Posted on 03/21/2004 5:32:51 AM PST by GailA
FedEx field of dreams Slow dance, many partners won plant
By Richard Thompson Contact March 21, 2004
The press conferences came 521 days apart.
A long time coming between Sept. 30, 2002, when FedEx announced Memphis would get one of four new FedEx Ground hubs, to March 4, 2004, when FedEx announced that 103 acres off Miss. 305 and U.S. 78 in Olive Branch would be the location of that $57 million hub.
It's unclear how much FedEx is paying Land's End LLC, owned by Memphians Dan Turley Jr. and Richard Maxwell, to become first tenant in the 310-acre DeSoto Distribution Center.
Friday is the target date for the deal to be closed, said Maxwell.
"It was a very hard-fought and lengthy process," said Turley, adding that at least 11 other sites were being considered in Shelby and Fayette counties. "During negotiations, you never know what the other guy has on the table."
FedEx Ground spokesman Perry Colossimo said, "It was one of the more challenging efforts and complicated efforts" that the site selection has had.
Deep in the woods, where only the treetops are visible from Miss. 305, FedEx Ground will locate its proposed 330,000-square-foot hub, its second in the Memphis area. The new hub is slated to open in 2006, creating nearly 400 jobs. Employment is expected to rise to 600 within six years. The hub is part of a $1.8 billion, multiphase expansion of FedEx Ground; the other three new hubs are scheduled to open in 2005.
Those announcements - Hagerstown, Md., Northern Kentucky and Hutchins, Texas - were made last July and August, seemingly on schedule for the expansion of its ground network.
Why did it take so long for the Memphis area, where FedEx's parent company is based?
"We perhaps felt a decision was close" last summer, recalled Olive Branch Mayor Sam Rikard, expressing a confidence that the city, DeSoto County Economic Development Council and the state had put together an attractive package of incentives and assurances for FedEx Ground.
"But then things slowed down," Rikard said.
In fact, things came to a halt in June. Months passed with little or no word from FedEx, recalled those involved in the process.
Thanksgiving - the time frame that FedEx Ground president and CEO Dan Sullivan said a decision would be announced - came and went.
"It was just a matter of finding the right location," said Allison Sobczak, spokesman for FedEx Ground.
In the end, Olive Branch won over two sites in Memphis: the old Memphis Defense Depot and a site off New Allen and Raleigh-Frayser roads.
It just took 521 days to do it.
Calls to the Memphis Regional Chamber seeking comments were not returned.
Here's a glimpse of what was involved:
FedEx might have been looking at Olive Branch well before that September day in 2002 when the search for a new hub location in the area officially began.
"We had been looking at Olive Branch for a while," said Sobczak.
In 2002, FedEx Ground was growing by double digits while FedEx's express business - its moneymaker - languished. Buoyed by small- to medium-size shippers and its residential service, the Pittsburgh-based unit's volume grew 30.4 percent to 2.28 million packages that year.
So, on Sept. 30, FedEx gave notice to the Memphis area industrial real estate market: It was shopping for truck-friendly land to put a new hub.
Soon thereafter, Turley received a call from FedEx Ground.
"It was more like a kickoff before a football game," said Turley, describing the feel of the first, and only, meeting with FedEx on site in Olive Branch on Oct. 23, 2002.
On that overcast and chilly day, those present included FedEx representatives, Turley, Maxwell, Rikard and DeSoto Council President Jim Flanagan.
Also present were Kevin Doddridge, general manager of the North Central Electric Power Association, and Mississippi Development Authority (MDA) representatives.
Both sides knew each other, which is different from some initial meetings with prospective industry where the company's name is often kept secret.
"I was a telephone man in 1973 when FedEx was in just two or three hangars out there at (Memphis International) airport and worked on their telephones," said Rikard. "It's just like we've all grown up with FedEx."
The project's code name was Project Concrete.
Rikard said FedEx Ground laid out its timetable and the discussion turned to the "routine" tax incentives that Olive Branch would provide, the local labor pool, infrastructure improvements and state commitments.
"We offered them the same package as Trex and Williams-Sonoma," said Rikard about incentives, which include a waiver of property taxes for up to 10 years when a company opens. School and road and bridge taxes are still paid.
Williams-Sonoma, a retailer, received tax breaks in 1998 and Trex, a maker of nonwood decking, was given a similar waiver in 2003.
After that meeting, it was clear that Olive Branch was on the short list.
"We were told that our site was one of many that they were looking at," said Turley.
But even then, there was a confidence that FedEx Ground was leaning toward Olive Branch.
"They really saw something they liked," said Doddridge. "I knew from the look on their faces and the questions they asked."
Besides a bald spot of red clay, the DeSoto Distribution Center is mainly grass and trees and its primary entrance is a thin, loose gravel road.
Yet, it is a gem, unblemished by easements, close to utilities and only two turns away from U.S. 78. Not to mention, it is within 10 miles of the FedEx superhub at Memphis International, said Maxwell.
"You just don't happen upon land like that," said Maxwell, who discovered it in 2001.
After that initial meeting, things progressed quickly.
Other people were brought in to help Olive Branch devise a package for FedEx Ground.
