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CPBJ Extra Blog

Don't cut your dandelions just yet

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It's no surprise that there is a direct connection between transportation/logistics and manufacturing sectors. But does the growth of one necessarily mean the growth of the other in any given region?

Answering that isn't as easy as I thought it would be.

Last month, this is what I heard at an event:

I looked into it a little more. It sounds reasonable because of the interdependence of logistics and manufacturing. And there's some truth there.

"A lack of logistics infrastructure is a factor in the lack of economic development," said Tom Donovan, senior vice president of sales and marketing at York County-based TBB Global Logistics Inc.

An area without roads, airports and railways is going to have a smaller, less-diverse economy. Mainly because the cost to transport goods in and out will be so large that savings on labor, land and taxes will be a moot point in sustaining that business, he said.

"Everything becomes a trade-off," Donovan said.

So having a lot of warehouses, trucking companies, roads and rails doesn't necessarily mean the factories will spring from the ground like dandelions in May.

In the end, Donovan pointed to a company's proximity to customer population as a huge factor.

Where are your customers? Can you get there in 24 hours? What are customer demands for delivery time? Where are workforce, tax and land rates reasonable given those other logistical factors?

"If I build this plant in Pennsylvania, how will it affect all of those factors?" said Donovan.

Don't pick your dandelions before they spring up. Companies will look at more than roads, rails and warehouses before building a factory.

In other areas, the issue is whether we can spare dandelions from the lawnmower.

It looks like jet- and missile-maker Lockheed Martin Corp. is cutting about 4,000 jobs nationwide, including closing its Newtown factory. The 3.5 percent cut in workforce is due to ongoing federal budget cuts.

With YRC Worldwide Inc., the Kansas-based trucking conglomerate with a large midstate presence, the issue isn't government cuts. It's debt. And different workforce concerns.

The company finally released its third-quarter financials this week: net loss of $44 million, operating income of just $5.8 million down from $27 million.

And its stock dropped 20 percent, according to this story in the Kansas City Star.

It is working on a contract deal with its Teamsters unions, essential to refinancing its debt, but it's unlikely that will be finalized this week, according to this story in the Kansas City Business Journal.

However, if you're thinking the Teamsters deal is the only thing that's affecting YRC's financial standing, keep in mind this is a company that has massive debt due to its years of acquisitions under previous management, says this Motley Fool analysis.

Logistics and manufacturing. World's largest jigsaw puzzle. In which the pieces move before you finish it.

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