Logistics industry keeps metro Atlanta running

September 19, 2014 - Suwanee - Using a wrist mounted bar code reader, Kyle Kelly readies a shipment from the healthcare distribution center in Suwanee. UPS does logistics for healthcare companies at its facility in Suwanee, and other companies including Pratt & Whitney at its distribution center near Hartsfield Jackson Airport. Logistics is the engine humming behind much of Atlanta’s economic activity connected to the rest of the world. It’s the backbone for a globalized economy, and Sandy Springs-based UPS, Atlanta-based Manhattan Associates and other local companies play leading roles in the industry. BOB ANDRES / BANDRES@AJC.COM
September 19, 2014 - Suwanee - Using a wrist mounted bar code reader, Kyle Kelly readies a shipment from the healthcare distribution center in Suwanee. UPS does logistics for healthcare companies at its facility in Suwanee, and other companies including Pratt & Whitney at its distribution center near Hartsfield Jackson Airport. Logistics is the engine humming behind much of Atlanta’s economic activity connected to the rest of the world. It’s the backbone for a globalized economy, and Sandy Springs-based UPS, Atlanta-based Manhattan Associates and other local companies play leading roles in the industry. BOB ANDRES / BANDRES@AJC.COM

Credit: Bob Andres

Credit: Bob Andres

In a sprawling warehouse near the world’s busiest airport, UPS workers carefully select commercial printer parts from a series of bins, then package them up for customers who need printers repaired. Elsewhere in the UPS facility, employees meticulously inspect airplane engine parts and compare them to blueprints before they are placed on shelves.

Pamela Mathen, a UPS quality inspector in the distribution center — operated for Pratt & Whitney — is responsible for making sure the aircraft parts are free of defects. Pratt & Whitney outsources the operation of its warehouse to UPS.

“We know if we fail to do our job, it could potentially cost some people’s lives,” Mathen says.

The work, run by the shipping company known for its brown trucks, goes well beyond delivering packages. The facility where Mathen works is part of Sandy Springs-based UPS’s Supply Chain Solutions business, one of the biggest in metro Atlanta’s logistics and supply chain industry.

This is logistics

Workers in the Pratt & Whitney warehouse make sure customers get the right parts shipped to maintain their aircraft engines. But the logistics industry stretches far beyond any one operation.

It encompasses ships at the Port of Savannah, trucks traversing the highways and cargo planes at Hartsfield-Jackson, all connected to distribution warehouses around the airport and scattered around the region. It’s how shoppers get a product in their hands, whether it’s a shirt ordered online or a gallon of milk purchased in a store.

Logistics and supply chain management, the backbone of a globalized economy, is one of metro Atlanta’s largest industries.

Atlanta has its roots in logistics, and was once called Terminus because of its founding as a railroad hub.

“At the end of the day, it’s about moving products to customers,” said Page Siplon, executive director of Georgia’s Center of Innovation for Logistics. Metro Atlanta’s logistics infrastructure helps attract businesses to the state, he said.

There’s no one part of logistics where metro Atlanta truly dominates. Chicago is the leading rail hub. The Port of Los Angeles as a gateway to Asia is the biggest U.S. port. Memphis and Louisville have larger air freight operations with FedEx and UPS hubs, respectively.

But Georgia has quite a bit of everything, including the world’s busiest passenger airport, the fastest-growing port in the country and headquarters of major logistics providers and users, Siplon said.

“I would challenge you to look at another state or pick another city that is as complete as far as logistics goes,” he said.

Businesses from Home Depot to Coca-Cola depend on logistics to get their products to customers. A total of 13,764 companies are enabled by logistics in the region including Cobb, Clayton, Fulton, Gwinnett, DeKalb and several other counties, according to the Georgia Center of Innovation for Logistics. That’s a total of 289,864 jobs.

A growth industry for Atlanta

Metro Atlanta plays a critical role in the logistics sector nationally. Major players include UPS Supply Chain Solutions and Atlanta-based logistics and supply-chain software firm Manhattan Associates. Georgia Tech’s Supply Chain & Logistics Institute focuses on innovations in logistics.

