Metro Atlanta trucking firms have less to move as retailers cut back

Sixth in a series: The AJC continues its look at how the economic crisis is affecting some of metro Atlanta’s key companies and industries.

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Sara Hopkins/Special

Amber Johnson pulls her gloves on before shifting the gears of the forklift she is driving. She’s about to pick up another load for a trailer that is parked at the Averitt Express loading dock.

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Sara Hopkins/Special

Kent Williams, regional vice president of Averitt Express, leans out of an Averitt truck and stands near the new Atlanta facility, built by the Cookeville, Tenn., logistics company, on Fulton Industrial Boulevard.

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With bright red truck cabs polished and gleaming and its newest and largest terminal in Atlanta, trucking company Averitt Express could be a poster child for the metro area’s distribution industry.

As demand has slowed from retailers and manufacturers, it’s more important than ever for companies to streamline how they get their products and supplies moving efficiently and cheaply.

Cookeville, Tenn.-based Averitt specializes in just that. The company opened its new facility this fall on Fulton Industrial Boulevard in southwest Atlanta, with 123 truck bays, showers and a gym for drivers.

Averitt, which employs 236 there, typically moves retail goods or supplies for big industries, from carmakers to builders. Atlanta-based Home Depot is one of its top customers.

But with retail sales slumping to new lows in November, and economists declaring that the economy has been in a recession for nearly a year, many in the industry have fewer goods to move. Both industry executives and experts said the recession will cause short-term pain.

It can also, however, provide longer-term opportunities.

“We’ve seen a bit of a slowdown. The business has softened,” said Kent Williams, Averitt’s regional vice president. “But we’re focused on continued growth, and we know we have to diversify and try to outperform our competition.”

Averitt’s story is part of what’s become a big business in Atlanta: distribution or its more contemporary and highfalutin name — logistics and supply-chain management.

Atlanta was founded as a “Terminus” for a southeastern railroad and has been building on that heritage ever since. Railroad engineers may not have used the word “logistics” or even heard of “supply chain” when they built the railroad here in the 1830s and 1840s.

But they would have understood what it meant: Engineering the crucial movement of goods, efficiently and cheaply, from one place to another. They also knew that it was the backbone of business.

Fast-forward to 2008: About 120,000 people are employed in the industry that has been a focus of Atlanta Mayor Shirley Franklin’s economic plan and a new initiative by Gov. Sonny Perdue to capitalize on Georgia’s position as the “gateway” to the East Coast.

“One of the definitions I really like for logistics is ‘inventory in motion and at rest,’ ” said Bob Pertierra, vice president of logistics industry development for the Metro Atlanta Chamber of Commerce. “Inventory in motion is making you money. Inventory at rest is costing you money. Tactically moving things is logistics. Managing the whole process is supply-chain management.”

It’s a complicated dance that involves mathematics, geography and business acumen.

It’s Pertierra’s job to travel (three months this year alone), looking for air cargo, trucking and supply-chain technology companies to build their offices and distribution and manufacturing hubs here. This year, he said, deals he worked on brought 1,250 jobs to Atlanta. A new PETCO distribution facility in Braselton, for example, employs 200. And he said he has more “serious” leads this year than at the same time last year.

Companies such as PETCO and Averitt want to be near Atlanta’s massive highway system, the world’s busiest passenger airport, the Savannah and Brunswick ports, and Georgia Tech, which produces highly qualified industrial engineers for logistics companies. There’s also strong consumer demand from the population of metro Atlanta, not to mention companies such as UPS and Home Depot that are supply-chain-centered.

But inherent in a term such as “supply chain” is the presumption that there is demand.

Transportation analyst Ed Wolfe, with Wolfe Research in New York, said all modes of transport have “weakened materially in recent months, suggesting sharply negative gross domestic product during the fourth quarter. Our sense is that shippers are drawing down on any available inventories and delaying shipping decisions [because of] significant economic uncertainty.”

But despite the grim numbers, Wolfe is bullish on the longer term, citing a new Kia automobile plant in West Point that will require raw materials, and, therefore, shippers. If President-elect Barack Obama implements sweeping infrastructure projects, it could help Atlanta’s industry.

“We believe the transports are better positioned than most industries to weather a steep economic decline and to eventually lead the economy back,” Wolfe wrote earlier this month.

As Home Depot CEO Frank Blake has said, a downturn is a terrible thing to waste. While demand is softening, Home Depot and other companies are using the recession to build a better mousetrap for when demand returns. Home Depot will spend $260 million through 2010 on new “rapid deployment centers” and has hired logistics experts, including Office Depot veteran Mark Holifield, to improve its supply chain.

Even though the nearly $80 billion home-improvement chain was founded as a warehouse concept, where the stock was shelved right in the store, that model is outdated and requires too much cash to be locked up in stock.

“Home Depot has about $11 billion in inventory, across its chain worldwide,” Holifield said in September. “That’s an incredible amount of cash.”

Instead of having lots of trucks pull up to individual stores to drop off goods, Home Depot is using regional warehouses to break down shipments into batches for stores. It minimizes trucking costs and creates fewer disturbances at the stores, so that employees will receive one big shipment a day instead of a dozen smaller ones.

And that’s exactly the kind of expertise UPS is profiting from.

Norman Black, a spokesman for the nearly $50 billion company, said that in 1998, UPS changed its charter from being “the best package delivery company in the world,” to “we enable global commerce.”

“That’s a dramatic change,” he said, one that led UPS to go public a year later and to acquire more than 40 supply-chain and freight companies since then.

A decade later, while the domestic market has been soft, UPS has delivered profits from international package delivery and its newest line of business: helping other companies solve supply-chain problems. In the first nine months of 2008, UPS earned 17.6 percent of its revenue from supply chain alone.

Black said it also feeds UPS’ core business, which is delivering packages.

“Literally delivering 15.8 million packages every day and running the ninth-largest airline in the world, we know how to run big networks, a competency that more and more companies need if they’re going to compete around the world.”

And when the markets come back, “and they will come back,” Black said, UPS will be there to help other companies use “supply chain as a critical strategic weapon. … The world is not going to stop trading with each other.”

Meanwhile, Averitt too has expanded to operating supply-chain networks, competing with giants such as UPS.

At the Mercedes SUV plant in Advance, Ala., Averitt has a 400,000-square-foot warehouse one mile from the plant. It receives and stores parts in the sequence they’re put on the cars. When the plant needs an order, it gets them there fast, with deliveries every eight minutes.

“We’re the underdog,” Averitt spokesman Brad Brown said. “We’re smart and flexible. We have to think outside the box. We’ll do just about anything.”