Thanks to your late-night online shopping habits, development in an area in upstate Pennsylvania called Lehigh Valley and sometimes colloquially referred to as just “The Valley,” has surged astronomically in the past five years.
Most recently, FedEx Ground, one of the largest transporters of parcels and other shipments, signed a $335 million lease to build its largest U.S. distribution center, a massive 800,000-square-foot, on Willow Brook Farms, a horse farm in Lehigh Valley. The plant is expected to be open in late 2018 and will process up to 75,000 items per hour.
FedEx’s new neighbors will include major retail players, like Amazon, Wal-Mart and Zulily, Dollar General Corp, Ocean Spray and PetSmart Inc. In 2016 alone, Samsung Electronics, Stitch Fix and Isuzu Motors have all signed large warehouse leases in the area.
In July, retail giant Amazon announced it will hire more than 500 full-time workers for its second warehouse in Lehigh Valley—a cool 1.1 million-square-foot operation. The warehouse is expected to open this year before peak holiday season and it said to handle larger or unusually shaped items.
So, how does your addiction to convenient shopping and two-day delivery have anything to do with land sales in a metropolitan area in upstate Pennsylvania? Well, a lot. Growing e-commerce demand, and soaring popularity for next-day or two-day delivery, means warehouse builders have been scouring the maps for areas close to airports and in proximity to major highways. This can often be a difficult task, especially when distribution centers need to be close to large, dense population areas, like New York and northern New Jersey, where land cost typically runs higher because simply, there just isn’t a lot of it available.
Lehigh Valley just happens to have all of the marks checked off. It’s a short ride away from Lehigh Valley International Airport, is convenient to Interstate highways connecting the Northeast, Midwest and South and is the closest distribution hub to New York City.
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“E-commerce is really changing the shape of the market,” said Perry Colosimo, a FedEx spokesman, in a written statement. “We conducted an exhaustive search across three states for the right location that would best enable us to meet this growing demand for our services … The Northeast region is a corridor because of its population density and high concentration of businesses, and that trend is projected to continue.”
When your goal is to get packages to the highest number of people in the shortest amount of time, it can be easy to see the appeal of Lehigh Valley.
Amazon first arrived in The Valley in 2010, and has seen its annual revenue go from $34 billion that year to $107 billion in 2015. In 2005, the e-commerce giant introduced Prime service, which aside from offering subscribers unlimited streaming of movies and TV shows, consumers are also promised free two-day delivery. Today, Amazon Prime has attracted eight million members, and last year, the retailer started using Lehigh Valley International Airport as one of five regional airports to haul packages aboard cargo jets.
According to brokerage CBRE Inc., online retailers have been turning their attention to two-day and same-day package delivery (Google Express’ two-day delivery service recently made its debut in North Carolina), which makes land in Lehigh Valley even more a hot commodity.
Think about it this way: this is what consumers want now. They’re used to next-day or two-day delivery, thanks largely to Amazon Prime. If you’re a retailer who can’t offer that, and you don’t expand your networks, you’ll lose out on growth. In fact, about 40 percent of warehouse managers said in a 2015 global survey that demand for shorter delivery times was “a driving factor” in warehouse strategy and transformation.
According to Adobe Digital Index, online sales from Thanksgiving day to the following Monday last year totaled $11 billion. With numbers like that, e-commerce retailers are scrambling for better warehouse systems. Without one implemented, any retailer could be the next company known as the one that ruined Christmas, like Best Buy was in 2011 when it ran out of inventory and couldn’t make its deliveries.
But, in all of this scramble, don’t forget, getting warehouse space in the right location is only half the battle. As warehouses become more complex and consumer demand continues to climb, to be fully productive, companies need streamlined supply chain management systems that effectively use automated software to save on warehouse space, and reduce costs-per-touch and provide up-to-date data to warehouse managers. Not all warehouses will operate in the same ways, obviously, as some prefer a dimensional approach to storing data while others have a more normalized approach.
So, the next time you’re up late tracking your packages and you see that it’s recently been scanned in at a center in upstate Pennsylvania, know that there’s a high likelihood that your paper brown box is zipping and zooming around on conveyor belts in The Valley—and a lot of a proper logistics and distribution system, along with effective inventory management tools, is how you’ll get your packages on time.
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