Supply Chain Opportunity Assessment: Economic Development for SE Michigan Final Report

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Slide 1: Supply Chain Opportunity Assessment: Economic Development for SE Michigan Final Report May 31, 2010 Sponsored by New Economy Initiative Hosted by Detroit Regional Chamber of Commerce and Michigan State University © Michigan State University, 2010 Slide 2: Presentation Outline • Project Background • Project Objectives and Workshop Deliverables • SCM Strategy, Targeted Industries, and Economic Impact • Economic Development Policies and Collaboration and Communications • Recommendations and Next Steps -2- © Michigan State University, 2010 Slide 3: Opportunity Assessment History • • • • • • • The Gateway Funnel The Detroit Region’s NAFTA Advantage Border Crossings and Network Flows Cities with SCM Capabilities Regional Economic Opportunity I-75, I-69 and I-94 Corridor A Connected Region and Economy -3- © Michigan State University, 2010 Slide 4: The Gateway Funnel -4- © Michigan State University, 2010 Slide 5: The Detroit Region’s NAFTA Advantage -5- © Michigan State University, 2010 Slide 6: Border Crossings and Network Flows -6- © Michigan State University, 2010 Slide 7: -7- © Michigan State University, 2010 Slide 8: Geographic Scope of Project: SEMI/NWOH/SWON • The geographic scope of the project included the region of Southeast Michigan and neighboring regional locations which would benefit from the creation of a regional supply chain hub • The neighboring regional locations included Northwest Ohio and Southwest Ontario • The region or geographic scope of the project is Southeast Michigan, Northwest Ohio and Southwest Ontario and the hub is referred to as the SEMI/NWOH/SWON regional hub -8© Michigan State University, 2010 Slide 9: Cities with SCM Capabilities City Memphis, TN  Supply Chain Management Capabilities Memphis was one of the first supply chain hubs building on its location as the global hub for Federal Express. The FedEx hub has attracted storage and processing facilities that can take advantage of the inbound and outbound movement of air freight. The educational needs of the region are supported strongly by programs at the University of Memphis. Louisville was the second major supply chain hub building on its location as the global hub for United Parcel Service. The UPS hub has attracted storage and processing facilities that can take advantage of the inbound and outbound movement of air freight. The educational needs of the region are supported strongly by programs at the University of Louisville. Created an inter-modal hub including rail, motor, and air to facilitate movement and processing of goods throughout the central Midwest. The initiatives include a strong focus on education. Chicago has always been a major manufacturing and distribution center due to its proximity to inter-modal transportation services and its population density. While this will continue, Chicago locations are being challenged by other sites due to increasing congestion. Building on the Rickenbacker Airport and other inter-modal capabilities, Columbus has established itself as a distribution hub for fashion, electronics, and appliances. The initiatives include a strong focus on education. Indianapolis is positioning itself as a less congested alternative for Chicago as a distribution hub particularly for electronics and parts. Indianapolis is focusing on cross-country rail and truck movements. This initiative has some focus on education but not to the degree that Memphis, Louisville, Kansas City, and Columbus have. ????????????????????????????? Louisville, KY  Kansas City, MO  Chicago, IL  Columbus, OH  Indianapolis, IN  SEMI/NWOH/SWON -9-  © Michigan State University, 2010 Slide 10: Michigan SCM Capabilities • • • • • • • U.S. – Canada location and border system Airport facilities and services Relative capacity and congestion levels Strong rail/intermodal facilities and services Appropriate business taxation forms and levels Reasonable regulatory systems Critical mass of SCM customers, service providers, and professional SCM staff • OTHERS????? - 10 - © Michigan State University, 2010 Slide 11: Regional Economic Opportunity - 11 - © Michigan State University, 2010 Slide 12: I-75, I-69 and I-94 Corridor - 12 - © Michigan State University, 2010 Slide 13: A Connected Region and Economy Highway and Rail Corridors Map: Courtesy of Gallis and Associates - 13 © Michigan State University, 2010 Slide 14: Presentation Outline • Project Background • Project Objectives and Workshop Deliverables • SCM Strategy, Targeted Industries, and Economic Impact • Economic Development Policies and Collaboration and Communications • Recommendations and Next Steps - 14 - © Michigan State University, 2010 Slide 15: Introduction to the Opportunity • Grow cross-border trade and increase the demand for trade services supported by both the public and private sector; • Develop the human capital to design, guide and operate a 21st Century global supply chain hub by providing education and training to build a world class workforce; • Advocate for policy changes at the local, federal and state levels to provide business incentives, improve the region’s transportation infrastructure, and support smooth operation while assuring border security; • Develop a research agenda and clearinghouse for related research to assist companies and policy makers; and • Increase the number of jobs in the sector. - 15 - © Michigan State University, 2010 Slide 16: Opportunity Assessment Key Activities • Identification and design of forward thinking innovative features