And new businesses are arriving. Gov. Nathan Deal recently announced that freight brokerage firm TQL would invest $1 million in an Atlanta facility, creating 75 new jobs. Goya Foods opened a 150,000-square-foot distribution center in McDonough this month, supporting operations in Georgia, South Carolina, Tennessee and Alabama.

Perishable products are one of the biggest potential growth areas in logistics for metro Atlanta.

Having the world’s busiest airport helps to position Atlanta as a hub for quickly moving perishables like pharmaceuticals and produce from Florida, Central America and South America by air. The U.S. Department of Agriculture recently started a pilot project with Georgia Ports Authority for the Port of Savannah to handle chilled fruit from South America, which could create even more opportunities.

Another key area for growth in logistics is e-commerce, Siplon said.

Thanks to online shopping, consumers are “much more impatient today” than they were a few years ago, Manhattan Associates chief executive Eddie Capel said. “You decide what you want, and then you say, ‘I want it by 2 p.m. tomorrow.’ ”

In the past, retailers would build 200,000 square-foot stores, Capel said. But today, “they can’t build a store that is big enough to replace a 4.5 inch by 2.5 inch screen in your hands,” he said. “Retail has been changed forever, and it’s a catalyst for growth of our business.” It requires better technology and faster delivery.

The rising role of logistics is driven by an ever-increasing demand for speed in getting items to customers; the continued globalization of the economy that spreads suppliers, manufacturers, distributors and customers around the world; and a constant drive to cut costs.

Outsourced logistics

A growing part of UPS’s business is helping other companies with that web of suppliers, customers and distribution centers. UPS operates warehouses full of inventory and spare parts and integrates them with the company’s expertise in shipping.

Companies like Pratt & Whitney and commercial printer maker Markem Imaje outsource warehousing and logistics to UPS, which operates behind the scenes to connect businesses, their suppliers and their customers.

“Pratt & Whitney — their business is making the best aircraft engines in the world,” said Alan Amling, director of global logistics and distribution marketing with UPS. Yet warehouses and transportation are still critical to their business to get their engines and parts to customers, “so they outsource to UPS.”

It’s not a new idea. Hundreds of contract logistics providers, including big competitors around the world like Exel and Kuehne + Nagel, and other players like Amazon.com are getting into the logistics industry serving small businesses.

As UPS carves out a greater presence, it brings in billions from areas beyond its package business.

Along the way, the company has gained expertise in techniques like precisely counting out bolts using a tray with numbered indentations called a “poka-yoke” after the Japanese term for mistake-proofing.

UPS’s clients can benefit from economies of scale by using just part of a warehouse shared with other UPS clients, with technology that links their inventory data to their ordering system.

UPS can also offer those clients space in multiple locations. That enables a business to store products or parts in enough locations to get them anywhere quickly.

A company that sells MRI machines, for example, may have a service guarantee that if the machine breaks down, it will be repaired within six hours.

“That creates a logistics challenge,” Amling said. “I have to have the parts nearby to fix it.” UPS has 950 locations where manufacturers can store parts in a shared facility, so technicians who repair the equipment can go to a local warehouse to pick up needed parts.

One of the industries with the most complex logistics demands is health care, where getting medical supplies to a hospital or medicine to a patient can be a matter of life and death. It’s a highly regulated industry, and what’s more, many medications and medical supplies must be kept refrigerated or frozen while in transit, adding a costly “cold chain” requirement to the equation.

For example, a skin graft material UPS stores near its air hub in Louisville must be kept frozen and can only be exposed to room temperature very briefly. When a hospital orders it late in the evening for a surgery the next morning, UPS can quickly move it from its health care distribution facility to a cargo aircraft down the street to be delivered to the hospital overnight, all while keeping the material frozen.

With health care spending projected to rise, UPS has been heavily focusing on expanding its contract logistics work in the sector and now has 14 health care facilities in the United States, including in Duluth and Suwanee.

At UPS, “our history is all about engineering … precision and efficiency and data and tracking. And all of those things translate incredibly well to the health care supply chain,” said John Menna, who leads UPS’s health care segment. “It was a natural fit for us.”

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