They included DeSoto County Supervisor Jessie Medlin, Olive Branch City Engineer Steve Bigelow, Chris Gouras of Vicksburg-based consulting firm Jimmy Gouras Urban Planning Consultants and Jimmy Dickerson, district engineer for the Mississippi Department of Transportation.
There were numerous conversations among Olive Branch, the state and Turley and Maxwell, who were in contact with FedEx Ground.
Two major topics stood out: Olive Branch's labor force and infrastructure. The package handler job is a part-time position for which FedEx typically hires a lot of college students. Of the new jobs initially, 325 are part-time.
Flanagan said the Olive Branch proposal made it clear that the area demographics could provide a wealthy pool of workers. Within 10 miles of the site, there are 213,000 people, he said.
As for infrastructure, Rikard said assurances were needed that the state would escalate the schedule for widening 305, which the state has offered to do. Also, commitments were needed from Olive Branch for water, gas and sewer, he said.
As summer of 2003 began, Rikard said, the feeling was that a decision was close.
"We felt like we had put our best foot forward," said Rikard.
Flanagan agreed: "There really weren't any loose ends on our end."
But FedEx Ground was still considering other sites.
As the summer gave way to fall then winter, Turley said, "Many times we felt that they (FedEx Ground) weren't coming (to Olive Branch)."
Yet, during this period where the process seemingly halted, Rikard said there was no indication that the project wasn't going to happen. Every now and then, Rikard said, he received word that the project was still active - an encouraging sign.
Things really picked up after Haley Barbour, a longtime friend of FedEx Corp. chairman Fred Smith, was elected governor of Mississippi last November.
Barbour ordered the Mississippi Development Authority to make the FedEx project a "priority," said Pete Smith, the governor's press secretary. "That kind of got the ball rolling again," he said.
On Jan. 20, the MDA met with Olive Branch and DeSoto County officials to refine the offer to FedEx Ground.
Nearly five weeks later on Feb. 23, Rikard said the governor's office called: FedEx Ground had chosen Olive Branch. Flanagan, Turley and Maxwell found out soon thereafter.
On March 4, Barbour announced the FedEx selection at the Whispering Woods Hotel and Conference Center in Olive Branch. State and county governments gave FedEx Ground nearly $3 million in economic incentives, primarily for property and infrastructure improvements. The company will also receive income tax rebates on salaries exceeding $32,700 - 125 percent of the state's average salary - and has been approved for a 10-year tax freeze on the property.
FedEx downplayed the relationship between Smith and Barbour, saying that, although Smith gave final approval to the decision, FedEx Ground and its site selection team primarily drove the process.
In the end, Maxwell and Turley said, the only thing that matters is that Olive Branch was chosen.
"The state and local people in Mississippi did a great job and that's why (the hub) is coming here," said Turley.
Rikard agreed, putting the whole process in such a context where 521 days didn't seem long at all.
"That (FedEx) project is short compared to building a city hall over here," said Rikard about the $4 million city hall under construction that should be completed this fall.
"That took 18 years. This (project) took 18 months."
One can find many complaints on the Web for each service, but my personal damage/loss history with both is widely different between the two. Lots of trouble with UPS, none so far with Fedex, theough Fedex Ground seems to be just as "agressive" with heavy packages.(e.g, the handlers and drivers don't like them much.)
Nope. I am a small business owner, who has accounts with both, and do not care in the least what the brand name of my delivery is. I do not care one bit if it is the USPO, Fedex, UPS, or DHL.
ALL I care about is price/performance, and loss/damage prevention.
I do not care what SEC filings say, and I avoid the media enough so I never see anyone's ads. All I am saying is what I personally see in my business, and that is all I care about, and nothing else. My Day job is with a fairly large company, and they switched to fedex shipping last year. As of the end of 2003, one of my largest vendors began shipping my raw materials to my small business Fedex Ground..No explanation, just different colored trucks coming.
So that's only what I see personally.
So, No, I am not a Fedex employee trolling for business- I could not care less who is doing the driving as long as my stuff really gets there, unbroken, and at a competitive price, and do not care in the least what business publications or ads say, only what I really see every week.
Well, IMO they’ve got several problems. One big one is that they’re carrying a lot of debt in comparison to UPS. The other is that they’re still hell-bent on keeping separate the express/ground/home delivery elements. I certainly can’t see how they do it.
They have an advantage on labor costs vs. UPS, but the problems are 1) ground is lower margin business (even with lower labor costs) and 2) they don’t have the density to make it (again, IMO).
So they’re in a position of having this (expensive, for them) new ground service infrastructure but don’t have the density or volume to feed it. Now they *have* to drum up volume – by hook or crook.
Some of it is cannibalized FDX air that is now going ground, some is from UPS (and UPS has the same problem WRT cannibalized air – but then they have the volume and density to still make money on low margin business, for the most part).
But then again, I know a few people that have been in the newer FDX hubs and claim their automation is *SWEET*. Latest/greatest everything. They’ll really be a problem once they get chugging.
But OTOH, UPS has implemented a couple of new systems and procedures to simplify and streamline things. Those that are in a position to know tell me “it’s the tip of the iceberg” WRT what they have planned. Can’t get more info than that, nor did I expect to…
It’ll be interesting to follow as it unfolds…
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