of the supply chain hub to become differentiated as a world class hub; • Economic analysis to assess the economic multiplier impact for job creation; • Rationalization of opportunity of the supply chain management hub concept; and • Documentation of the appropriate products and industries and critical success factors for the regional supply chain hub. - 16 - © Michigan State University, 2010 Slide 17: Supply Chain Opportunity Assessment: Workshop One Recap • Increase awareness of Supply Chain Opportunities for SEMI/NWOH/SWON • Determine capabilities and benefits to be incorporated into the Supply Chain Hub for SEMI/NWOH/SWON • Determine the industries and associated cargo volumes which would be attracted to utilize the Supply Chain Hub for SEMI/NWOH/SWON - 17 © Michigan State University, 2010 Slide 18: Supply Chain Opportunity Assessment: Workshop Two Recap • Validate SCM design dimensions and attributes for the supply chain hub for SEMI/NWOH/SWON • Determine the SCM policies to enable implementation of the SCM design dimensions • Assess the economic potential of the supply chain related industry types for SEMI/NWOH/SWON - 18 © Michigan State University, 2010 Slide 19: Supply Chain Opportunity Assessment: Workshop Three Recap • Validate SCM strategy, targeted industries, and economic impact for SEMI/NWOH/SWON • Determine economic development policies necessary for successful implementation of the SCM strategy • Agree on next steps to assure project momentum continues - 19 © Michigan State University, 2010 Slide 20: Presentation Outline • Project Background • Project Objectives and Workshop Deliverables • SCM Strategy, Targeted Industries, and Economic Impact • Economic Development Policies and Collaboration and Communications • Recommendations and Next Steps - 20 - © Michigan State University, 2010 Slide 21: Supply Chain Hub Strategy Creation Strategy and SCM Strategy Elements - 21 - Slide 22: SEMI/NWOH/SWON Supply Chain Strategy • Building on the unique characteristics, identify the industries that we can focus infrastructure, regulation, policy, and communication resources to attract firms that can use SEMI/NWOH/SWON as a supply chain hub or interchange. • The supply chain hub is, in reality, a collection of supply chain facilities or mini-hubs: – Air freight to motor freight – Rail freight to motor freight – Value added services - 22 - Slide 23: SEMI/NWOH/SWON Supply Chain Strategy • The SCM Strategy involves multiple areas: – Build differentiated supply chain hub(s) which will stimulate economic growth and job creation – Attract industries to the supply chain hub • Industries with a heavy manufacturing focus • Industries with a light manufacturing focus • Industries with a distribution and value added services focus – Facilitate development of hub with private/public sector partnership • The SCM Strategy Elements (design dimensions) outline the necessary and the differentiated capabilities of the SCM Strategy - 23 - Slide 24: SCM Strategy Elements • • • • • • • • Ability to serve global markets Infrastructure and support capabilities Government regulations Competitive tax climate Availability of human, land, supplier, and financial capital Economic competitiveness and lowest total cost to serve Supply chain sustainability Collaboration and partnership - 24 - Slide 25: SCM Strategy Elements • Ability to serve global markets – – – – – U.S.-Canada trade corridor International/NAFTA transport links Access to Canadian ports Customs house, forwarding, and related services Foreign trade zone facilities - 25 - Slide 26: Ability to serve global markets Attribute U.S.-Canada Trade Corridor Current State Implications Future State 1 of 2 Some Constrained infrastructure and opportunity for institutional barriers plant and DC locations Easier border flow; more systems for customs clearance; additional border crossing Achieve more integrated and coordinated transportation flow Access to Canadian maritime ports opens competitive option for SE MI International/ NAFTA Transport Links Access to multiple transportation modes but limited integration Provides competitive option between U.S. eastern ports and Canada Reduced ability to serve U.S., Canada, and global markets Cost reduction through tax and competitive advantages Access to Canadian Ports - 26 - Slide 27: Ability to serve global markets Attribute Customs house, forwarding, and related services Foreign trade zone facilities Current State Implications Future State Extend competitive advantage Extend competitive advantage 2 of 2 Services already in Stronger than place but benefits competing regions not fully realized High quality, underutilized capability Reduced duties and fees - 27 - Slide 28: SCM Strategy Elements • Ability to serve global markets • Infrastructure and support capabilities – – – – – Airport capabilities Interstate highways Railroad network Intermodal transportation capacity Distribution facilities - 28 - Slide 29: Infrastructure and support capabilities Attribute Airport capabilities Current State DTW airport capacity; frequent direct Asian flights; available capacity for dedicated and belly cargo freight Implications Less congested than Chicago; draw for global fulfillment operations; dedicated air freighter and belly cargo to accommodate 100% screening rules Good connectivity from Detroit south and west and through Canada Future State 1 of 2 Build on DTW aerotropolis and utilize Toledo, Windsor, Willow Run, Lansing, Flint, Pontiac, Saginaw, and other local airports Exploit current capacity and expand network Interstate highways Network of I-75, I94, and I-69 is less congested than Chicago’s - 29 - Slide 30: Infrastructure and support capabilities Attribute Railroad network Current State US-Canada railroads pass through Michigan; shipper access to NS and CSX through Conrail; access to U.S. East coast and Chicago Several dispersed facilities with excess capacity Good private, leased, and public warehouse capacity Implications Access to Halifax and Montreal ports; Conrail connections to two railroads; access to U.S. east and west coast Future State 2 of 2 Railroad infrastructure improvements will improve access east and west; also need improvement in other states within the region Potential for more centralized DIFT concept; new CN intermodal facility Extend competitive advantage; Build consol/deconsol, cross-dock centers Intermodal transportation capacity Distribution facilities Detroit ramp less congested; good connection to east coast cargo Physical capacity and labor available for new business activity - 30 - Slide 31: SCM Strategy Elements • Ability to serve global markets • Infrastructure and support capabilities • Government regulations – Higher weight limits – Carrier permitting process - 31 - Slide 32: Government regulations Attribute Higher weight limits Current State Favorable to some shippers and industries Implications Future State Lower Extend transportation competitive costs; favorable for advantage intermodal particularly in transition from rail intermodal Cumbersome process; not favorable for carriers and shippers Need “one stop shop” permit process; need reciprocal, binational permitting Carrier permitting Multi-agency process system - 32 - Slide 33: SCM Strategy Elements • • • • Ability to serve global markets Infrastructure and support capabilities Government regulations Competitive tax climate – – – – Michigan Business Tax Personal property taxes on equipment Personal income tax Tax abatements and incentives - 33 - Slide 34: Need for competitive tax climate Attribute Michigan business tax Current State Gross receipts intensity and surcharge issues Implications Negative effect on Michigan businesses Discourages investment in Michigan Advantage for Michigan Allows Michigan to compete for specific projects but results in higher general rates Future State Reduce gross receipts intensity and eliminate surcharge Reduce personal property taxes Extend competitive advantage Targeted application Personal property Relatively high taxes on equipment Personal income taxes Tax abatements and incentives Relatively low and flat Competitive, targeted - 34 - Slide 35: SCM Strategy Elements • • • • • Ability to serve global markets Infrastructure and support capabilities Government regulations Competitive tax climate Availability of human, land, supplier, and financial capital – – – – – – Supply chain expertise Supply chain skilled labor Technology enablers Land and facility availability Financial capital Supplier and support capabilities - 35 - Slide 36: Availability of human, land, supplier, and financial capital Attribute Supply chain expertise Current State Implications Future State Presence of supply Strong SCM chain institutions, managerial companies, and capabilities universities 1 of 2 Advantage over other states; retain in-state talent; need firms to manage SCM risk Use retraining funds for skilled labor Leverage capabilities into competitive advantage; create a critical mass in technology sector Supply chain skilled labor Technology enablers Readily available labor Good resources and capabilities: EDI, RFID, GPS tracking, demand, visibility systems, TMS, WMS, trade mgmt systems skills Highly skilled Good support technology for SCM operations - 36 - Slide 37: Availability of human, land, supplier, and financial capital Attribute Land and facility availability Financial Capital Current State Competitive real estate prices Lack of venture capitalists and angel funding Implications Advantage over other states Problem for startup firms Future State 2 of 2 Land is cheap; good place for DC’s Invest in hub; need long-term capital and policy commitment from users to occupy land Extend competitive advantage Supplier and support capabilities Strong supply base Nearby supplier locations - 37 - Slide 38: SCM Strategy Elements • • • • • • Ability to serve global markets Infrastructure and support capabilities Government regulations Competitive tax climate Availability of human, land, supplier, and financial capital Economic competitiveness and lowest total cost to serve – Hub operations cost – Hub service levels – Outbound empty trucks - 38 - Slide 39: Economic competitiveness and lowest total cost to serve Attribute Hub operations cost Current State Higher cost to operate Implications Future State Are there offsetting Lowest cost to productivity serve; lowest advantages? weather risk during transportation Service advantages could offset cost disadvantages Better service potential for combined U.S./Canadian market for intermodal imports Fill outbound trucks Hub service levels Managerial and skilled labor may create advantages; northern fringe location may inhibit access to entire U.S. Trade imbalance; excess empty containers Outbound empty trucks Low outbound rates - 39 - Slide 40: SCM Strategy Elements • • • • • • • Ability to serve global markets Infrastructure and support capabilities Government regulations Competitive tax climate Availability of human, land, supplier, and financial capital Economic competitiveness and lowest total cost to serve Supply chain sustainability – – – – Customer service and reliability Security Green/environmental aspects Reliable weather - 40 - Slide 41: Supply chain sustainability Attribute Customer service