We write often on this blog about economic development, our concern about our troubling economic indicators, and our suggested strategies for improving our trajectory. John Lawrence, a longtime friend who has worked in the trenches on a number of important issues, has ideas of his own. He’s authoring nine posts for us in the next three weeks about economic growth. He’s written more than 30 posts for us in the past, so many of you know him from his previous provocative commentaries. He’s now working as manager of economic development Planning for EDGE. He enjoys having a real conversation, so if you have comments and questions, we hope you will share them with him.
Here’s his second post:
By John Lawrence
For more than 30 years, only logistics has driven market competitiveness. Since 2000, the market has become less competitive as the FedEx growth advantage has diminished. The Metro Memphis area must solidify its position as a leading global logistics market by building on the presence of local rail and water connections, in addition to air cargo.
Logistics Drives This Economy
Despite talk about the music industry, computing technologies and tourism, logistics is what we really do well. Transportation and related services provide 127,000 jobs (20% of regional employment) and $15 billion of economic output (28% of gross metropolitan product). Metro-Memphis is one of the most specialized large logistics economies in the United States, with a concentration nearly four times the national average.
Greater Memphis’s logistics cluster is complex, global and highly service oriented. The cluster looks different here than in many other regions. It includes most of the activities associated with materials movement but also employs more specialized and higher-skilled workers in a diverse set of occupations. The local logistics sector employs 25% more managers than the national average, 56% more production workers and 66% more facilities management workers.
Multi-Modal Network Investments
Metro-Memphis excels at the firm-to-consumer relationship. At the intersection of Interstates 40 and 55, the region is well organized for the movement of goods. World-class freight infrastructure includes the world’s second busiest cargo airport, the fourth largest inland U.S. river port and is one of only five U.S. cities served by five Class-1 railroads.
Investments are reinforcing a commitment to logistics. More than $500 million has been spent by the railroad industry on recent facility improvements. Construction is underway for an outer-loop highway (I-269) around Shelby County that will someday link to the I-69 Canada to Mexico corridor. Planning is underway for a third vehicular bridge over the Mississippi River. And, the Port of Memphis is planning a possible expansion at President’s Island.
Logistics as a Tool vs. an Industry
Metro-Memphis has ridden an extraordinary wave of growth tied almost exclusively to one industry (air freight) and one company (FedEx). As FedEx has matured and started making global investments, the local area performance has flattened.
Today, we must start thinking of logistics less as an industry and more as a tool that supports other industries. We must also think about the changing nature of shipping and our multi-modal strengths to deliver on-time, as opposed to just overnight. The future will depend on how we use that infrastructure, not necessarily by growing the logistics sector for logistics-sake.
But in a globally competitive environment, we have to begin by protecting our logistics assets. Despite the decline in air-freight growth, this region still has unrivalled multi-modal capacity. As places like Atlanta and Louisville publicly and proudly try to stake their claim as growing logistics centers, Metro Memphis needs to take greater command of its assets and the potential they represent.
To do this, we should shift our focus from being the middleman, shipping other people’s things to innovation of high-value goods or production of time-to-market-critical goods that benefit from the shipping expertise we have built. We should shift from describing air, water and rail in isolation to promoting the overall capacity of the world’s most diverse logistics infrastructure. We should understand changing global needs and define the future of logistics in emerging industries like personalized medicine and diagnostic laboratories.
Logistics does not have to mean low-skill, low-wage labor. Specific initiatives in Biologists, Export Planning and Ag-Biosciences could position the region to both grow and use our logistics infrastructure more purposefully. This could then lead to much greater and beneficial expansion of our economy.
The potential to diversify our market could hinge on our ability to attract and build business that needs this infrastructure. A key strategy guiding the Memphis & Shelby County Regional Economic Development Plan will be securing our place in the global logistics network.
Part One: Creating a Process of Economic Transformation
Part Three: Diversifying the Economy Beyond Logistics – Friday (9/27/13)
Part Four: Leveraging Assets for International Trade – Tuesday (10/1/13)
Part Five: Building a New Manufacturing Economy Workforce – Thursday (10/3/13)
Part Six: Organizing for Innovative Entrepreneurial Growth – Monday (10/7/13)
Part Seven: Connecting Jobs, Workers, Institutions & Activity Centers – Wednesday (10/9/13)
Part Eight: Tracking the Market to Understand Emerging Opportunities – Monday (10/14/13)
Part Nine: Prioritizing First-Step Initiatives – Wednesday (10/16/13)
John:
We got this email message so we’re passing it along to you:
Interesting posts.
But it would be great to dig even deeper into logistics sector. Which part of it can be high pay and what does that look like? How big is it? How do we use the logistics capability to become a place that makes things to ship? ( seems like different sets of skills).
Interesting stuff. Eager to read more.
John:
Thanks for this post. I-269 is a boondoggle from almost every point of view, but particularly in its damaging impact to Memphis, which raises the question of the willingness to put cars and trucks ahead of people and that we are willing to sacrifice the economic health of our core city to shave a few minutes off a trip through Memphis. As we’ve written before, I-269 exists as an example of developer influence over Memphis and Shelby County, and it was done over the objections of both city and county mayors at the time.
