WC’s Supply Chain Industry

Feature Article: Wilson County’s Supply Chain Industry

Central Freight Lines - Wilson Trucking Company drop yard, viewed from I-40 West

Driving westward along the Interstate 40 highway corridor between Lebanon and Mt. Juliet in Wilson County, Tennessee, an observant eye sees much more than trees and gentle rolling pastures. In addition to the scenic venues, there are frequent passing images of robust business activity in the county.

Besides the usual clusters of gas stations, hotels and eateries stationed along this busy interstate highway, one also observes large paved plats of tractor trailer rigs, parked neatly in front of rows of warehouse shipping and receiving docks.

Looking up at the signage on the nearby buildings, one sees a variety of familiar, and less familiar, corporate logos. FedEx. Under Armour. XPO. CEVA. Richie Brothers. The list goes on. Taking an I-40 off ramp and continuing the drive along other county roadways, in many places the experience repeats itself. Besides hosting a bevy of modern trendy retailing establishments and malls, Wilson County’s (WC) commercial residents also includes providers of those “behind the curtain” business processes and resources that help to make consumer shopping experiences a reality, both locally and elsewhere. These processes and resources, often unnoticed by shoppers, consist of a variety of daily logistical operations, facilities and delivery equipments essential for moving materials, parts and products along the nation’s “supply chain” to end markets.

Supply Chain Defined

What is a supply chain? The Council of Supply Chain Management Professionals (CSCBMP) defines the supply chain (SC) as being the “material and informational interchanges in the logistical process, stretching from acquisition of raw materials to delivery of finished products to the end user”11 .

Richie Brothers truck auction yard viewed from I-40 East

11 CSCMP Supply Chain Management Terms and Glossary, August 2013, retrieved from https://cscmp.org/CSCMP/Educate/SCM_Definitions_and_Glossary_of_Terms/CSCMP/Educate/SCM_Definitions_ and_Glossary_of_Terms.aspx?hkey=60879588-f65f-4ab5-8c4b-6878815ef921

A corporate supply chain is a challenging complex operation involving several critical middleman, or intermediary, functions - material sourcing, transport, storage, production, distribution, etc. Like musical instruments in an orchestra, to be wholly effective, these essential chain components must operate in synchronized unison with one other, often involving the specialized and managerial expertise of many different SC organizations.

High Growth Service Industry

As the nation’s economy grows, nonmanufacturing “service” supply chain providers are an increasingly prominent part of the economic equation. Supply chain businesses today are not only enablers of key corporate operations, they are increasingly a major financial component of the nation’s economy.

A recent article published in the Harvard Business Review notes, for example, that “the U.S. supply chain contains 37% of all jobs, employing 44 million people. These jobs have significantly higher than average wages, and account for much of the innovative activity in the economy … Supply chain service jobs include many different labor occupations, from operation managers, to computer programmers, to truck drivers. They comprise about 80% of supply chain employment, with an average annual wage of $63,000, and are growing rapidly.”12

As evidence of the HBR article’s conclusion concerning the growing importance and prominence of supply chain industries, we note, for example, a recent U.S. Department of Labor employment report for October 2018. In its opening paragraph, the report highlighted that nonfarm job gains for October occurred primarily in healthcare, manufacturing, construction, transportation and warehousing. The report stated that in the first 10 months of 2018, an impressive 184,000 new jobs were added in the latter two supply chain categories. It went on to report that one third of the job gains in manufacturing were in the manufacture of transportation equipment, suggesting new capital investment and interest in supply chain rolling stock13 .

Challenges exist, however, as the supply chain requirements of individual businesses tend to differ – by industry type, by corporate strategy and, perhaps most importantly, by available financing. Given the relatively high capital requirements, most corporations do not want to own or manage their entire supply chains. They may choose, however, to selectively own and manage parts of the chain where it makes economic and strategic sense to do so. A company may decide, for example, to build its own private distribution warehouse or maybe buy its own fleet of delivery trucks.

Typically, the greater the distance between the terminal ends of the supply chain (suppliers and markets), the more critical the intermediary functions. Significant cost efficiencies, even competitive advantage, can result from well managed mid-chain functions, including scheduling, long distance transport (long haul), freight storage and handling, shipment consolidation or disaggregation, etc.

The business risks involved in the design and management of a supply chain today are high but so are the potential benefits and returns. A variety of key decision areas must be addressed by corporate enterprises, from in-source vs outsource decisions, selecting physical distribution routes, choosing and contracting with transport mode providers, incorporating new information technology, etc.

12 The Supply Chain Economy and the Future of Good Jobs in America by Mercedes Delgado and Karen Mills, Harvard Business Review, September/October, 2018

13 The Employment Situation – October 2018, US Dept of Labor News Release, USDL-18-1739, November 2, 2018

Public vs Private Supply Chains

For individual corporations, no tactical or strategic logistical decision looms larger than deciding whether to implement a key supply chain component in-house (aka in-source) or contract it out to a public third party logistics provider (i.e., outsource the component to a “3PL” in industry jargon).