and reliability Current State Increased uncertainty due to congestion Implications Future State Increased cost and Customers reduced service requiring more reliability and closer suppliers to lower cost and improve service Increased freight monitoring Need technology and facilities to monitor freight Firms looking for closer suppliers or transporters that have less environmental impact Security Consumers and regulators expecting increased security Firms strongly focus on low cost suppliers Green/ environmental aspects Firms looking for suppliers who can minimize environmental impact - 41 - Slide 42: SCM Strategy Elements • • • • • • • • Ability to serve global markets Infrastructure and support capabilities Government regulations Competitive tax climate Availability of human, land, supplier, and financial capital Economic competitiveness and lowest total cost to serve Supply chain sustainability Collaboration and partnership – Teamwork with government stakeholders – Develop common value-based SCM message – Partnership with private sector and targeted industries - 42 - Slide 43: Collaboration and partnership Attribute One integrated regional plan Current State Implications Future State Regional support from all stakeholders of the integrated SCM plan Need a “champion” or major player to act as an anchor; early investment and commitment Champion - 43 - Slide 44: Synthesis of Strengths and Weaknesses of SCM Strategy Elements • Strengths – Good potential for cross-border distribution hub away from congestion of Chicago-Toronto – Good potential for trans-loading heavy imports from Halifax or Prince Rupert – Good airport and highway infrastructure with limited congestion – While wage rates are high, skilled management and labor talent is readily available – Land and facilities readily available – Relatively inexpensive outbound motor carrier capacity • Weaknesses – Located on peninsula unless cross-border is considered – Perceived or real high union wage scale – Perceived or real high gross receipts and personal property taxes – Infrastructure barriers and custom processes, particularly at border – Current industry sectors in recession – Poor perception of current capabilities – Lack of public/private partnership authority – Absence of regional government authority to coordinate and promote supply chain initiatives - 44 - Slide 45: Supply Chain Hub Strategy Creation Strategy and SCM Strategy Elements Industries offering Value Add Potential - 45 - Slide 46: Economic Model: Industry Sectors 1 Crop and animal production 2 Forestry, fishing, and related activities 3 Oil and gas extraction 4 Mining, except oil and gas 5 Support activities for mining 6 Utilities* 7 Construction 8 Wood product mfg. 9 Nonmetallic mineral product mfg. 10 Primary metal mfg. 11 Fabricated metal product mfg. 12 Machinery mfg. 13 Computer and electronic product mfg. 14 Electrical equipment and appliance mfg. 15 Motor vehicle, body, trailer, and parts mfg. 16 Other transportation equipment mfg. 17 Furniture and related product mfg. 18 Miscellaneous mfg. 19 Food, beverage, and tobacco product mfg. 20 Textile and textile product mills - 46 - 31 Water transportation 32 Truck transportation 33 Transit and ground passenger transportation* 34 Pipeline transportation 35 Other transportation and support activities* 36 Warehousing and storage 37 Publishing including software 38 Motion picture and sound recording industries 39 Broadcasting and telecommunications 40 Information and data processing services 41 Fed. Reserve banks, credit intermed. & related svcs 42 Securities, commodity contracts, investments 43 Insurance carriers and related activities 44 Funds, trusts, and other financial vehicles 45 Real estate 46 Rental, leasing svcs. & lessors of intangible assets 47 Professional, scientific, and technical services 48 Management of companies and enterprises 49 Administrative and support services 50 Waste management and remediation services 51 Educational services 21 Apparel, leather, and allied product mfg. Slide 47: Economic Model: Industries from workshop one Industry code 1 1 of 3 Industry description Crop and animal production Industry/Cargo (workshop notes) 1. Agriculture products (1110) 2. Shipping for greenhouses in Windsor (1110) 3. Home grown diverse food producing 4. Short shelf-life products (flowers from Africa) (1110) 111110 Soybean Farming 3 4 Oil and gas extraction Mining, except oil and gas 1. Raw material exports: sand (2123), iron ore (2122), coal (2121); platinum; salt; water "Salt, common, mining and/or beneficiating" 212393 Other Chemical and Fertilizer 2. Water Mineral Mining "Salt, rock, mining and/or beneficiating" 212393 Other Chemical and Fertilizer Mineral Mining "Sodium chloride, rock salt, mining and/or beneficiating" 212393 Other Chemical and Fertilizer Mineral Mining Rock salt mining and/or beneficiating 212393 Other Chemical and Fertilizer Mineral Mining 6 8 9 10 11 13 Utilities Wood product mfg. Nonmetallic mineral product mfg. Primary metal mfg. Fabricated metal product mfg. Computer and electronic product mfg. 1. Wood product (3210) 1. Carbon fiber manufacturing (3359, 331B, 3270) 2. Glass production (3270) 3. Advanced composites (331B) 1. High security commodities: platinum 1. Machining capabilities (3332, 332B, 3335) 1. Battery technology/recycling (3359) 2. Electronics (3341, 3344, 3345) 3. Defense (electronic equipment) (334A) - 47 - Slide 48: Economic Model: Industries from workshop one Industry code 14 15 17 18 2 of 3 Industry description Electrical equipment and appliance mfg. Motor vehicle, body, trailer, and parts mfg. Furniture and related product mfg. Miscellaneous mfg. Industry/Cargo (workshop notes) 1. Electric engine mfg for infrastructure (3353) 1. Automotive (3361): auto parts (336A) 2. Defense (vehicles) (3361) 3. Automotive charging (??) 