So, two questions: No need to comment about I-269, but if we had that kind of money to spend where it would have the greatest impact in creating the different kind of higher-wage logistics that you say we can care, where should we spend it?
Also, as you mention, we need to exploit our port. How do you think we can do that and how important is it to achieving a different logistics future?
Thanks for this post. It’s clear that we can’t out-cheap Mexico when it comes to low wages and low costs for old school logistics, so we need to develop even more and own best-in-class skills that add value.
We look forward to the next post on diversifying the economy beyond logistics.
9:55: Friday we will focus on diversifying the market. Expect a few answers there (or at least a conversation starter).
10:12: As mentioned above, a half billion dollars have been spent recently on rail. This is tremendous for connecting our market to international ports on the coasts. The need is to see this be more than a transfer yard for product passing through. A few ideas on the table: 1) the need for linking other modes to rail and 2) linking existing rail to existing/potential manufacturing sites. This way products created here more easily get into this vast system and a market with many modes moves closer to truly multi-modal.
Maintaining the port as it exists today is certainly important to commodities shipping from the area. The problem is… what is our position in the future. With a small exception, all of the harbor-front property on President’s Island is taken. If a manufacturer wanted to be there today, it would be difficult to accommodate. Do we A) improve land nearby and link it to the port with rail, B) try to improve land that is not ready but fronts water, C) dredge a new leg of harbor, D) some combination? How we move product to and through the port is a great (but long term) infrastructure project.
Another aspect to this is the changing nature of Container-On-Barge shipping. We are not positioned to take advantage of this today. Space, facilities and technologies are needed to make this possible.
Side Note: Many others in the community are thinking about this. For example, the new Emerge Memphis CEO (Carlton Crothers), is very interested in Memphis’s unique position as a shipping center. How can we innovate in the fields of freight movement on modes beyond air? How do we transfer containers between modes? How do we revolutionize technology for port infrastructure?
I don’t think people in power understand how most of us are sick of hearing about logistics. A “memphis businessman” wrote this comment a few weeks ago and it really stuck with me because it summed up where a lot of us young professionalsl are at right now — where are the jobs that keep us from moving to Nashville and Atlanta? The comment was —
“Our white collar/professional job growth is virtually non-existent and too many of our job creation efforts seem myopically focused on “new economy” manufacturing, etc., not that those jobs are not needed here, but when downtown office, airport office, and Midtown office space activity is utterly abysmal (the only thriving office space sub market is East Memphis), it should tell you that we are headed in a singular direction of becoming a blue collar town (not for professionals).
“Are we oblivious to the fact that we have lost professional jobs in Pinnacle, Morgan Keegan, FedEx (those are the well-known ones) and before that, Harrah’s and Hilton Hotels Corp., and we continue to invest overwhelmingly in non-professional jobs. Simultaneously, we talk about talent and host events for young professionals saying come back/stay here, but we don’t pursue cultivating entrepreneurs to create local jobs for them nor have we prioritized incentives to lure the type of jobs here that the professional talent gravitates toward.
“I fear that by adopting and vocalizing the blue collar, grit-n-grind, ‘we are gritty and proud’ mantras, we only reinforce the thought process that we are doing the best we can with trading $75-$100,0000/year jobs for $35-$50,000/year jobs. It’s like our ever increasing poverty, education challenges, crime, racial tension, teen mother births, economic inequality, lack of population or economic growth, proximity to other poor counties, political turmoil, urban versus suburban standoffs are all emblematic of our true grit and scrappiness and we wear it like it’s a badge of honor.
“What happened to the city that birthed Holiday Inns, Universal Life Insurance, NBC Bank, First TN, Leader Federal, FedEx, Union Planters, Morgan Keegan, etc.? What major employers have we birthed lately (past 30 years since FedEx)? Are we structured/poised to birth any new ones or will we be solely reliant on the cheap labor/high subsidy job creation model to attract more Electrolux, Mitsubishi, KTG jobs that end up hiring a majority of their workforce from outside of Memphis from surrounding areas? I know there are professionals within these companies and that these companies will do business with local professional service firms, but that is a byproduct and not driven by priority.
“When Nashville’s #1 talent draw pool is Memphis, we have an immense problem.
“We should all be worried. It seems like the mayor should have a jobs czar who pushes the economic development job creation vision that he has for the community and that gives EDGE, Chamber, Brookings, Chairman’s Circle, Memphis Tomorrow, Mid-South Minority Business Council, etc., a specific piece to carry and deliver on, thus creating some degree of alignment with an overall vision and direction versus all of this free-styling, Lone Range initiatives that take up time, attention, money, and end up with unclear, unmeasured, mediocre results at best. Right now, it seems as though it is the flavor of the month rather them responding and aligning with his vision and direction. That’s what scares me most: the competing agendas that end up nowhere.”
Thanks, John, for the elaboration about the port. There’s so much potential there.
We appreciate your writing this series, and a reason that we accepted your kind offer to do it is because in addition to the explaining philosophy and approaches and the conversation it should start, you are telling us about things that have been done that are important to our economic future, like the massive investment in rail.
