Kristina Slattery
Kristina Slattery
Business Development

Kentucky Cabinet for Economic Development

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Kentucky is ready to anchor post-covid supply chain

The coronavirus pandemic has forced industry leaders to rethink their supply chain and logistics strategies. The crisis may accelerate a trend toward localization, with industries choosing to go local for local

The past few months challenged companies in ways they likely never endured before. The COVID-19 outbreak created work stoppages, cash-flow concerns, supply issues, canceled orders, uncertainty and other problems in abundance. One industry that stepped up in a major way has been distribution and logistics, and Kentucky has been at the center of those efforts.

For consumers, online ordering and home delivery quickly became the go-to method during this crisis, both in terms of usage frequency and for a broader range of goods. That appears likely to continue post-COVID as part of the new normal. E-commerce has been a major factor in the industry's growth for the past 20 years, as online shopping became an integral part modern life. In 2000, e-commerce accounted for less than 1 percent of all retail sales. Fast forward to 2019 and that number climbed to more than 11 percent. As more consumers relied on online ordering out of necessity in recent months, e-commerce's share of the market has risen to unprecedented levels.

For Kentucky, with more than 540 logistics and distribution facilities and about 75,000 full-time jobs in the industry, that creates both near- and longer-term opportunities.

Near term, as logistics and distribution companies reorient to ensure worker safety, they are both paying more and seeking new employees. Recent corporate announcements serve as evidence.

In the longer term, a growing reliance on overnight shipping and an increased role for the industry overall could further help Kentucky compete for manufacturers looking to onshore.

Kentucky's logistics and distribution industry has long served as an economic development lighthouse-particularly in recruiting manufacturing and service-related businesses reliant on global overnight shipping. As well, the industry long stood as a major factor in decisions by many existing companies to expand in Kentucky.

Thanks to UPS, DHL and Amazon Air shipping hubs, Kentucky is fast becoming the nation's No. 1 air cargo state. Amazon itself operates nearly a dozen fulfillment centers throughout the central part of the state and Kentucky has more Amazon employees than any other state save the company's home state of Washington.

And, Kentucky is home to hundreds of small and mid-size logistics companies that are by nature nimble and responsive to market and demand shifts. Given those strengths and foreseeable post-pandemic changes in both consumer behavior and how businesses operate, the industry in Kentucky is well-positioned for success.

Long before the industry was thrust to the forefront by the recent global crisis, the Commonwealth of Kentucky recognized the importance of logistics and its role in keeping the country connected.

Since 2014, distribution and logistics companies alone have announced plans to invest more than $4.7 billion and create nearly 15,000 full-time jobs. Those numbers trended upwards in recent years, as companies announced over $3.2 billion in investment and more than 9,000 new jobs since the start of 2017.

Consider the exponential impact distribution growth has had on the expansion of manufacturing across the state, and it's easy to see the industry is a significant factor in the $31.6 billion invested and 89,000 jobs announced across all industries since 2014.

Kentucky is an ideal location for logistics companies of any size, as highlighted by a number of recent announcements.

Amazon's announcement of its air hub in January 2017 gets much of the attention, and understandably so with an investment of nearly $1.5 billion expected to create 2,700 full-time jobs at the Cincinnati/Northern Kentucky International Airport in Hebron. Many attuned in to the industry likely also recall the September 2019 announcement that UPS will invest $750 million and create 1,000 full-time jobs in support of its Worldport air cargo hub and Centennial Ground hub in Louisville.

But the commonwealth's logistics prowess extends far beyond those global shipping giants. In 2018, ecommerce company announced a 400-job project in Shepherdsville while Kroger made its intentions known to create almost 200 distribution positions in Northern Kentucky.

From Taz Trucking, a family owned company that announced 25 new jobs in late 2018, to PACCAR Inc., a Fortune 500 company that in 2019 announced 82 new jobs with a $52 million investment in Louisville, distribution and logistics companies continue to find success throughout the commonwealth.

Kentucky's role as a major national player in the distribution and logistics industry stems from its ideal geographic location. Kentucky's borders lie within 600 miles/1000 km of more than two-thirds of the nation's population, personal income and manufacturing operations. That's less than a day's drive. At the center of a 34-state distribution area in the eastern U.S., businesses that currently ship from Kentucky are well aware the state's geographic advantages can't be matched.

In Kentucky, 20 interstates and controlled-access parkways provide effective and efficient highway infrastructure. With 2,760 rail miles, Kentucky is a main-line center for CSX, Canadian National and Norfolk Southern, as well as for regional and local networks of shortline railroads and intermodal freight facilities. Kentucky boasts 11 active or developing riverports and 1,600-plus miles of commercially navigable waterways.

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