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The strategy calls for capitalizing on the existing infrastructure and assets, as well as the location of the region, to build the area into a supply chain hub. The author's of the strategy believe that the region can offer shippers and companies a high level of value in designing and routing their supply chains in the region.
The region has long been a leader in manufacturing, which has led to a strong supply chain presence, and it is strategically situated on the U.S. Canadian border and is the busiest international border crossing. Furthermore, many of the assets are already in place, including air, rail, truck and water capabilities and a highly skilled workforce.
Three Phases
The study, sponsored by the New Economy Initiative for Southeast Michigan, lays out the benefits and an initial strategy to turn the Detroit area into a supply chain hub, with a collection of smaller supply chain facilities to help facilitate intermodal transportation of goods (air to rail, rail to truck, etc.). The six-month study looked at greater Southeast Michigan, Southwest Ontario and Northwest Ohio in developing the recommendations.
The supply chain management strategy involves developing three essential components. The first is to build differentiated hubs that can attract industry activity to stimulate economic growth and job creation. The second is to attract industries to the supply chain hub to build economies of scale. The third is to facilitate hub development through private/public sector partnerships.
The study identified the targeted industry sectors for the supply chain hub based on the potential for uniqueness of capability, economic development and job creation within the industry sector and potential sector growth opportunity. Twelve industry sectors were identified, and these sectors were then grouped into three major clusters, focusing on heavy manufacturing, light manufacturing and distribution.
"According to the models we've developed for the region, by focusing on light and heavy manufacturing and distribution centers, we stand to gain upwards of 66,000 jobs, increasing economic activity by $10 billion annually," said David Closs, a professor at Michigan State University and co-author of the study. "However, to achieve the job growth and increased economic activity, the region must refine some economic and regulatory policies and enhance communications regarding the unique capabilities the region offers each of the strategic elements."
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According to Closs, the unique benefits that the region offers include the 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"; and supply chain sustainability.
"The region's unique location and capabilities make it a very attractive location to develop into one of the world's leading international logistics and supply chain hubs," said Melissa Roy, senior director of the Detroit Regional Chamber. "In addition to the geographic advantages, our area has a highly-skilled workforce as well as the infrastructure and assets in place to become a leader in the global supply chain. By leveraging this position, companies can increase the speed of moving goods while decreasing cost across multiple modes of transport: air, sea, rail and truck."
The study found that strategically, the Detroit region is well positioned to grow its supply chain presence and offers business many benefits, including:
- Good potential for a cross-border distribution hub away from Chicago-Toronto congestion;
- Good potential for trans-loading heavy imports from Halifax, Nova Scotia, Montreal or Prince Rupert in Vancouver for import from ocean ports with less congestion to the US;
- Good airport and highway infrastructure with limited congestion;
- Economic competitiveness and lowest total cost to serve;
- Highly skilled, readily available management and labor talent;
- Land and facilities readily available;
- Relatively inexpensive outbound motor carrier capacity.
Supply Chain Expertise as Selling Point
"Supply chain hubs begin as high activity transportation centers where freight is brought in from domestic and international locations and shifted from one transportation mode to another, such as water to rail, rail to truck, or air to truck, to complete efficient delivery to manufacturers, retailers and consumers," said Closs. "As the hubs develop, activities such as warehousing, inventory management and light manufacturing begin to occur as a result of the convenience of locating near major freight hubs. Eventually, management expertise is necessary to guide, integrate and synchronize these activities across firms, region and globe."
Supply chain expertise has become a selling point among many North American cities due to the significant economic potential. Based on research at Michigan State University, the economic multiplier for supply chain activities ranges from 1.8 to 3.0.
For example, Memphis and Louisville have developed substantial economic activities using the supply chain solution capabilities of FedEX and United Parcel Service. Chicago, Columbus, Kansas City and Indianapolis have similarly used their cross-road locations from a highway and rail perspective to develop a substantial supply chain industry.