As we talk about these issues, we need to have a clear context, so thanks for elaborating on the facts behind your comments and the milestones that drive your thinking.
Wanting:
I don’t think you will find anyone who wants fewer highly educated, high skill workers.
Let me add this… we are not even really blue-collar in the traditional sense. We dream about being white collar but we would be lucky to be blue collar. Our market has become twice as concentrated in a small set of clusters. We have lost almost half of our manufacturing jobs since its peek.
Our problem is not that we have become logistics focused or manufacturing focused. Our problem is that the majority of jobs created in this region since 1980 have been in only locally-traded industries… retail, food service, etc. Not in traded-sectors… products and services originating here and being sold elsewhere to bring new economic growth.
A goal of this planning effort is to introduce innovation and production to a market driven almost entirely by distribution and locally traded businesses. If we do this, then the white collar demand grows.
When farmers from the delta brought crops to Front Street, the white collar Memphis commodity trading business was born. Union Planters was born.
Also, we have a distinct skills gap. Yes, we need to keep our brainy young people here. But, what do we do for the 30% of the working age population that never went farther than high school? What do we do for the 25% of the population that started college but never reached an associate’s degree? What do we do for the 200,000 not employed and 90,000 underemployed?
Industry-driven workforce development to deploy our human capital is also a piece of this puzzle.
I will not argue that talent retention and attraction is not important. It is. Regional outmigration is a measure we are all aware of. And providing jobs for medical researchers and sales people and financial services professionals should be a piece of the puzzle. But no matter how many times I’ve called, Bank of America just won’t relocate here (kidding… sort-of).
We’ve got lots of programs aimed at the untrained and people in poverty, so maybe they’re not doing their job. But we use those people to justify tax giveaways and jobs that pay too little. This blog has said over and over that most of the success in the economy is determined by the percentage of people with college degrees. If I understand that right, we’re taking our eye off the ball if our group with college degrees isn’t uppermost in economic plannig. I get the feeling that we’re not and that little being done is about us and that’s why so many of us are always wrestling with whether to move or not.
Eric: What, specifically, should we do to a) create more college edecated people, b) retain college educated people and most importantly c) employ college educated people?
How about developing a real talent retention program, getting really serious about entrepreneurs and venture capital for them, hand out PILOTS for knowledge companies and creative economy jobs, invest in higher quality of life, lower costs at U of M, invest in placemaking all over the city, make Memphis a green city, make all neighborhoods safe, show that government knows how to use technology to improve services so we don’t feel like we’re trapped in the 1980s, an inviting riverfront, city services that look like someone can get the basics right, and I’m sure I can think of more if I give this more time. Make us feel like we really matter and Memphis is fighting to keep us rather than letting us feel like we are just a bullet point in a speech. I remember months ago that SCM asked people for their ideas, but I can’t find that now.
We start by changing the way we talk. I hope I never hear anyone say again, “we’re a blue collar city,” and can’t we tell the Grizzlies to quit saying that. We should quit saying that grit and grind is what Memphis is like, and we definitely should quit saying that Memphis is the next Detroit. Talk about trying to drive away talent. These statements do it every day.
RE: “What, specifically, should we do to a) create more college educated people, b) retain college educated people and most importantly c) employ college educated people?”
As a college educated professional in a service industry position that can be more easily found in vibrant and growing cities such as Nashville and Atlanta, I for one would like to see that Memphis is somehow and in some way improving. I know it sounds superficial, shallow and bit like whining, but d@mn it, living in Memphis- as it is today- is not exactly a reward in and of itself. I need some hope that individual efforts are not being thrown into a bottomless pit and simply forestalling the inevitable. That tomorrow will in fact be better than today. That in the race to provide quality of life, Memphis and the region are not slipping further and further into the back of the pack. Show me why someone should stay when just over the horizon (almost literally) there is a city of similar size and scale that offers the intimacy of Memphis and the ability for involvement that affords while enjoying the economic and social vibrancy of an emerging urban center. Help prove to me that intelligent, innovative and energetic individuals that realize a city is more than a municipal organization from which services are derived are not in fact a minority in this corner of the country. This is not meant to be a slight. I am legitimately searching (grasping) for reasons. Do this and do it on a city wide scale and we might see the exodus slow.
As far as transforming our local economy, I think this song has been played before. It predates me, but it sounds very similar to the tune that gave us the brand “America’s Distribution Center”. We should build up our infrastructure based on our assets as a crossroads- rail, road and water (and eventually planes), tout our low cost of land, our cheap labor, our central location and our balmy climate (our roads are rarely icy unlike our those found in St. Louis and Louisville). Included were political cartoons, editorials and seminars which served to enlighten the public with the idea that once corporations located their distribution centers here and got their feet wet locally –so to speak- that they would soon realize the logic in locating their manufacturing facilities here as well and be rewarded with savings in both time and money.
We all know the disappointing outcome of that approach. My question is how is this approach at an economic any different than the first attempt?
Also, how do we staff the businesses that produce time-to-market-critical goods and are driving innovation within the logistics chain? Simply providing an employment opportunity is not enough- these individuals will actually need to want to live here.