cultural and economic advantages

Move to action

Goals - Summary

Create more and sustainable jobs through better alignment of Michigan’s logistics and supply chain assets with domestic and global opportunities.

● Catalyze growth and change in manufacturing, distribution and trade with well placed transportation and logistics facilities providing efficient access to markets, resources and services

● Prioritize infrastructure investment and policy initiatives to lower cost, reduce time, and remove risk

Organize development to make Michigan the epicenter of a bi-national supply chain economic system with benefits reaching across the state.● Pull together as a state in economic development and investment● Offset peninsular location by improving the functioning and positioning of

Michigan and Ontario as one region● Join the southeast Michigan trade and production center to facilities and

activities throughout the state and the Great Lakes area● Support the integration of commercial processes in design, fabrication,

assembly and distribution through business attraction, siting, and transportation and information networks

Goals – Example Detail


Agenda


Multimodal domestic and trade network●Full modal range, good NAFTA and global connections–Principal nexus to top US trading partner

●All modal avenues “lets us be aggressive and resilient, and makes our property more valuable”

Ample roadway capacity and route alternatives●Built for greater demand: lesser congestion and room to grow●Lesser risk of delay due to multiple routes●Robust truck supply for outbound shipping

Land in key locations

Fresh water●Reliable resources for production input, processes and cooling● “Unique opportunity in tri-state area versus California and Texas”

Core Assets (Michigan Advantages)

Manufacturing skills●Culture of making things– “If need reverse engineering, many firms can help within 100 miles”

●Reflected in supplier base for many industries●Supported by leading universities

Logistics skills●Well established logistics capabilities: many modes, leading plus many

smaller third party logistics (3PL) companies●Honed in service to demands of auto industry●Value added services: kitting, sequencing, packaging, labeling,

assembly, warehousing●Deep customs and border process experience●Supported by leading universities– “Should be Silicon Valley for supply chain operations”

Core Assets (Michigan Advantages cont’d)

Michigan needs a comprehensive economic development plan and cohesive strategy●Stop current state of cannibalizing from neighboring communities within

the state

Perception that areas are hurt due to lack of “move-in” ready real estate●Developers have been wary about building spec buildings●Often companies moving into the area do not want to build a new facility

or gut an old one due to time constraints●Many existing facilities are obsolete●General lack of availability of sites with direct rail access

Lack of consistent high speed broadband access in certain rural areas

Economic Development Environment

Major highway conditions good, off-highway “crumbling”●Primary system conditions comparable to other states●Other investment in infrastructure “isn’t there and roads declining”

Michigan location “not on the way to anywhere” – except Canada●Consequence of peninsular geography●Affects location for regional distribution more than manufacturing●Location models typically capture only US population–US population within 500 miles of Detroit: 117 million–US/Canada population within 500 miles of Detroit: 131 million– 14 million added population equivalent to Los Angeles MSA

Logistics Limitations

Tools: network alternatives, facility flexibility, information feeds, service recovery – and logistics skills●Facility flexibility favors leasing over purchase to adjust to market shifts–Requires inventory of modern, variable tenant buildings

Risk management affects operational and location decisions

MI is strong in several management areas – notably network alternatives and logistics skills – and can grow stronger●Building market awareness important

Risk Management


Agenda


Site Requirements TemplateHeavy Industrial/Manufacturing

General Manufacturing Food Processing Hi-Tech Mfg & Processing

Example • Machinery • Plastics • Packaged foods • Electronics

Size (Contig. Developable Acres) • Minimum 25 • Minimum 10 • Minimum 10 • Minimum 25

Security • Manageable at site • Manageable at site • Manageable at site • Manageable at site

Population W/in 1 hour drive • >30,000 • >30,000 • >20,000 • >50,000

Public Transit • Accessible • Accessible • Accessible • AccessibleSkills • As defined by the

specific industry• As defined by the

specific industry• As defined by the

specific industry• Strong engineering and

IT skills across broad range

Other Economic Network • Proximity to supplier/vendor base

• Proximity to supplier/vendor base

• Proximity to supplier/vendor base

• Proxi to agriculture base

• Proximity to strong, specialized supplier/vendor base

Highway Access • Interstate, state highway or major arterial within 10 miles

• Interstate, state highway or major arterial within 20 miles



Intermodal Rail Access • Within 100 miles • Within 100 miles • Within 150 miles • Not typically required

Rail Siding • Preferable • Preferable • Preferable • N/APAir Access • Cargo

• Express• Cargo• Express

• N/AP • Express

Port Access • Bulk• B/B & Project

• Bulk• B/B

• Bulk • N/AP

International Access • Canada• Global connection

• Canada• Global connection

• Global connection • Global connection

Water Flow (GPD) • 36,000 • 17,000 • 25,000 • 65,500Sewer Flow (GPD) • 32,500 • 15,500 • 22,500 • 60,000Electricity • 1.0 MW • 0.5 MW • 1.0 MW • 2.0 MW• Telecom • Fiber-telecomm highly

preferred • Fiber-telecomm highly

preferred• Fiber-telecomm highly

preferred• Dependent telecom &

route diversity

Opportunity MatchesOpportunity Type Region Outlook Michigan

Targeted Industries

Michigan Role

Advanced Engineering, Manufacturing & Machining

SE, DET Increased activity Further research ongoing

Yes Support of auto, defense, R&D, and other industries Encourage and fund specific training programs to

increase skilled workforce availability

Agribusiness All except urban areas

Strong existing value chains Further research ongoing

Yes Continued agricultural farming and export Expand on food processing Support agriculture for biofuels and biofuel R&D Consider agricultural or aquaculture specific energy

rates to help growthAquaculture UP Increasing Activity Activity currently taking place with indigenous tribes

in the UP More activity expected due to accessibility to clean

water Consider agricultural or aquaculture specific energy

rates to help growthAutomotive Throughout

state, with emphasis on southern areas

Increasing activity – automotive companies have stated they want the supply chain to be geographically close

