(CENTRAL KY. MARKET REVIEW) — Lexington’s robust logistics industry has benefitted from the boom in online sales caused by COVID-19. The region’s logistics companies are growing even as they, too, navigate the challenges caused by the global pandemic.
The logistics sector finds a perfect setting in Lexington, centrally located at the crossroads of Interstates 64 and 75, said Gina Hampton Greathouse, executive vice president for economic development for Commerce Lexington.
“It’s all about our location. We are within 600 miles of over 65% of the U.S. population and the buying power that that population has,” she said. “We have three major air hubs (UPS, DHL, and Amazon) within an hour from Lexington and a UPS ground hub here in Lexington. FedEx operations are throughout the region.”
Greathouse predicts nothing but continued growth in the logistics sector in the coming years, pointing to the recent expansion of Amazon’s presence in Lexington as one example of things to come.
Amazon is constructing a new delivery station on Newtown Pike at New Circle Road that is expected to create hundreds of new jobs. The facility is Amazon’s third such delivery station in the state and will increase the efficiency of last-mile delivery capabilities to customers in the region, a company spokesperson said.
The online retailing behemoth plays a huge role in logistics in Central Kentucky and elsewhere in the state and the country.
The company has invested more than $20 billion in the state since 2010, creating 18,000 full- and part-time jobs as well as some 49,000 indirect jobs that are linked directly to its presence. In the Bluegrass state it operates 10 fulfillment and sortation centers, two delivery stations, one customer service center, two Whole Foods Markets and includes a $1.5 billion Amazon Air hub that launched operations in August about 85 miles from Lexington at the Cincinnati/Northern Kentucky International Airport (CVG).
Amazon’s overall Kentucky investment ranks sixth among the 50 states by dollar amount.
The facility is under construction, but no timetable has been announced for completion of the delivery station. “Stay tuned for updates,” the spokesperson said.
That same message could come from Blue Grass Airport, where upwards of $100 million has been invested in infrastructure at an airport that is bouncing back after passenger traffic nosedived worldwide last year.
“For us this year, the big news has been the airfield work—the $100 million investment—and we’re thrilled to keep that project moving,” said Amy Caudill, director of marketing and community relations for the airport.
After closing down the primary runway for three days in August for resurfacing, Caudill said Blue Grass is nearing completion on a nine-year project that included extensive work on the taxiways.
One of the companies that benefit directly from the airport upgrades is Thoroughbred Aviation Maintenance (TAM), which consolidated its headquarters at Blue Grass in August, pledging to create 47 jobs over the next three years. When it announced the $800,000 project, the company had 18 employees at the airport.
TAM maintains and services all inbound and departing commercial flights in Lexington. Founded in 1988, the company provides avionics installation, repair and inspections, aircraft painting, interiors, airframe repair and other services for government aircraft and law enforcement agencies, as well as corporate and privately owned aircraft.
In 2019, the airport reported its eighth consecutive record year for passenger traffic when about 1.46 million people flew in or out of Blue Grass.
Caudill pointed out that the resurgence of COVID and its variants and other factors are tamping down passenger numbers for 2021.
“The return of business travel has been very slow, so that has had an impact on the number of people flying out as well as flights offered,” said Caudill. Some service to New York and Washington, D.C., that was canceled because of the pandemic has not yet been reinstated.
While air traffic is a ways from returning to 2019 levels, truck traffic is roaring ahead as the American dependence on online shopping intensifies.
Like Greathouse with Commerce Lexington, Verst Logistics Chairman and CEO Paul Verst said Central Kentucky and Northern Kentucky are perfectly positioned for the logistics and transportation industries.
“If you really think about it, Kentucky is one of the best areas to distribute goods and services from. Within a two-day period, we can deliver to up to 80% of the U.S. population. With so many people working or staying home, the e-commerce and fulfillment business is booming. People are ordering groceries and other products online and looking for instant delivery,” said Verst, whose company has a substantial presence in Lexington and Louisville as well as Northern Kentucky, home of its Walton headquarters.
