Executive Overview: What Business Leaders Need to Know About Gulf Coast/Inland Ports

Lara L. Sowinski

World Trade

May 1,2007

Historically, Latin American trade has figured prominently for Gulf Coast ports, however, like seaports on the West and East Coasts, it’s Asian trade that’s becoming the big story. Likewise, inland ports are positioning themselves to take on more volume, most of it from Asia, but from Mexico too.

The Port of Houston—the most significant container port along the Gulf Coast—has started operations at its new Bayport Container Terminal (www.portofhouston.com). The first phase of the sorely needed terminal opened in February with 65 acres. Complete build-out of the 1,043-acre terminal is planned for 2017, but officials are prepared to speed up construction if demand is greater than expected.

Ocean carrier CMA CGM (www.cma-cgm.com) has added a new string of 5,100-TEU vessels that will serve the East Asia to Houston trade lane. Bayport currently has a handling capacity of 360,000 TEUs annually, although it will increase to 600,000 TEUs and eventually 2.3 million TEUs.

Texas continues to be a magnet for trade and development because of its growing population. It’s the second most populous state after California and its population is forecast to double to over 50 million by 2040. Big box retailers have established numerous distribution centers in the Houston area, although similar growth is happening throughout the state.

AllianceTexas still a forerunner

The AllianceTexas (www.alliancetexas.com) mixed-use, master-planned development in North Fort Worth was conceived just over 17 years ago as the world’s first purely industrial airport, explains Dave Pelletier, Director, Corporate Communications, Hillwood, the real estate company that developed AllianceTexas.

FedEx has one of their three primary sorting hubs there, while American Airlines runs a major maintenance facility in AllianceTexas for their Boeing 777s and Bell Helicopter uses the locations for sales and pilot training.

The 17,000-acre development is only about 40 percent built out, says Pelletier; that leaves plenty of space to accommodate growing trade.

“We are continuing to develop as a major distribution and logistics hub,” says Pelletier, “and this year we’re undergoing our most aggressive speculative building campaign to date. We’re building about 2 million square feet of spec space, which will be in about six buildings.”

Most of the goods coming into AllianceTexas are from Asia, primarily China, which enter through Los Angeles-Long Beach then are moved by BNSF (www.bnsf.com) rail to the intermodal yard at the development. From there, “goods are transported either to the distribution centers within the development or to other facilities within about a day’s drive, which is the normal distribution pattern for most companies here,” Pelletier explains.

“The intermodal yard is the biggest attraction to the development,” he adds. “It’s currently handling about 600,000 lifts per year, but we’re expanding to handle 1 million lifts by 2010-11. Companies see the benefit of being close to the intermodal yard in order to save trucking costs typically associated with having to move containers from a rail facility to your warehouse. J.C. Penney has a 1.2 million square foot distribution center here and they save a lot of money on trucking costs because they’re located right next to the intermodal yard.”

Both BNSF and UP (www.up.com) railroads are at AllianceTexas. “UP has a major north-south line on the east side of the development, and while they don’t have an intermodal yard, they do rail-serve about a half dozen facilities in the development. They’re able to pull the rail car right up to the door of the facility and off-load. General Mills, Behr, GM, and DSC Logistics (www.dsclogistics.com) are some of the companies that use this service,” Pelletier says.

Not only is the intermodal yard a big draw, “but we also have foreign trade zone status at AllianceTexas. In addition, there’s Interstate 35, which is a major corridor from Canada through the U.S. all the way down to Mexico, and the Fort Worth Alliance Airport. Companies can take advantage of three transportation modes, which results in tremendous efficiency in operations as well as cost savings.”

Aside from the intermodal yard and multiple transportation options, the development also boasts state-of-the-art warehouses. Tony Creme, Marketing Manager for Hillwood, notes that, “most companies today are looking for on-site trailer storage. We’re building 2 million square feet of speculative industrial space this year, and every one of the buildings has additional land for trailer parking across from the dock doors. Clients are also asking for higher ceilings. Most of the buildings we’re constructing this year will have 32-foot clearances or higher. They’re also going to be bigger. Our standard spec building used to be around 400,000 square feet. This year, two of the buildings will be 472,000 and 562,000 square feet.”

To improve velocity, companies also want “the number of dock doors to be maxed out,” says Creme, “they want as many as possible to maintain velocity, which goes hand-in-hand with more sophisticated warehouses and more sophisticated WMS systems. The quicker pace also makes it more important to have trailer storage space right outside the dock door so trailers are ready to back up to the building. Companies are turning inventory quicker than ever before.”

Kansas City makes its move

Although relatively new to the scene compared to AllianceTexas, Kansas City’s SmartPort (www.kcsmartport.com) is going after a lot of the same international trade that’s coming in from Asia and destined for consumer bases in the nation’s interior. And, the advantage of serving multiple corridors with a variety of transportation modes is again a huge selling point.

“Whether the freight comes in from Los Angeles-Long Beach, the Pacific Northwest, the Gulf ports, or from Mexico, there are very strong rail connections to Kansas City,” says Chris Gutierrez, President, Kansas City SmartPort. Given that many companies try to mitigate supply chain disruption by moving product through more than one port when possible, the ability to serve multiple corridors is a definite plus.

“We’re ready to grow,” emphasizes Gutierrez. “At the end of last year, we located three projects: a million square footer, an 800,000 and a 500,000 all build to suit. We definitely have more product coming online and we’ve got the air, rail, and truck infrastructure ability and capacity to handle it.” In addition, three new intermodal developments are in the works. “The BNSF has announced a 1,400-acre intermodal logistics park similar to what they’ve done in Chicago and in AllianceTexas. Current intermodal capacity for BNSF is about 350,000 lifts, but this new facility will expand that to 1.5 million lifts. Next, KC Southern rail (www.kcsouthern.com) has 1,300 acres, which is being developed by CenterPoint (www.centerpoint-prop.com) for a logistics park that will target freight from Mexico. Finally, the Kansas City International Airport (www.flykci.com) is one of the largest available land airports in the country. The airport group controls about 10,000 acres. They’ve selected CB Richard Ellis (www.cbre.com) to develop about 700 acres of that for distribution, either traditional highway or air access. The airport has a designated runway for cargo and it’s very underutilized.”

One initiative that really helps Kansas City SmartPort stand out is the Trade Data Exchange, says Gutierrez. “If you talk to anyone in the supply chain industry, the one issue that’s constantly brought up is ‘visibility.’ No matter who you are—the shipper, carrier, government—everyone wants to know where the product is, how it’s moving, and if it’s secure. Our Trade Data Exchange is a tool to provide that complete supply chain visibility from beginning to end, from purchase order to final delivery. There’s so much data out there, but there’s not a tool to aggregate it into what I call ‘one visibility portal.’ The second part of that, of course, is efficiency, and the byproduct of efficiency and visibility is security.” The system was developed by Plano, Texas-based EDS. “We’ve been recognized by the Department of Homeland Security, Customs and Border Protection, the National Industrial Transportation League (NITL), and others as being ahead of the curve. Through some of the federal funds that SmartPort has secured, we expect to have the Trade Data Exchange up and running by the end of this year.”