Yes Small and large auto parts manufacturing companies Support efficiencies in rail system that would allow

materials traveling through Michigan to be offloaded instead of being shipped back to Michigan by truck


Targeted Industries

Michigan Role

Biofuels UP Increasing Activity Yes Support biofuel processing and R&D in combination with agribusiness

Defense & Aerospace SE, UP, NE, DET

Linked into automotive activity

Further research required

Yes Solar panels for NASA Other defense and aerospace manufacturing (not

well defined)Food Production Throughout

the state High industry growth due

to focus on home dining Re-regionalization of food

production

Yes Food production, re-establish ties to agricultural Regional distribution of both raw products and

finished products

Logistics Services MW, EM, SW, SE, DET

High industry demand Yes Most of Michigan’s industrial activities involve exporting

Activity will increase as Michigan continues to recover economically from the downturn

Medical Device EC, EM, WM, UP

Slow Increase Yes Individual level – doctor comes up with a new idea, patents it and starts production

Pharmaceuticals/ Biotech

EC, EM, WM, UP

Some indication of new activity, particular interest in water usage

Yes To be determined


Targeted Industries

Michigan Role

Raw Materials – Minerals

UP, NW, NE Increasing activity – encouraged by Michigan but little monetary help

Michigan needs to help support infrastructure improvements to allow raw materials to be exported more easily from the region

Raw Materials – Forest UP, NE Stable to increasing activity – encouraged by Michigan but little monetary help

Yes Michigan processes forest materials into tissue, biofuel, paper, etc

Michigan needs to help support infrastructure improvements to allow raw materials to be exported more easily from the region

Renewable Energy UP Increasing activity Yes Michigan has encouraged and started assisting the UP with access to forests

Michigan needs to financially help with infrastructure improvements (highway, energy, rail)

Wood Products UP Strong existing value chains Yes Wood processing is a significant industry

Furniture WM, SM Positive employment forecast

Yes To be determined

Chemicals ECM, DET Positive employment forecast, contributions to GSP, and commodity forecasts

Yes Assist with conversations and activities related to railroad expansion

Continue work with “I-Park” concept - encourages companies that use the same services to co-locate

Region Comparative Summaries – Reference Map

EDC Region Comparative Summary:Freight Infrastructure

EDC Region Comparative Summary:Other Logistics Factors


Agenda


Michigan has Logistics & Supply Chain assets around the state, but the key infrastructure assets are concentrated in SE MI, inside the I-69 corridor●Major interstate highway corridors●Both bi-national bridges, and the planned bridge●All rail intermodal facilities, and the planned improvement●Air hub ●Top volume waterfront

All contribute to MI’s capability to support domestic & international trade, have capacity for growth, and interact as a multimodal system with alternatives that reduce risk


These assets are matched by critical non-infrastructure assets, also concentrated in SE MI: ●Workforce skills in manufacturing and logistics●Research universities in manufacturing and logistics●Affordable land for development – but not suitable buildings


Opportunities to exploit LSC assets with developable sites have been identified around the state, but economic development focused in Detroit is uniquely able to leverage all of the key state assets, especially planned new infrastructure ●Build where your assets are: proximity to transportation assets and labor

pools are primary considerations in LSC site selection●Generates quantifiable benefits around the state●Opportunity in Detroit is clustered in two sites connected by interstates

Economic development programs throughout MI should be pursued to exploit local opportunities, and to complement the effort in Detroit as part of a statewide economic system


Finish what we started: NITC, DIFT

Site assembly - chiefly residential●Acquisition and rezoning, or special use zoning

Site preparation: making developer-ready

Risk reduction options●Provision of free or low cost land●Provision of low-cost financing

Access route improvements●Mainly state of good repair: arterial pavement, bridges, current condition

and anticipation of higher volume

LSC Program Example: Detroit

Neighborhood support●Security and lighting●Transit access from homes to jobs●Traffic and noise buffering (residential/industrial breaks)●Local hiring and apprenticeships

Development programs●Business attraction marketing–Selling MI logistics advantages, tailored to targets and district–Branding–Exploit MEDC 3PL program

●Use of incentives and inducements


Real Estate●Address zoning or permitting process issues to ensure expedited and

certain process for new development or redevelopment● Identify redevelopable land in private ownership and provide technical or

other assistance to facilitate redevelopment●Establish site certification programs to identify “shovel-ready” parcels

that may be marketed outside the state

Transportation Infrastructure●Address state of good repair issues on regional and local roadways

LSC Program Example: Outside Detroit

Business Attraction and Retention●Work with MEDC and other parties to develop a marketing strategy and

materials to increase visibility and change perceptions outside MI●Work with local businesses to build more robust local/regional cluster

relationships: supplier/vendor, innovation/development

Incentives and Other Policy Tools●Develop a specific evaluation framework for applying state’s flexible

incentive programs– Identify hard (financial) and soft (training, permitting and regulatory

process) efforts that region and local municipalities can use to augment state programs

–Set thresholds for target companies on criteria of industry/use targeting

–Establish ongoing ROI and reporting criteria for state and local incentive eligibility

LSC Program Example: Outside Detroit

Thank You!

logistics and supply chain asset study collaborative development council briefing august 20, 2014

Documents

development slide

economic development

supply chain assets

successful development

logistics facilities

development agenda directions

citizens vision slide

century logistics