‘Serendipitous centrality’ spells success

As serendipity goes, it has worked out pretty well for South Bend.

“If someone were to walk into a major manufacturer of some commercial product — toothpaste, as an example — and say, ‘Let us take over the distribution,’ South Bend and St. Joseph County would be a likely location to allow for shipping to the greatest number of people from the fewest facilities possible,” says Patrick McMahon, executive director of Project Future, an economic development group based in South Bend.

“We are most appealing to someone whose product serves the entire U.S. population right from the get-go, because of the logistics of reaching the population from here,” he adds. “South Bend has the classic business-real estate advantage of ‘Location, location, location.’”

A number of features contribute to South Bend’s success as a national distribution hub:

• It is located just 90 miles east of Chicago, and within a single day’s drive from most major East Coast cities.
• It is located within the confluence of most major east/west rail and highway systems that drop around the southern tip of Lake Michigan.
• Three Class I railroads and one Class II railroad are located here.
• There are more than 50 trucking facilities in St. Joseph County.
• South Bend is located near major Midwestern cities and manufacturing centers.
• UPS and FedEx both offer one-day service through major facilities on South Bend Regional Airport property.

Additional advantages

An aerial view of the Tire Rack distribution center in South Bend.

In addition to the geographic features, St. Joseph County boasts 13 industrial parks and a well-trained workforce, thanks to numerous institutions of higher learning that work with local employers to design degree programs meeting the changing needs of the market. In fact, South Bend is at the center of the second-largest overnight, over-the-road distribution zone in North American, reaching 41 million U.S. residents. This makes it the perfect hub for the region.

“When we talk about the regions fitting together, what we mean is that ideally they don’t overlap,” McMahon explains. “Rather, they abut. If you have four such hubs in strategic centers, you can reach a significant portion of your customer base in one day through ground shipping. That’s very attractive to distribution people who are trying to keep costs down.”

The area’s distinct advantages have prompted many major companies to locate here. They have also encouraged locally based businesses to stay put.

“We started in Indianapolis in 1979, and when the focus became ‘mail order’ in 1984, we came back to our roots in South Bend,” says Matt Edmonds, vice president of marketing for online tire retailer Tire Rack. “With six distribution centers throughout the United States, Tire Rack maintains its major operations here. At several different points in our history, we have contemplated our location. At each point, we asked, ‘Is South Bend still the right place for us?’ We’ve hired consultants from elsewhere. And every time, they’ve told us that South Bend is in the top three locations in the country when you look at the percentage of the population you can reach with one-day delivery.”

(To learn more about Tire Rack’s views on the advantages of being in South Bend, see “Tire Rack: Started here, staying here” in this issue.)

Strong business infrastructure

Tech Data in South Bend.

The physical assets of the region have also contributed to a robust business infrastructure that supports national distribution activities.

“The high concentration of over-the-road trucking companies is the result of being a full day’s drive from the East Coast, and a short drive from Chicago,” McMahon says. “That in turn means that the supporting business infrastructure for distribution facilities is very strong.”

For Paul Mead, director of the South Bend logistics center for Tech Data, the proximity to major cities and an excellent local workforce are key factors in maintaining a location here.

The leading wholesale information technology distributor has been in South Bend since 1996 and in its current facility since 2003.

“Our South Bend logistics center is one of six we have throughout the United States,” Mead says. “Its central location is advantageous for Tech Data due to the proximity to major cities like Chicago, Indianapolis, Toledo, Cleveland and Detroit, which enables us to reach a large population of customers throughout the Midwest.

“In fact, several of our largest and most strategic customers are close by, enabling us to cost-effectively support them with same-day shipping and next-day delivery,” he adds. “We also can draw from a skilled and talented workforce in South Bend.”

The South Bend facility is a key component to Tech Data’s world-class logistics infrastructure throughout North America, which ships more than 37 million items each year.

Unfortunate but unrelated

While all of this success may appear to stand in stark contrast to the December announcement by AJWright that it would close its distribution center here, McMahon is quick to point out that the closure is not a reflection on the area’s distribution capabilities.

Rather, he says, the center closed because the AJWright retail concept was not performing well.

“You have to look at why they were located here in the first place,” he explains. “It was based on where they were putting stores. As they added stores nationwide, they needed an efficient, well-located distribution center. That’s why they built a facility here.”

When the TJX Companies decided to cease AJWright’s activities, 162 retail locations were shuttered. The closure of the distribution facility in South Bend naturally followed.

“The decision to close down the stores was unfortunate, but it has nothing to do with distribution logistics,” he says. “It was based entirely on the fact that this retail concept wasn’t doing well with consumers.”

But McMahon is confident the building will not stand empty for very long.

“It’s a very attractive facility,” he says. “It’s a new construction that was designed and built to handle high volume. It has five miles of conveyor inside the building, 35-foot ceilings and 88 loading docks. It’s a big box, very well set to move goods.”

Local center to expand

Spice manufacturer McCormick & Company is investing $6 million in a new 50,000-square-foot distribution center in South Bend to accommodate growing operations at its existing facility. Company officials chose to expand their South Bend location over alternative sites in Illinois and Michigan.

According to a press release issued by the company, the investment “supports McCormick’s vision of the South Bend facility becoming the supplier of choice, leading in reliability and industry measurements of excellence.”

McCormick has 120 employees in South Bend and already has added 10 more workers as a result of the expansion.

“This reinforces their original decision to locate here,” McMahon says. “They’re not looking for another spot. They’re going to do well from here.”

McCormick broke ground for the expansion on Nov. 2, 2010. The addition, which includes 20,000 square feet of refrigerated warehouse space, is slated for completion in June 2011. McCormick in February amended its original proposed expansion efforts by adding another 25,000 square feet to the building addition and increasing total project costs to more than $14 million. Company officials are considering the relocation of an existing brand of products to South Bend — a move that would add another 14 jobs.

Up-front incentive

Looking ahead, McMahon is confident South Bend will remain competitive as a leading hub for national distribution.

“The cost-effectiveness of functioning in this environment makes this a very easy community for a distribution facility to do well in,” he says. “We will remain strong and competitive in this part of the United States. Our location and transportation access sells itself.”