1. Office furniture (3370) 1. Wind turbines (3336): alternative energy; Medical Technology (3391); devices and prosthetics; 2. Defense industries (Armaments, troop supplies) (332A) Security/Defense: TACOM, TARDEC; 3. High speed rail components; Nuclear pre-fabricated parts (3339, 336B) 1. Alcohol/spirits (3121) Foodstuff (3110) Perishables: high regional consumption of cognac; Europe import; local wineries (3121) canning (3110) home grown food processing (3110) Paper goods (3222) Chemicals and polymers (Dow – Kuwaiti Dow) (3251, 3253, 3259) Advanced composites; Nuclear (non specified); Battery technology/recycling (3359) Bio-fuels (3240) Bulk materials (non spec) (4820) Parts distribution; (4840) Premium delivery 19 Food, beverage, and tobacco product mfg. 22 25 Paper mfg. Chemical mfg. 30 32 Rail transportation Truck transportation - 48 - Slide 49: Economic Model: Industries from workshop one Industry code 35 3 of 3 Industry description Other transportation and support activities Industry/Cargo (workshop notes) Heavy aircraft maintenance (3364); Aircraft parts distribution (3364); Recruit supply chain service industries to relocate to Detroit area (ex: Indy): inbound for consumer goods, retail distribution, containerized cargo, flexible containers, deconsolidation, cross-dock, add-on services, labeling, rework, consolidating services, demand aggregation and disaggregation, common shipments across industries, home delivery, data warehouse for shipping data, fulfillment centers, mfg goods that require sub-assembly (4930) Distribution facilities; (4930) Plant science (research, not a product) Recycling/reclaiming (5620); Waste paper/metal/scrap (5621, 5622, 5629) 36 47 50 Warehousing and storage Professional, scientific, and technical services Waste management and remediation services - 49 - Slide 50: Detroit Regional Chamber – Target Industries • • • • • • Transportation & logistics Alternative energy Aerospace Medical devices Homeland Security and Defense Advanced Manufacturing - 50 - Slide 51: MEDC - Target Industries • • • • • • Alternative Energy Automotive Engineering Life Sciences Homeland Security and Defense Advanced Manufacturing Film Industry - 51 - Slide 52: Target Industries: Synthesized from Workshop Two • Automotive Renewal • Alternative energy – – – – Battery technology Bio fuels Wind Solar panels • • • • • • • • • • - 52 - Beverage and alcohol distribution Carbon fiber manufacturing Chemical processing Defense Electronics - industrial Food processing Medical technologies Retail importing and value add Water technologies Waste Management Slide 53: Target Industries: Cluster Descriptors • HEAVY: Heavy Manufacturing and industrial cluster attracted to hub for resource efficiency and differentiation – – – – – – Automotive renewal Alternative energy Carbon fiber manufacturing Chemical processing Defense Electronics – industrial • LIGHT: Light Manufacturing and industrial cluster attracted to hub for resource efficiency and differentiation – Food processing – Medical technologies – Water technologies • DISTRIBUTION: Warehousing and consumer based industry attracted to hub market location for distribution and value added services – Beverage and alcohol distribution – Retail importing and value add – Waste management - 53 - Slide 54: Value Propositions by Industry Cluster SCM Element Ability to serve and be served by global markets Infrastructure and support capabilities Government regulations Competitive tax climate Availability of human, land, supplier, and financial capital Economic competitiveness and lowest total cost to serve Supply chain sustainability - 54 - Heavy Manufacturing Technical skill and global air-motor-rail interface Infrastructure and labor skill Load limits Ideal for heavy manufacturing Technical talent and global SC skills Reduced cost of uncertainty due to less congestion Minimal uncertainty Reliable weather Strong private sector message Light Manufacturing Technical skill and global air-motor interface Distribution Technical skill and global air-motor-rail interface Load limits Technical talent and global SC skills Reduced cost of uncertainty due to less congestion Minimal uncertainty Reliable weather Technical talent and global SC skills Available DC capacity Reduced cost of uncertainty due to less congestion Minimal uncertainty Reliable weather Collaboration and partnership Slide 55: Supply Chain Hub Strategy Creation Strategy and SCM Strategy Elements Industries offering Value Add Potential Economic and Job Creation Impact - 55 - Slide 56: Geographic Scope of Economic Modeling • The region or scope of the project is the SEMI/NWOH/SWON regional hub • Canadian data for the economic modeling activity required a long lead time to secure and thus was not available for the economic analysis • The economic modeling results reflect the impact on the SEMI/NWOH region only • Including SWON data into the analysis at a later date will increase the positive economic results of the project - 56 - Slide 57: Economic Model: Geographic Scope - 57 - Slide 58: Three Stages of SCM Economic Activity Stage 1 (Current) Economic activity associated with SCM Stage 2 (+3 years) Economic activity associated with SCM following recovery Stage 3 (+7 to10 years) Enhanced economic activity associated with SCM scale and industry attraction - 58 - Slide 59: What Does it Take to Go from Stage 2 to Stage 3? Stage 1 (Current) Economic activity associated