©2009 vital economy, inc. vital economy alliance initial market assessment transportation...
TRANSCRIPT
©2009 ViTAL Economy, Inc.
ViTAL Economy Alliance ViTAL Economy Alliance
Initial Market Assessment
Transportation Distribution and Logistics Cluster
— 2 —©2009 ViTAL Economy, Inc.
Industry Life Cycle: Five Stages
EmbryonicEmbryonic
IntroductionIntroduction
GrowthGrowth
Maturity Maturity
DeclineDecline
Embryonic: An entrepreneur struggles to make the transition from idea to working concept.
Embryonic: An entrepreneur struggles to make the transition from idea to working concept.
Introduction: New, unique offering developed and patented. Focused on small group of customers.
Introduction: New, unique offering developed and patented. Focused on small group of customers.
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22
Growth: Market demand grows as the product is accepted. Significant funds required to increase the scale of production. Economies of scale increase; costs decrease. More new entrants join the industry; competition intensifies.
Growth: Market demand grows as the product is accepted. Significant funds required to increase the scale of production. Economies of scale increase; costs decrease. More new entrants join the industry; competition intensifies.
Maturity: Growth slows. Industry dominated by a few large companies. Few new product innovations.
Maturity: Growth slows. Industry dominated by a few large companies. Few new product innovations.
Decline: Sales decreasing at an accelerating rate. Mergers and consolidations may occur in an effort to remain competitive and maintain profits.
Decline: Sales decreasing at an accelerating rate. Mergers and consolidations may occur in an effort to remain competitive and maintain profits.
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55Container on Barge
Container on Barge
Distribution CentersDistribution Centers
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Evaluating Cluster Potential
Maximizing Economic Development PotentialMaximizing Economic Development Potential
INDIGENOUSCOMPETITIVEADVANTAGE
•People•Location• Indigenous Assets• Infrastructure•Technology
MARKET ATTRACTIVENESS
Low High
Low
HighHigh
PotentialClusters
Clusters that leverage indigenous competitive advantage x high market attractiveness create sustainable economic development
Clusters that leverage indigenous competitive advantage x high market attractiveness create sustainable economic development
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Comments on Transport Developments
Transport industry typically reorganizes during recessions to reduce costs, increase services
Unclear how future will look Observations
Fuel costs will encourage transport by energy efficient modes – rail and marine
International through regional connectivity will be a competitive advantage
The South Atlantic and Gulf will increase in importance as transportation gateways to the US
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Examples of Opportunities for SI
Distribution CentersDistribution Centers
Distribution Centers growing throughout Mid West. Responding to new Supply Chain management approaches.
Distribution Centers growing throughout Mid West. Responding to new Supply Chain management approaches.
Short-line RailShort-line Rail
Short-line rail has expanded since rail deregulation. Many business inquires in SI related to rail access.
Short-line rail has expanded since rail deregulation. Many business inquires in SI related to rail access.
River TerminalsRiver Terminals
High energy costs making marine transport attractive. Container on barge developing.
High energy costs making marine transport attractive. Container on barge developing.
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Life Cycle Consideration
The niches in the business life cycle Short-Line Railroads
Over 500 short-line and regional railroads in U.S., including 17 in Illinois
Industry has grown substantially since rail deregulation in 1980 as Class I Railroads abandoned or sold off much of their mainline trackage
Increasing fuel and road maintenance costs for truck transport lead short-line railroads to be increasingly competitive for short haul traffic
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Cluster Scale: Will it Contribute to SI’s Goals?
Short-Line Railroads Examples of companies
Shawnee Terminal Railway Vandalia Railroad Decatur Junction Railroad
Average short line RR in the U.S. operates 85 miles of track and employs 36 workers (American Short Line Railroad Association, 2002)
Wide range of size in track length (from a few miles to several hundred miles), employment, capital depending on purpose
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Short Lines Short Lines
Market Segments
Market Segmentation: Short-Line Railroads
The best segments have Potential, Lifespan, Accessibility, and Profitability.
Short-Haul Railroads
Regional Railroads
Switching RailroadsLocal scale, switching services between major rail lines
Longer haul feeder service connecting with major rail lines
Often former branch lines or spurs, connecting specific industries, commodity terminals or manufacturing plants to major railroads
— 9 —©2009 ViTAL Economy, Inc.
Life Cycle Consideration – River Terminals
The niches in the business life cycleRiver Terminals
Recent growth in river terminals has been relatively flat as a whole, varying from positive to negative growth by segment
Projected or potential growth in specific niches such as container-on-barge traffic
Southern Illinois is centrally located, has 2 major rivers, ports of entry, trucking and rail support infrastructure
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Cluster Scale: Will it Contribute to SI’s Goals?
River Terminals Hundreds of terminals on Mississippi and Ohio
River systems Varying in size from major ports (e.g. New
Orleans, Memphis) to smaller terminals for single commodities
Typical terminal for grain handling employs between 50-100 workers
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Market Segments
Market Segmentation: River Terminals
Container-on-BargeContainer-on-Barge
CoalCoal
GrainGrain
AggregatesAggregates
FertilizerFertilizer
The best segments have Potential, Lifespan, Accessibility, and Profitability.
River Terminals
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Cluster Scale: Will it Contribute to SI’s Goals?
Regional Distribution Centers Examples of companies
Large companies with ‘in house’ DCs Major department stores e.g. Walmart, Target Home Improvement Specialty big-box stores e.g. electronics retailers
Third Party Logistics providers (3PLs) Operate DCs serving Single client or multiple clients from
one DC
Large regional distribution center for a major retailer: ~1.5 million sq. ft, ~500 employees
Capital investment for DC of this size would be on order of $100 million
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Market Segments
Market Segmentation: Regional DCs
The best segments have Potential, Lifespan, Accessibility, and Profitability.
Large Department Stores
Home Improvement Stores
Big Box Specialty Retailers
Food/Grocery
3PLs – Single-client DCs
3PLs – Multi-client DCs
Regional DCs