ATLANTA – Trends in economics, consumer behavior, merchandising and regulation are bringing big changes to Georgia, according to experts Tuesday at the Georgia Logistics Summit, as well as some policy challenges.
A steadily growing domestic economy and an emerging middle class abroad means customers for Georgia-made goods, notes Tom Cunningham, economist with the Metro Atlanta Chamber of Commerce.
“What we do is export high-value-added products. As the rest of the world’s income grows, the consumers are shifting to high-value-added products,” he said.
At the same time, U.S. consumers are increasingly shifting toward e-commerce. That’s prompting retailers to develop distribution centers closer to urban areas to shorten delivery times as more companies promise same-day delivery and free shipping, said Curtis Spencer, president of the IMS Worldwide consulting firm.
The Georgia General Assembly changed policy this year by passing House Bill 935 which exempts from local property tax the inventory of e-commerce warehouses. It is awaiting Gov. Nathan Deal’s signature to become law.
“It will definitely make us competitive over other states,” said Jannine Miller, director of the Georgia Center of Innovation for Logistics which is hosting this week’s conference.
Commissioner of Economic Development Chris Carr said e-commerce is a targeted segment of the logistics industry. “If you look as far as the eye can see, e-commerce is critically important,” he said. “We want to be a place companies want to locate and give them every reason to be here. That will help us do that.”
Yet, companies are still building conventional distribution centers to supply stores. More than 60 of them are seeking 1-million-square-foot facilities across the country. “I think Effingham County is about to see a boom with the distribution centers. The distribution center rate is about a 3-4 percent vacancy rate around Savannah right now,” Miller said. Creating challenges for the logistics industry are new federal regulations requiring truckers to log their hours behind the wheel electronically, which some observers fear will shrink some capacity and create freight delays.
Also, the U.S. Customs Service just instituted new online tracking of imports that is resulting in added penalties and fines, according to Rhett Willis, president of Savannah-based DJ Powers Co., one of the country’s largest freight brokers. “It has given us five years of headaches and a lot of gray hair,” he said.
Another challenge is the trucker shortage which grew by 10,000 last year, and their average age is 58, Curtis said. Wages rose 17 percent since 2014, and that upward pressure could squeeze profits as retailers promising free shipping to consumers creates downward pressure on logistics firms. Labor contracts on the West Coast have halved the price differential for Asian imports between the two coasts, making the all-water routes to Savannah and Brunswick more competitive, he said.
“Hurray for Georgia ports because this is going to raise the boat,” he said.
Georgia has addressed the trucker shortage by offering free training at technical colleges.
And over all, the state has tried to accommodate the shipping industry by adding $1 billion yearly to road improvements as a result of last year’s transportation-funding bill. And it’s been a leader in taking advantage of a new federal highway bill that targets freight corridors. “Between funding the expansion of the Port of Savannah and the world-leading airport in Atlanta, Georgia has recognized that logistics is very important to the state, and we want the industry to know that we know that,” Carr said.
