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Ability to access key markets or customers Freight facilities exist to facilitate the processing and movement of goods from an origin to a destination. The point of origin may be a source for raw materials, a manufacturing plant, or an intermediate point. The destination may be the ultimate consumer, a manufacturing plant, or a staging point along the way. Regardless, freight facilities typically choose locations that allow them to most directly and efficiently access these origin and destination points. Access is expected to accomplish two things: 1) delivery service with speed, predictability, and precision that matches or exceeds the competitive standards in the market and 2) costs that are as low as possible. Retail companies often establish their distribution networks on a concept of overlapping circles, each with a radius of approximately 500 miles. Beginning with the factory, this builds a supply chain that allows for a one-day drive to the regional distribution center, then the local distribution center, and finally to stores located in major consumption areas. Distribution Networks 40 Freight Facility Location Selection: A Guide for Public Officials
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The ability to service a particular customer within a one-day drive is a common service expectation and location consideration. This requires both physical proximity to the customer and a location within the transportation network which permits ready movement to the customer's facilities. For a city terminal being operated for pickup and delivery by a truck fleet, customer proximity is substantially shorter and the density of customers in the region greater. These facilities are situated to minimize total miles within a few-hour service radius and require an investment in trucks as well as terminals. Intermodal facilities and rail freight terminals are also located near major consumption zones but, due to their size and need for access to multiple customers, tend to be located at the outskirts of major metropolitan areas. Additionally, these facilities need to be located at points where they can generate large loads of freight for long- distance shipping. For example, a rail freight terminal can require almost 100,000 carloads annually travelling at least 2,000 miles to be financially viable. Only the combination of volume and distance provides the competitive advantage over other modes. Intermodal facilities servicing containers and truck trailers have similar requirements. In such cases, the carrier will attempt to be near a market that either generates this volume or where they can collect freight from a relatively short distance to create the volume required. Freight Facility Location Selection: A Guide for Public Officials 41
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Case Study Rickenbacker Intermodal Facility is strategically located in the Columbus, Ohio, metropolitan area and is within a one day drive of more than 50% of the population of North America, and over 60% of US manufacturing production. The current rail operations at the facility include service by Norfolk Southern (NS) and CSX (two Class I Railroads--see note below). The facility is also located in close proximity to several major highways in the Columbus area: Interstates 270, 71, and 70 as well as highways 23 and 33. Operated by NS, Rickenbacker Terminal opened in March 2008 and is located adjacent to Rickenbacker International Airport, approximately 15 miles south of Columbus. NS previously operated the Discovery Park intermodal facility nearby, but that facility had exceeded its capacity and a new site was deemed necessary to accommodate expected growth. Because it was operating above capacity, NS had to turn away domestic rail business, which at the time accounted for 20% of all traffic at the facility. This lack of capacity was detrimental to both NS and the Columbus region. Thus, a search for a new, larger location was undertaken, and NS selected the Rickenbacker site. A Class I railroad is a major railroad with annual carrier operating revenues of $250 million or more. There are seven Class I railroads in the US and Canada: Burlington Northern Santa Fe (BNSF) Railway, Canadian National (CN), Canadian Pacific (CP), CSX, Kansas City Southern (KCS), Norfolk Southern (NS), and Union Pacific (UP). 42 Freight Facility Location Selection: A Guide for Public Officials