Supply Chain Houston: The Case for Logistics in the Bayou City

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March 2, 2017

This is the first in a two-part series exploring factors that make Houston a compelling destination for warehouse, distribution and fulfillment centers, and what each of Houston’s top industrial submarkets have to offer developers and end-users from a supply chain perspective.

Supply chain importance intensifies

Increasing transportation costs, the rising importance of sustainability goals and more demanding service requirements are pushing companies to be closer to their customers. However, navigating a supply chain from strategy through implementation can be complex and difficult. Given that as much as 80 percent of operating costs are in logistics – freight, labor and inventory – it is critical for businesses to have a deep understanding of the supply chain.

The case for Houston

With a large and growing population and as a major port market for energy, commodities, breakbulk and increasingly container product, Houston presents a compelling case as an important link in companies’ supply chains. According to the U.S. Census Bureau, Houston is the fourth most populous city in the U.S. and has a population of approximately 6.6 million people in its metro area. Furthermore, Houston is expected to grow by approximately 9.2 percent over the next five years. While Houston is home to a large population itself, its population catchment area makes it a strategic distribution location for reaching a significant portion of U.S. consumers.

One of Houston’s key competitive advantages is its world-class port. The Port of Houston consistently ranks first in the U.S. for foreign waterborne tonnage. It’s also the largest Gulf Coast container port and the nation’s leading breakbulk port, handling 65 percent of all major U.S. project cargo.

In addition to its port, Houston boasts an expansive and developing network of multimodal transportation infrastructure, which currently includes three Class 1 railways, 1,400 major truck firms and 16 intrastate and interstate highways that network from Houston for a total of 575.4 miles of highways and expressways. The multimodal nature of Houston’s transportation infrastructure gives the city capacity to support larger regional distribution centers, as well as fulfillment centers focused on supporting increased demand from e-commerce.

Relative to other distribution hubs such as Southern California and the New York/New Jersey metro area, Houston provides a beneficial business operating environment with no corporate or personal income tax, low government regulation and a generally low cost of doing business. Furthermore, the city’s diverse, educated and growing population create an excellent labor environment.

With all of this in mind, Houston has emerged as a market to watch in major U.S. and global supply chains. But with supply chain networks facing challenges like never before, picking the right location to pin a logistics strategy to the ground is more and more complex. Compounding the complexity of site selection is that supply chains are far from “one size fits all.” Just within Houston, companies are faced with site selection decisions that could drastically impact their distribution and logistics strategies. For more information about Houston’s top industrial submarkets, tune in next week for the second post in this two-part series.

For more on how population growth and consumer goods are impacting Houston’s industrial market, click here.

Sources: JLL Research, Greater Houston Partnership, U.S. Census Bureau, Port of Houston Authority

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