with SCM Stage 2 (+3 years) Economic activity associated with SCM following recovery Stage 3 (+7 to10 years) Enhanced economic activity associated with SCM scale and industry attraction - 59 - Slide 60: SCM Economic Activity for Stage 3 • SCM Stage 3 activities involve multiple areas: – Build differentiated supply chain hub (s) which will stimulate economic growth and job creation – Attract industries to the supply chain hub • Industries with a heavy manufacturing focus • Industries with a light manufacturing focus • Industries with a distribution and value added services focus – Facilitate development of hub with private/public sector partnership • Air freight to motor freight • Rail freight to motor freight • Value added services - 60 - Slide 61: Economic and Job Projections • U.S. base economic activity level in dollars (Source: IBISWorld Industry Market Research Reports) • Determine Great Lakes regional activity (Source: IBISWorld) • Determine Michigan economic activity based on relative population • Establish base Michigan economic activity level (economic and jobs) – Stage 2 • Estimate economic growth potential based on Michigan share of industry (economies of scale) and growth (attraction) – Stage 3 - 61 - Slide 62: Target Industry Evaluation • Growth Opportunity: – Organic: New growth from existing industries – Opportunistic: Growth resulting from market share shift – Innovative: New growth from industry innovations • Growth potential – dependent on historical growth (5 years), projected growth (5 years), current share, and potential for locational synergy – 1.00 would be neutral growth • Change perception – – – – Increase probability of success Emphasize competitive strategy elements Define common and consistent strategy Communicate strategy - 62 - Slide 63: Industry Forecasts – Heavy Manufacturing Industry Automotive renewal Alternative energy Carbon fiber manufacturing Chemical processing Defense Electronics - industrial Growth Opportunity Organic and Innovative Organic and Innovative Opportunistic and Innovative Organic and Innovative Opportunistic and Innovative Growth Potential 1.20-1.30 1.08-1.65 1.30 1.11 1.13 Opportunistic and Innovative 1.19-1.40 - 63 - Slide 64: Economic Evaluation: Heavy Manufacturing Industry Stage 2 Economic Forecast ($M) 5,084 757 6,682 3,739 4,069 919 Stage 3 Economic Forecast with Hub ($M) 6,609 1,056 7,717 4,461 5,250 1,231 Increase Resulting from Hub ($M) 1,525 299 1,035 722 1,181 312 Stage 2 Job Activity (000) 62.7 4.0 56.6 24.0 22.0 2.8 Stage 3 Job Activity with Hub (000) 81.5 5.5 65.4 28.7 28.4 3.8 Increase Resulting from Hub (000) 18.8 1.5 8.8 4.7 6.4 1.0 Automotive renewal Alternative energy Chemical processing Defense Electronics -Industrial Forestry and biofuels Total - 64 - 21,250 26,324 5,074 172.1 213.3 41.2 Slide 65: SCM Industry Activity – Heavy Manufacturing $26,324M (23.8% increase) $? Jobs ? $ 21,250M Jobs 172,100 Jobs 213,300 (23.4% increase) Stage 1 (Current) Economic activity associated with SCM Stage 2 (+3 years) Economic activity associated with SCM following recovery Stage 3 (+7 to10 years) Enhanced economic activity associated with SCM scale and industry attraction - 65 - Slide 66: Industry Forecasts – Light Manufacturing Industry Food processing Medical technologies Water technologies Growth Opportunity Organic, Opportunistic, and Innovative Innovative Innovative Growth Potential 0.87-1.11 1.23 1.19 - 66 - Slide 67: Industry Forecasts – Distribution Industry Beverage and alcohol distribution Retail importing and value add Waste Management Growth Opportunity Organic, Opportunistic, and Innovative Innovative Growth Potential 1.04-1.15 Opportunistic and Innovative 0.91-1.34 1.20-1.40 - 67 - Slide 68: Economic Evaluation: Light Manufacturing, Distribution Industry Stage 2 Stage 3 Economic Economic Forecast Forecast ($M) with Hub ($M) 9,550 4,573 5,123 3,659 2,946 25,851 10,285 6,127 6,864 4,902 3,572 31,750 Increase Resulting from Hub ($M) 735 1,554 1,741 1,243 626 5,476 Stage 2 Job Activity (000) 82.6 20.0 15.1 11.1 15.2 144.0 Stage 3 Job Activity with Hub (000) 89.0 26.8 20.3 14.9 18.5 169.5 Increase Resulting from Hub (000) 6.4 6.8 5.2 3.8 3.3 25.5 Food, beverage Wholesale trade Retail trade Warehouse & storage Waste management Total - 68 - Slide 69: SCM Industry Activity – Light Manufacturing/Distribution $? Jobs ? $ 25,851 M Jobs 144,000 $ 31,750 M (22.8% increase) Jobs 169,500 (17.7% increase) Stage 1 (Current) Economic activity associated with SCM - 69 - Stage 2 (+3 years) Economic activity associated with SCM following recovery Stage 3 (+7 to10 years) Enhanced economic activity associated with SCM scale and industry attraction Slide 70: Total SCM Industry Economic Activity $ 58,074 M (23.3% increase) $? Jobs ? $ 47,101 M Jobs 316,100 Jobs 382,800 (20.8% increase) Stage 1 (Current) Economic activity associated with SCM Stage 2 (+3 years) Economic activity associated with SCM following recovery Stage 3 (+7 to10 years) Enhanced economic activity associated with SCM scale and industry attraction - 70 - Slide 71: Total SCM Industry Economic Activity $ 58,074 M (23.3% increase) $? Jobs ? $ 47,101 M Jobs 316,100 Jobs 382,800 (20.8% increase) Stage 1 (Current) Stage 2 (+3 years) Stage 3 (+7 to10 years) 66.7 K Jobs! - 71 - Slide 72: Supply Chain Hub Strategy Creation Strategy and SCM Strategy Elements Industries offering Value Add Potential Economic and Job Creation Impact Economic Development - 72 - Slide 73: Presentation Outline • Project Background • Project Objectives and Workshop Deliverables • SCM Strategy, Targeted Industries, and Economic Impact • Economic Development Policies and