Getting the right product to the right place at the right time – all day, every day.
A new slogan for FedEx?
No. That’s the job description for Mike Berry. But Berry doesn’t work for a manufacturer or a retailer or a logistics specialist or a trucking company, a railroad or an airline. As President of Hillwood Properties, Mike Berry is the number one advocate and dealmaker for AllianceTexas. For those outside the world of supply chain management, Alliance is some place near Fort Worth. For those inside the world of manufacturing, retail, distribution, and logistics, AllianceTexas is one of the most significant inland ports in North America – a place where things get done.
Twenty-three years ago Mike Berry went to work for what might arguably be the best example of a public/private partnership in Texas. As keynote speaker at the 11th Annual TCU Supply and Value Chain Center Conference, Berry observed, “Most folks don’t realize that we have one of the most significant inland ports in North America in AllianceTexas.” Significant might be an understatement.
First Step – The Vision
Three entities – Ross Perot’s Hillwood Properties, Fort Worth Mayor Bob Bolen and the FAA – joined to create the first industrial airport in the U.S. It was 1988 and Texas was reeling from the crash of the savings and loan industry and creating an industrial airport was part of a strategy for growth in North Texas.
In 1988 there was no such thing as an industrial airport. But Berry knew there were a number of big industry players who had told him they would be growing and would need a facility to handle large scale manufacturing and distribution that included a runway. In 18 months, Hillwood had designed the entire project and took the lead role with soft money by funding the environmental work and design, then coordinated with all the public agencies. “We then deeded the land to the city and they in turn deeded it to the FAA as their equity to get the project approved in Washington,” said Berry. The FAA then used discretionary money to get the Alliance runway built.
Second Step – Connect To DFW & BNSF
Hillwood put together land, right-of-way, design, zoning and environmental studies to build a new freeway connecting Alliance at I-35W going east to the DFW airport. “We didn’t see the Alliance industrial airport as a competitor to DFW’s commercial role, but rather compatible,” noted Berry. Berry used the same strategy to get Texas 170 built as the airport project – the private companies funding the initial phase front end costs like land and engineering – then the city taking the package to TXDot in Austin and asking to have the highway built linking all the major pieces of infrastructure together and improving distribution throughout the region.
The last piece of infrastructure was something even Berry didn’t envision at the beginning in their master plan. “To this day,” he said, “it has become the most important piece of transportation infrastructure that has made this project successful as an inland port – BNSF Railway’s intermodal facility.” Intermodal freight ships goods in a container and moves the container from boats to rail cars or trucks without ever handling the freight inside the container during the transfer. BNSF Railway handles over 600,000 container lifts a year in Alliance, largely driven by goods coming in from Asia through the West Coast ports. “Imagine picking up 80 percent of the activity of the Port of Houston and bringing it here and dropping it into our backyard – that’s what we’ve done,” said Berry.
The Route From Asia & Expanding the Panama Canal
As the delivery of products from Asia has grown, so has Alliance. “Our linkage here is to the West Coast and Asia through the port of Long Beach and into Fort Worth,” noted Berry. To illustrate his point about the trade routes and how Alliance fits in, Hillwood and its clients have built the infrastructure of an inland port to play off the way products are moving globally. “Asia has been the primary builder of products and imports for many years,” Berry said. “As Asia continues to push products into the Americas, a large part of those imports land at the West Coast ports.” Part of the strategy in growing the inland port concept is working with BNSF Railways to grow the route from the Long Beach Port to Alliance.
Berry is also looking at how to play the new activity coming through the soon to be expanded Panama Canal, as well as its effect on the Port of Houston. “The Port of Houston will be a huge beneficiary of the opening of the Panama Canal,” said Berry. “The capacity through the canal will double when they finish and we have to position ourselves to know where that product is going and try to take advantage if it does go to the Port of Houston.” Berry expects containers unloaded from Houston will be trucked through to Alliance.
Berry sees the strengths of Alliance as not just the intermodal capability, but also the shipping flexibility provided by air connections and highway connections coupled with the intermodal rail routes.
When it comes to working with clients, Berry says, “We no longer talk about location, or real estate, or bricks and mortar; it’s about total landing costs.” Berry wants to make it easy for businesses looking to consolidate their supply chain strategy and he shared an example of how AT&T can take an order for an iPhone as late as 10 p.m. at their Alliance facility, and deliver it to their California customer the next day.
J.C. Penney is another example. Several years ago J.C. Penney did an analysis of its distribution centers in the U.S. The company was shipping the majority of its large bulk buys from Asia to ten different distribution centers. “After their supply chain analysis, they made a decision to collapse their distribution centers to two – one in California remained open and all the others were collapsed into Alliance, next to the BNSF intermodal hub,” said Berry. “The change was made for cost reasons.”
The Alliance Foreign Trade Zone, number 196, was ranked number one by dollar volume in the country, and has been number one four of the last five years. Merchandise inside an FTZ is not subject to U.S. duty or excise tax and is exempt from state and local taxes; merchandise can remain in a zone indefinitely. A U.S.-based manufacturer can bring foreign-sourced parts or materials into the Alliance FTZ, pay no duty, then put those parts or materials into a finished product also using U.S. parts and Texas labor. When the finished product enters U.S. commerce, the company pays duty only on the value of the foreign non-duty-paid parts.
The other Alliance competitive advantage is a triple freeport tax exemption. In Texas, companies with millions of dollars in inventory are taxed on that inventory. But for inventory held in Alliance for 175 days or less, there is no inventory tax paid to the city of Alliance, Tarrant County or the local school district.
Future Trends in Manufacturing & Logistics
Berry smiled as he talked about a recent Wall Street Journal article on transportation costs and re-shoring where companies like Levi Strauss are returning their manufacturing from Asia to Central and South America. Levi Strauss now sources from a factory in Honduras and has cut ship time to the U.S. from 27 days from China to six days from Honduras. With an upward wage pressure in Asia pushing wages closer to those in the U.S., the cost advantage for China is now down to 16 percent.
And then there’s General Electric. In Alliance, GE is now building a 950,000 square foot locomotive manufacturing facility. “Right after that announcement, GE announced they were going to move their mining equipment division right next door to take advantage of our infrastructure,” said Berry. “Plus, they have the rail they need right next to their complex. There are 18,000 parts that go into the manufacturing of a locomotive – can you imagine the challenges to get everything here in time? When a company like GE makes an investment like that, it’s a good sign for supply chain in North Texas.”
The keynote presentation was sponsored by:
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