Large corporations may decide to “vertically integrate” or take ownership of key portions of their supply chain. Some will privatize chain components for cost economies of scale while others will do it for reasons of tighter managerial control or security.

A review of Wilson County’s business community shows that its resident corporations are engaged heavily in both public and private supply chain activities. Activity of private supply chains is found in many places in Wilson County. Corporate logos of such well known national brands as Bridgestone, Kroger, Starbucks, Walmart and others, adorn the trailers of many privately owned or leased trucking fleets that travel along the nation’s interstate highways, passing or stopping in WC.

The same logos, or perhaps different ones, may be seen in Wilson County on the exteriors of large private warehouses owned by corporations who have decided that it is also important to own or lease their own dedicated storage facilities. Amazon, Bridgestone, Genesco, Hollister, Lifeway, FedEx, Starbucks, for example. WC is host to many corporations who have their own managed warehouse facilities – some with storage space exceeding a million square feet.

What about companies who don’t have the resources, or the inclination, to operate and maintain their own transport or storage facilities? For these firms, outsourcing is the preferred SC alternative, by creating contractual partnerships with for-hire transportation firms and/or leased warehouse facilitators.

Use of 3PLs is a common business practice for many physical goods producers or distributors, especially for medium size firms who serve large regional or national markets. Well known 3PLs with a significant presence in Wilson County include, for example, CEVA Logistics, DSC Logistics, FedEx Supply Chain, GEODIS, Knight Transportation, Schneider National, XPO Logistics, as well as others.

In-source versus outsource decisions may ultimately come down to who is willing to bear the capital investment cost of the infrastructure (e.g., vehicles, land development, buildings, etc.). Wellheeled large corporations with reliable suppliers and stable markets may prefer to in-source much of their supply chain infrastructure.

FedEx Supply Chain, Eastgate Blvd, Lebanon, TN

On the other hand, mid-size corporations, even some large corporations, especially those in highly competitive industries replete with changing suppliers or customers, may decide that capital cost savings and flexibility are more important than tight management control and lower operating expense, hence the decision to outsource. Of course, corporations may also seek a more practical compromise by entering into long term leasing contracts with 3PLs that preserve managerial control while avoiding expensive capital cost outlays.

WC’s Locational Advantage

Given the high level of recent economic growth in Tennessee and the nation, the shipment volume

and corporate need for fast and efficient supply chains is increasing sharply. The need to strategically move materials, parts, and finished goods from manufacturers, through distributors, to other businesses, and to the end markets, has never been greater.

Economic development agencies understand that corporations today seek out advantageous middle ground locations and partners through which to support their production, storage and distribution activities, effectively tying together the supplier and market ends of the chain. As the old adage goes, a chain is only as strong as its weakest link. Hence, the importance to corporations of finding strategic locations and partners to support the allimportant chain middle.

“Location, location, location” is the sacred mantra of the real estate industry. Location is also a major factor in WC’s success in becoming an important partner for many physical goods producers and distributors. Much of this success is owed to the county’s inherent strategic central location within the main urban and industrial regions of the nation. It is said that about two-thirds of all US markets are less than a day’s drive from Wilson County and Tennessee.

This affords Wilson County the unique economic opportunity to act as a convenient go-between and facilitator (i.e., intermediary) for a significant percentage of the nation’s surface freight movements, whether the points of origin and destination are interstate, intercoastal, or cross border continental.

Another locational economic benefit is the county’s close proximity to urban Nashville, whose own economic growth rate is one of the nation’s highest. It is said that proximity only counts in horseshoes and hand grenades, but the mutual benefits of neighboring Nashville and Wilson County are real enough. Nashville workers, for example, are given additional living options in surrounding contiguous counties such as Wilson, while WC’s transport and warehouse companies have access to additional business resources in nearby Nashville/ Davidson County. For corporations with national or global distribution agendas, Wilson County is a perfect strategic location from which to carry out such activities. The availability of affordable land in 583 square mile Wilson County, along with a skilled work force, business resources and services, and a supportive local government, all combine to make Wilson County a nationally attractive supply chain partner for business enterprises operating across the U.S. and abroad.

Wilson County continues to be a good current and future locale and base of operations for various intermediary corporate, or for-hire, logistical functions, especially in support of the following key supply chain activities:

 fast, high capacity, highway transport for east vs. west freight movement,

 provision of east/west route connectors for north and south freight movement,

 truck maintenance and procurement,

 freight consolidation/rebundling, and,

 warehousing and freight storage.

Warehousing

Overcoming distance barriers to commerce is just part of the supply chain challenge. Overcoming time barriers (e.g., delays) to commerce is important too. Moving materials, parts or goods to the factory, distributor, or end market, is part of the delicate balance which effective supply chains strive to attain; hence, the important role which warehouses and other types of storage facilities play in construction of supply chains.