Collaboration and Communications • Recommendations and Next Steps - 73 - Slide 74: Enabling Economic Development • • • • • • • • Global markets Infrastructure Regulations Tax climate Capital availability Economic competitiveness Supply chain sustainability Collaboration SCM strategy elements Targeted industries Industry Value Proposition •Heavy manufacturing •Light manufacturing •Distribution - 74 - Slide 75: Enabling Economic Development • • • • • • • • Global markets Infrastructure Regulations Tax climate Capital availability Economic competitiveness Supply chain sustainability Collaboration 66.7 K Jobs! SCM strategy elements Targeted industries •Heavy manufacturing •Light manufacturing •Distribution Industry Value Proposition Economic development Job creation - 75 - Slide 76: Enabling Economic Development Policy refinements SCM strategy elements Targeted industries Industry Value Proposition Economic development Job creation - 76 - Slide 77: Enabling Economic Development Policy refinements SCM strategy elements Targeted industries Industry Value Proposition Collaboration and communications Economic development Job creation - 77 - Slide 78: Enabling Economic Development: Policy Refinements Policy refinements SCM strategy elements Targeted industries Industry Value Proposition Economic development Job creation - 78 - Slide 79: Policies to Enable Economic Development • • • • • • • - 79 - Ability to serve global markets Infrastructure and support capabilities Streamlined government environment Competitive tax climate Availability of human, land, supplier, and financial capital Economic competitiveness and lowest total cost to serve Supply chain sustainability Slide 80: Policies to Enable Economic Development • Ability to serve global markets – – – – – Integrated border community Maximize U.S./Canadian location advantages Enhance transportation services environment Leverage foreign trade zone locations Design integrated process to receive in SE MI and facilitate cross-border shipments – Seek partnerships opportunities with other major U.S. ports - 80 - Slide 81: Policies to Enable Economic Development • • Ability to serve global markets Infrastructure and support capabilities – Create development incentives associated with transportation assets – Tie economic development and site location to transportation assets – Allow private investment in transport infrastructure – Coordinate between all modes of transportation - 81 - Slide 82: Policies to Enable Economic Development • • • Ability to serve global markets Infrastructure and support capabilities Streamlined government environment – Incentivize use of brownfield properties for transportation and distribution – “One stop permitting” – Neutral entity to implement and drive logistics in SE MI, SW Ontario, and NW Ohio - 82 - Slide 83: Policies to Enable Economic Development • • • • Ability to serve global markets Infrastructure and support capabilities Streamlined government environment Competitive tax climate – Reduce corporate tax burden – Equalize local tax structures – Block implementation of state service tax on B2B transactions - 83 - Slide 84: Policies to Enable Economic Development • • • • • Ability to serve global markets Infrastructure and support capabilities Streamlined government environment Competitive tax climate Availability of human, land, supplier, and financial capital – Enhance commercialization of Michigan university supply chain talent – Connect trained workforce directly to employers - 84 - Slide 85: Policies to Enable Economic Development • • • • • • Ability to serve global markets Infrastructure and support capabilities Streamlined government environment Competitive tax climate Availability of human, land, supplier, and financial capital Economic competitiveness and lowest total cost to serve – – – Reduce costs to transportation industry Maintain advantage with state load limits Promote advantages of integrated cross-border service potential - 85 - Slide 86: Policies to Enable Economic Development • • • • • • • Ability to serve global markets Infrastructure and support capabilities Streamlined government environment Competitive tax climate Availability of human, land, supplier, and financial capital Economic competitiveness and lowest total cost to serve Supply chain sustainability – – Emphasize role that reduced uncertainty and more proximate sourcing can have on enterprise sustainability Provide incentives for lower and reduced environmental impact for shippers and carriers - 86 - Slide 87: Enabling Economic Development: Collaboration and Communications Policy refinements SCM strategy elements Targeted industries Industry Value Proposition Collaboration and communications Economic development Job creation - 87 - Slide 88: Collaboration and Communication to Enable Economic Development • Collaboration and communication – Communicate the benefits of reduced SC operating uncertainty in Midwest – Communicate common and credible voice to policy makers with an industry perspective – Create an operational SCM Development entity to be a single voice to coordinate, promote, facilitate, and advance SE MI supply chain initiatives (e.g., Georgia, Columbus, Indianapolis, Kansas City, and Virginia) - 88 - Slide 89: Collaboration Structure – Kansas City Smart Port Board of Directors – – – – – – – – – – Burlington Northern Santa Fe \| Profile \| WebsiteSkip Kalb, Director, Strategic Development Dysart Taylor \| Profile \| WebsiteKen Hoffman, Attorney W Greater Kansas City Foreign Trade Zone, Inc. \| Profile \| WebsiteAlfred J. Figuly, President Johnson County Airport Commission \| Profile \| WebsiteR. Lee