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Background

Importance

Logistics and distribution is a significant part of the ever increasing service sector of the US economy. At $1.3 trillion in 2006, it represents 9.9% of the US gross domestic product and is four times that size worldwide. Many sectors of the logistics and distribution economy are exploding.

US companies in the third party logistics (3PL) business had revenues exceeding $100 billion in 2005. This industry alone has seen 14% annual growth (compounded) since 1996. According to IBM's Vice-President of On-demand Innovation Services, "Marketplace trends are driving fundamental changes in the current business environment. Traditional company value chains and business models must be dramatically transformed, decisions must be made dynamically, and business processes must be able to quickly adapt to execute those decisions. Organizations must be designed to respond immediately to unpredictable economic fluctuations ".

To support its worldwide missions during times of war and peace, the U.S. Department of Defense (DoD) operates the largest and most complex logistics and distribution system in the world. In fiscal year 2005, the Defense Logistics Agency (DLA) was responsible for moving and providing goods and services worth almost $32 billion throughout the world. These goods were required for peacetime and wartime military operations as well as humanitarian missions and emergency preparedness and include: food, clothing, medical supplies, weapon systems, repair parts, and other items required for humanitarian missions. So that public funds are utilized and managed most efficiently and services are provided most effectively, the DLA continuously seeks ways and means to reduce costs and improve delivery times in its operations.


Logistics in Louisville

Since the early 1800's, the growth of the city of Louisville and to a large extent Kentucky, has been closely tied to logistics and distribution.In many ways, the city of Louisville owes its existence and growth to the Falls of the Ohio River. Because river boats which transported goods up and down the Ohio river in both directions could not navigate the 26 feet drop in elevation occurring over two and a half miles (called the water falls, but in reality these are cascading rapids), the goods had to be off-loaded from downstream boats and loaded on to upstream boats and vice-versa. River boats brought goods down-river from northern and up-river from southern states, and essentially exchanged them at the falls through use of the wharfs and warehouses located on the banks of the Ohio in Louisville. This led to construction of wharfs and warehouses to store the goods exchanged between the upstream and downstream boats, which eventually led to the expansion of the city.   

Riverboat

 

Ewing Diary

Riverboat

 

Ewing Diary

 

UPS Jets

 

 

UPS Jets

 

River boats were gradually replaced by trains with the growth and development of the extensive railroad infrastructure in the U. S. in the late 19th and early 20th centuries. Due to its central location, Louisville became a nexus for many railroad lines. Thus, Louisville not only kept its position as a major logistics and distribution hub, but also began expanding as a major manufacturing and industrial center. In the 1950's, the development of interstate highways greatly facilitated the movement of goods by truck, so much so that rail and river transportation systems lost market share. However, Louisville was again fortunate to lie at the intersection of three major interstate highways. Attracted by the resources at Louisville and its geographical location, United Parcel Service (UPS) built its airline operations headquarters in Louisville and underwent a billion dollar expansion that resulted in the Worldport (worldwide air hub). UPS is expanding again with a second, one billion dollar investment that is expected to result in a 3,000,000 square-feet facility.

 

The synergy of all of these modes of transportation continue to attract manufacturing and service companies to Louisville that depend upon logistics and distribution services as the lifeblood of their businesses. A high percentage of existing enterprises, as well as those investigating relocation in the region, must rely upon a strong, dependable logistics and distribution system.

Greater Louisville, Inc. (the Chamber of Commerce) has identified logistics and distribution as an economic growth niche for the metropolitan area. Consider these trends:

  • The greater Kentuckiana region surrounding Louisville is also referred to as the "auto alley" due to the fact that 10% of the cars and trucks sold in the US are produced in and around Louisville. Many auto suppliers for the Toyota, Corvette, Ford and other area assembly plants are also located in the vicinity.
  • Louisville itself is a major metropolitan city within 600 miles of two-thirds of the US population and considered an important logistics hub.
  • Increased transportation expected along the Mississippi and Ohio rivers as well as the interstate highway networks attributable to the logistics and distribution of alternate fuels (ethanol, biodiesel, etc.), pharmaceuticals, autoparts and materials for the aluminum industry.
  • Goods are produced in the midwest but an overwhelming majority is shipped to the US coasts. One in eight consumers in the US are in California. Louisville is ideally suited as a manufacturing, consolidation and distribution hub for the goods.
  • Increased congestion in transportation networks in general, but particularly in the Kentuckiana region, and the opportunities this presents for increasing transport efficiency and transportation throughput at current or slightly expanded capacity levels.

In response to the economic thrust, the University of Louisville has formed the Logistics and Distribution Institute (LoDI) to support the vision by engaging in research, teaching and problem solving relating to logistics and distribution.

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