With online retail giant Amazon recently announcing that it will add 500 more jobs to its huge distribution center in Lexington County, the Midlands has added luster to the gem of its distribution sector. With Amazon — renowned as an innovator in the field of distribution and logistics — thriving here, local leaders hope that more companies will see reason to grow here as well.
The 500 new jobs will bring the total at its Lexington County site to about 2,000 according to the S.C. Commerce Department. At its 1.25 million-square-foot warehouse near the I-26 and I-77 interchange, the company fulfills thousands of customer orders daily, putting packages together and sending them out the door on trucks to customers.
Amazon first opened the warehouse in late 2011. For the Midlands, the Amazon center provides the imprimatur of the marquee name in warehousing and distribution. As Commerce Secretary Bobby Hitt says, “Having such a recognized company make repeat expansions in our state is a credit to South Carolina’s positive business climate and workforce.”
Carl Blackstone, CEO of the Columbia Chamber of Commerce, sees Amazon’s presence as a boon to give the region credibility not only in this economic sector but for all business areas. “It puts our region on the radar,” Carl says.
It’s also an economic boost for Columbia, as was highlighted by State Senator Nikki Setzler, whose district includes the plant. “I hope and pray Amazon continues to grow right here in Lexington County because that means more employment opportunities for many willing and able South Carolina citizens who are looking to improve their quality of life,” he said when the latest set of added jobs was announced.
In citing one of its regional centers in Lexington County, Amazon is taking advantage of the Midlands’ prime location in the Southeast and the costs of doing business here. Among those lowered costs was a tax break for the company as part of the incentives deal that brought the company’s first warehouse in South Carolina. Back in 2011, Amazon pledged to bring at least 2,000 jobs and an investment of at least $125 million to the Midlands. In return, the legislature and Gov. Nikki Haley approved a five-year exemption for the company on collecting state sales taxes. The S.C. House initially rejected that part of the deal then reversed itself as Amazon prepared to walk away.
That sales tax exemption is set to expire in 2016.
In choosing Columbia, Amazon and other distributors use an excellent location that is central to the Eastern Seaboard and that makes it an attractive locale, according to Manoj Malhotra, a professor at USC’s Darla Moore School of Business and director of the school’s Center for Global Supply Chain and Process Management. He sees central South Carolina as well-situated to draw more business in the sector. Being in the area allows easy access up and down the East Coast via I-95 and I-77, he notes, along with the key coastal connection of I-26 to the Port of Charleston. Put the location and port access together, he says, and the region has a definite competitive advantage in the sector. “We are well-situated,” he says.
The sector that is lumped together under the headings of transportation, distribution and logistics touches more of the economy than many people realize, notes Deepal Eliatamby, president of Alliance Consulting Engineers and chairman of the TDL Council that promotes the sector’s growth. He notes that distribution is a key consideration for high-tech manufacturers such as BMW. “They all need the TDL sector,” Deepal says.
In 2014, 70 out of every 100 vehicles made by BMW in the Upstate were shipped out of the country for sale. More than 260,000 vehicles moved through Charleston, making BMW’s plant the number one U.S. automotive exporter.
The sector is a major player in the state’s economy, and it is growing. According to the S.C. Council on Competitiveness, the nonprofit group that supports the transportation distribution and logistics industry cluster (TDL Council), the distribution sector supports a workforce of more than 50,000 across the state, working in more than 4,000 companies. The distribution sector has been stronger in the Midlands than in the rest of the state, with a 2.76 percent increase in employment here. That is due in part to Amazon’s arrival, according to the council.
While big arrivals such as Amazon get the headlines, the council notes that a majority of growth in the distribution sector comes from the expansion of existing firms. The number of firms in the cluster did increase at a rate of 5.9 percent between 2011 and 2012, the first significant growth since 2007.
“One of the keys to drawing investments such as Amazon is the existing infrastructure and business partners,” Deepal says. “For instance, having a regional hub for UPS adjacent to the Columbia Metropolitan Airport offers an attractive connection for companies such as Amazon to build near. To fuel more growth, the state is adding to its shipping capacity with a deeper Port of Charleston and an ‘inland port,’ a rail connection from the coast to the Upstate.”
“As South Carolina builds capacity with transportation infrastructure projects — the opening of the Inland Port last year and the impending deepening of the Charleston Harbor — the state’s transportation, distribution and logistics industry cluster is well-positioned to become even more competitive on the global stage,” says Ann Marie Stieritz, president and CEO of the S.C. Council on Competitiveness.
To keep the sector growing requires preparation and a vision, according to Deepal and Carl Blackstone of the Chamber. The state needs to target its infrastructure investments in projects that will help the sector attract new companies and grow existing ones. “We have to be strategic about growth,” Carl says.
He mentions one project as an example that has been awaiting completion in the Midlands for years: an expressway connection from Columbia Metropolitan Airport to Interstate 26. That connection goes only partway now before dumping airport traffic onto city streets short of the interstate.
That connector was promised to UPS years ago and needs to finally happen, he says, so that companies see the airport as truly an efficient place to do business. “That would be a marketable addition to the Midlands,” Carl says. “Time for business is money.”
Local governments have to do the ground work and get locations ready for businesses to build their expansions, Deepal says. That includes getting everything a company would need into place, including road, data and water/sewer connections, before a company has expressed interest.
Companies no longer do the work to get a site ready, he says. Instead, they look for sites that have been certified as ready to go before they will consider investing their capital. For companies, that lets them move more quickly and avoid surprise delays, Deepal says.
“You have to set the table for people to come to dinner,” he says.
Lexington County is promoting sites in the same industrial park with Amazon and elsewhere in the county, Carl says. Richland County doesn’t have sites that are as large ready to go. Expanding Shop Road further into Lower Richland, as has been proposed, would allow more room for new businesses to locate in the county, which overall is more heavily developed. Other counties such as Fairfield and Kershaw have “mega sites” ready to go for new businesses to fill — and tie into the connections of the area’s distribution network.
Businesses also, usually, want incentives to locate a business here, and distribution companies such as Amazon are no exception. More typically, economic development incentives have gone in the past to manufacturers and other companies that tend to be bigger investments, with more equipment or higher usual wages. Do distribution companies provide an adequate economic return for such incentives?
Yes, according to Manoj Malhotra of USC. The return is often higher for a manufacturer, but incentives for distribution also pay off, he says. Even if Amazon doesn’t collect sales taxes, its workforce pays payroll and other taxes, he notes. Wages for the sector need to be higher than others such as hospitality or service industry work, Manoj notes, pointing to UPS as an example. “It’s not easy work,” he says.
Distribution projects such as Amazon are worth pursuing, Deepal says, but that requires making sure our infrastructure, including our roads, have the capacity to attract them and working to get sites ready, so that those companies looking to take advantage of the central location of the Midlands have a ready-made place to land.
“We can’t rest on our laurels,” he says.