Metcalfe, Executive Director Kansas City Area Development Council \| Profile \| WebsiteRobert J. Marcusse, President Kansas City Southern \| Profile \| WebsitePat Ottensmeyer, Executive Vice President of Sales & Marketing Kansas Department of Transportation \| Profile \| WebsiteChris Herrick, Director of Planning & Development Mid-America Regional Council \| Profile \| WebsiteRonald B. Achelpohl, Manager, Transportation Programs Missouri Department of Transportation \| Profile \| WebsiteElizabeth Wright, District Engineer TranSystems Corporation \| Profile \| WebsiteMichael A. Priest, Regional Vice President - 89 - Slide 90: Kansas City - Agencies Executive Committee • Alfred J. Figuly President Greater Kansas City Foreign Trade Zone, Inc. • Skip Kalb Director, Strategic Development BNSF Railway Company Robert J. Marcusse President Kansas City Area Development Council Email: marcusse@thinkKC.com Michael A. Priest Principal and Regional Vice President TranSystems Corporation • - 90 - Slide 91: Collaboration Structure – Columbus, OH Columbus Region Logistics Council ODW Logistics Battelle Memorial Institute Columbus Chamber Abbott Nutrition Big Lots Cardinal Health Columbus Regional Airport Authority Columbus State Community College CSX Intermodal DB Schenker Logistics DSW Shoes Exel Honda of America Mfg., Inc. Kraft Limited Brands McGraw Hill Norfolk Southern Pacer International Spartan Logistics Sterling Commerce The Ohio State University The Pizzuti Companies UPS - 91 - Slide 92: Collaboration Structure - Georgia Georgia Center for Logistics and Innovation – target industries Georgia Industries • Cleantech • Data & Call Centers • Defense • Energy & Environment • Entertainment • Financial Services • Food Processing • Global Trade • Headquarters • Information Technology • Logistics & Transportation • Manufacturing • Tourism - 92 - Slide 93: Georgia Center for Innovation and Logistics - 93 - Slide 94: Georgia Center for Innovation and Logistics • Wide range of stakeholders to address logistics issues. problem holder–problem solver model. • "Problem Holders" come from logistics, shipping and transportation entities. Driven by real-world experiences, they bring complex challenges and opportunities to the table. • "Problem Solvers" come from the worlds of academia and technology, from entrepreneurial to established companies. They contribute a unique technological perspective and can often provide the most objective analysis of an industry issue. • Logistics is comprised of many firms operating independently and interdependently; and all are reliant upon a common infrastructure in essence, a "logistics ecosystem." • The Center of Innovation for Logistics is focused on identifying a structure from which everyone can work: a unique set of resources detailing the composition and impact of logistics throughout Georgia. - 94 - Slide 95: Why is Collaboration and Communication Necessary to increase Scale and Attractiveness? • Reduces likelihood of redundant infrastructure investments • Increases potential for critical scale through effective investments, borrowing, and grants • Communicates the message in context of supply chain performance benefits to the firm rather than economic development benefits for the region • Communicates a common, consistent message to potential clients - 95 - Slide 96: Presentation Outline • Project Background • Project Objectives and Workshop Deliverables • SCM Strategy, Targeted Industries, and Economic Impact • Economic Development Policies and Collaboration and Communications • Recommendations and Next Steps - 96 - Slide 97: Project Findings and Recommendations • Opportunity Assessment has re-enforced the economic development potential for the Hub – 66,000 new jobs created – Doing nothing may run the risk of additional jobs lost • Hub organizational model should include all impacted stakeholders; both public and private stakeholders • Key Hub competencies should include supply chain expertise, economic development, collaboration, and grantsmanship • Maintaining momentum over the next few months will be critical to project success - 97 - Slide 98: Example Hub Organizational Concept Industry Public Private Development Entity Government Universities - 98 - Slide 99: Key Hub Competencies • Supply Chain Expertise – – Design of supply chain solutions for Industry Monitoring to assure effective implementation of solutions for industry Marketing and communications of supply chain solutions to targeted industry Creation of industry partner communities Collaboration scope is regional, multi-state, and international Stakeholders work together to design, market and implement supply chain solutions Monitor results to assure hub success; Jobs created and value created for industry Design of the regional physical infrastructure footprint for the supply chain hub(s) Pursue funding to finance the infrastructure improvements • Economic Development – – • Collaboration – – – • Grantsmanship – – - 99 - Slide 100: Supply Chain Opportunity Assessment: Next Steps • Identify key public and private stakeholders who will be critical for project implementation • Continue with workshop meetings to implement project findings and recommendations • Identify leader organization and governance to implement the supply chain and economic development strategies • Pilot the implementation of the strategy by designing and implementing a supply chain solution for an industry - 100 - Slide 101: Summary: Supply Chain Hub Strategy Strategy and SCM Strategy Elements Industries offering Value Add Potential Economic and Job Creation Impact Economic Development - 101 -