Delivering the Goods : Moving Merchandise Is Shaping Up to Be a Hot Southland Industry
Logistics, a word borrowed from military supply lines, is now the name of a fast-growing business that is already a major employer in Southern California and one of its premier industries for the future.
Logistics describes the combination of trucking, warehousing, freight forwarding, customs brokering and distribution that now employs 157,530 people in the region’s six counties.
It is the business of Weber Distribution of Santa Fe Springs, a 73-year-old warehousing company that has gone from $4 million to $50 million in revenue and from 200 to 500 employees by taking increased responsibility for the transportation, warehousing and distribution to retailers of such products as Kellogg’s Corn Flakes and Eveready batteries.
“Eveready entrusts its batteries to us, and we see to it that they are shipped to retailers as needed,” says Nicholas Weber, the company’s president and the third generation of his family to head the company.
The difference between today’s warehousing and that of Weber’s father and grandfather is that sophisticated information systems--electronic data interchange, intranet computer linkages--allow shippers, customers and Weber to constantly monitor inventories and deliveries.
Logistics reflects the way the world is moving. The increased involvement of U.S. companies in international trade has created a growing demand for distribution services.
“Major companies tell you to take their product from a factory in Malaysia to a customer’s door in the city of Industry, and they don’t want to hear about your problems. But they do want accurate inventory reports, schedules of shipping and constant communication with you,” says Michael Robinson, vice president of Kintetsu Intermodal, a Carson-based subsidiary of a Japanese freight forwarder that is one of the world’s largest logistics companies.
“If you don’t have the capital to provide all those services, you lose ground,” adds Robinson, who runs a warehouse that receives consumer electronics goods from Asia and from Tijuana, and ships them on.
Indeed, those demands for capital and computer systems are driving traditional warehouse operators and freight forwarders to sell their businesses and retire. Major investors see opportunity. Los Angeles investor William Simon Jr.’s family company, along with well-heeled investment partners, last year bought Bekins Co., the residential mover, and LEP International, a freight forwarder, and combined them into a new company, International Logistics.
The aim was not residential moving but the shepherding of “high-value goods,” says Simon, who predicts that the logistics industry will grow 21% annually for the next few years and become a $500-billion global business.
“It’s already a $250-billion business,” says Daniel Kuzdzal, a director of global accounts for Fritz Cos., which has major warehouse facilities in Carson and Redondo Beach. San Francisco-based Fritz is the nation’s largest customs broker, with 430 offices worldwide. But since 1988 it has plunged into warehousing and distribution, acquiring 50 other companies and ballooning its work force to 8,000 employees and its revenue to $1 billion.
Fritz has suffered losses and inevitable growing pains, but it had no choice.
“If a customer asks you to provide transport and warehousing and you say that you only provide customs brokering, somebody else will soon take your customer,” says Jim Fitzhugh, Southern California regional manager for Fritz.
The global supply line that Fritz provides for Sears, Roebuck & Co. illustrates why logistics is an industry with a future. Sears decided that it would help move the merchandise it imports from Asia if cartons and even containers were bar-coded with information on the contents. So now Fritz takes control of bar-coded containers in China and Hong Kong, brings them through the ports of Los Angeles and Long Beach, into and through its warehouse in Carson and on to Sears’ nine distribution centers nationwide.
The system was set up by Sears Executive Vice President for Logistics William G. “Gus” Pagonis, who happens to be the now-retired Army general who set up supply lines for the Gulf War. The system saves Sears an estimated $1 billion a year, by cutting out handlers, forwarders and whole shipping departments. Logistics can be downsizing on a grand scale, and it will grow as an industry because it represents big money.
Yes, but why will Southern California benefit from that growth? For several reasons. First among them is its huge local market.
“Some 60% of everything that is shipped here stays here,” says Weber of Weber Distribution. So it is economical for shippers to use the region as a distribution center.
Even today the number of local jobs created by logistics is nearing totals once associated with aerospace or even the current leader, entertainment. To be sure, many traditional warehouse jobs are low-wage. But as customer demands for intelligent services grow, the general level of wages and benefits in the logistics business will rise as well.
The region’s major advantage lies in the ports of Los Angeles and Long Beach and its complex of airports.
“The area has deep-water harbors and it’s on the Pacific Rim,” notes a logistics expert.
But business is never automatic. To succeed, local companies have to muster the will to make investments in information systems, as Weber Distribution, Fritz, William Simon and others have done.
At Fritz, Lynn Fritz, now chairman, bought out his brother’s and sister’s interest in the family company because they were reluctant to make the needed investments in logistics. Kintetsu Intermodal intends to go public in 1999 to raise the needed capital.
What those companies share is a vision of the growth of logistics, and of Southern California--once the edge of a continent--as a distribution center for the world.
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Distributing the Work
A look at the number of firms and employees involved in logistics-related industries in six Southland counties:
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Firms Employees Los Angeles County Trucking and warehousing 2,800 52,000 Air transportation 483 39,000 Water transportation 158 8,100 Freight arrangements/services 472 1,100 Orange County Trucking and warehousing 694 13,400 Air transportation 91 7,000 Water transportation 29 300 Freight arrangements/services 90 800 Riverside / San Bernardino counties Trucking and warehousing 1,053 18,000 Air transportation 98 2,400 Freight services 279 1,400 San Diego County Trucking and warehousing 651 6,500 Air transportation 111 3,700 Water transportation 51 600 Freight services 114 700 Ventura County Trucking and warehousing 217 2,200 Water transportation 20 200 Freight services 10 130
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Sources: Commerce Department; Economic Development Corp. of Los Angeles County