Of the various organizations that collaborate in supply chain partnerships, perhaps it is the warehousing and storage facilitators who are currently experiencing the most significant industry transitions and transformations, especially against a backdrop of emerging digital technologies and a growing need for improved handling of larger volumes of freight in shorter

South Shore Furniture regional distribution center, Mt Juliet, TN

time periods. In Wilson County, for example, one notes the presence of cross-dock facilities and drop yards14 in close proximity to I-40 and other major thoroughfares.

A variety of public and private warehouse operations are based in Wilson County, including state of the art automated facilities (e.g., Amazon) and general regional or national distribution centers.

Many warehouses in Wilson County are large. The storage facilities used by Bridgestone, Opus Nissan, and Wilson Sporting Goods, for example, are all in excess of a half million square feet. The storage spaces of Amazon and Under Armour are each over a million square feet.

In 2017, there were about 16 private warehousing & storage firms located in Wilson County, employing some 2,870 workers earning an average weekly wage of $804, slightly less than the average general industry wage for the county15 .

Transport Alternatives

Various transportation modes are available today to move materials and finished goods along individual supply chain routes. Transport mode alternatives include truck, rail, air, water, pipeline, and intermodal (combined transport using two or more different transport modes). Since President Eisenhower signed into law the Federal Aid Highway Act of 1956 to provide early funding for construction of a cross-country Interstate Highway System, the primary national transport mode has been the use of trucks to haul freight stored in trailers or containers. The dominance of truck transport in today’s supply chains is obvious. In 2015, for example, of the total 15.9 million tons of freight moved domestically within the U.S., 67% was by truck.

While various transport modes exist in Wilson County (e.g., highway, rail, air), the county’s unique proximity to several major interstate highway systems makes truck transport the most attractive mode of choice for moving freight.

14 Cross docks are combination shipping/receiving docks in which materials are unloaded from an incoming semi-trailer truck and then loaded directly into outbound trucks or trailers, with little or no storage in between. Drop yards are used for various purposes by trucking companies, including, for example, short term parking of empty trailers. 15 Source: U.S. Bureau of Labor Statistics; data for subsector NAICS 493 - warehousing & storage.

Using the latest available data (2017), we note 60 private trucking companies reside in Wilson County, employing a total of slightly more than 800 workers, earning an individual average weekly wage of $122616 .

Being locally employed in the trucking industry is a fairly lucrative occupation. On average, a Wilson County trucking firm employee’s weekly wage is about 50% higher than the $814 average weekly wage brought home by all workers employed by private industry in the county.

Freight transportation, a primary supply chain component, is a key part of Tennessee’s economy. The state’s gross domestic product (GDP) for freight industry sectors accounts for nearly 40% of Tennessee’s total GDP, higher than the nation’s percent of total GDP in the U.S. for similar industry sectors17 .

WC’s Regional Highway Systems

Since about two thirds of all freight tonnage in Tennessee moves by truck, one cannot overstate the importance of the national interstate highway system as a key contributing factor of the

economic success enjoyed by Wilson County and the state.

Key segments of the U.S. east-west corridor’s Interstate 40 (I-40), as well as State Route 109, and middle Tennessee’s bypass Interstate 840 (I-840), are all located in part within Wilson County. Traffic volume, most notably freight trucks, has increased steadily over past decades along all three thoroughfares as they pass through Wilson County, providing evidence of WC’s increasing importance as a key supply chain locality. See Figures H6, H7, H8 and Map 1.

Construction and development of Wilson County’s transportation infrastructure are important to the county’s current and future economy, particularly WC’s segment of Interstate 40. It is important to note that I-40 carries much of the nation’s long haul east/west truck traffic. WC’s I-840 and State Route 109 segments are expected to evolve as important connectors between east/west I-40, northwest/southeast Interstate 24 (I-24) and north/south Interstate 65 (I-65), creating a powerful all-directional national freight transportation hub. (See Chain, page 22)

Master of Business Administration (MBA) Degree

In keeping with its mission to provide opportunities for advanced study in fields appropriate to the needs of the community, Cumberland University offers a Master of Business Administration (MBA) degree. The program primarily seeks to provide individuals who have earned an accredited baccalaureate degree in any field with an opportunity to acquire advanced business expertise while continuing to work full-time during the period of enrollment. The MBA curriculum is designed to afford students the opportunity to develop both analytical and communication skills, and deepen their understanding of basic and advanced business processes and related areas. The MBA degree can be earned in as little as one year entirely online, entirely on campus, or any combination. Tuition cost is very competitive, and students can begin the program at any of six eight-week terms during the year. The MBA program is accredited by the Accreditation Council for Business Schools and Programs (ACBSP). For more information, please contact the Labry School at (615) 547-1210.

16 Source: U.S. Bureau of Labor Statistics; data for subsector NAICS 484 - truck transportation which includes both general and specialized freight trucking. 17 Tennessee Statewide Multimodal Freight Plan, Tennessee Department of Transportation, 2014