“We see no end in sight for continued exponential growth in our geographic area,” he said. “Companies continue to make the mass exodus from states like California due to high taxes and regulations along with the length of time it takes to get goods delivered from the West Coast.”
Kentucky and surrounding states will continue to be the recipient or these types of companies looking to get closer to their customer base, he added.
Between his operations in Kentucky as well as Ohio, Indiana, Alabama and Arizona, Verst is approaching 2,000 employees in a soup-to-nuts business that includes trucking, packaging, warehousing and “order fulfillment,” he said.
But like other companies, Verst said the biggest challenge is attracting and retaining talent to handle the demands of its business and customers.
Lexington-based Longship reported similar labor challenges.
“Hiring is a daily challenge for all businesses and with competition for quality candidates at an all-time high, the search for good talent has become increasingly more difficult. We have several job openings at our Lexington headquarters and Nashville, Tenn., locations…,” said Courtney Putthoff, chief of staff at Longship, a Lexington logistics firm that plays matchmaker for truckers and companies searching for a shipper.
During the height of the pandemic, “we kept the grocery stores stocked,” said Kenny Ray Schomp, president and founder.
In August, Longship further cemented its relationship with Lexington and Fayette County with a $4.3 million investment in a new 30,000-s.f. office and headquarters where the company promised to create 155 well-paying jobs for Kentucky residents over a 10-year period.
The new headquarters, located on two floors in an office building in Hamburg, has 120 workstations with state-of-the-art equipment, training rooms and a 24-hour fitness facility for employees. Longship currently has 80 employees at its Lexington office and five in its Nashville satellite office.
Small- and mid-size companies aren’t alone in their staffing challenges.
FedEx, which has a substantial presence in Central Kentucky and is one of the Big Three in global courier delivery service, did not provide details about its operations in Kentucky, but a spokesperson said COVID-19 has caused hiring concerns for the company.
“Recruiting and acquiring top talent is a top focus, yet the industrywide labor shortage is putting on added pressure as there are less people to fill more available roles. FedEx has experienced a dramatic increase in demand for our residential delivery services as online shopping and e-commerce surge,” said FedEx spokesman Chris Allen.
“To keep up with demand, we are currently hiring for 80,000 nationwide positions across various FedEx operating companies,” he said.
Allen made it clear that there’s no great mystery about why demand has soared.
“FedEx continues to keep commerce moving and deliver critical shipments during the COVID-19 pandemic. The impact of the virus has generated elevated volumes, and we continue to experience high demand for capacity and increased operating costs across our network,” he said.
FedEx drivers and most folks who get behind the wheel in and around Lexington probably will benefit from some highway improvement work that is either underway or on the drawing boards.
Two high-profile projects in the Kentucky Transportation Cabinet’s District 7 are scheduled for completion in November. Repaving about 4.5 miles of I-75—northbound and southbound—in Scott County should be finished by Nov. 30. A 1.3-mile project along Versailles Road between Oxford Circle and Angliana Avenue should wrap up by Nov. 15, the highway department said.
Projects that are being planned include widening New Circle Road at Leestown Road, rebuilding Liberty Road from New Circle Road to Liberty Elementary School, and the reconstruction of Brannon Road from Harrodsburg Road to Nicholasville Road, according to Natasha Lacy, a spokesperson for District 7.
Like Blue Grass Airport, Lextran hasn’t been able to duplicate pre-pandemic passenger numbers for the bus service.
“Our ridership levels have since stabilized at about 35% below pre-pandemic levels on fixed-route and about 12% below pre-pandemic levels on paratransit,” said Fred Combs, director of planning, technology and community relations.
Combs said the bus system made some changes in May to improve service along the Versailles Road corridor and is now immersed in a regularly scheduled operations analysis that will determine what service to provide in the future. One major new development, a Baptist Health hospital in the Hamburg neighborhood, will be given plenty of attention, Combs said.
The pandemic also may have changed some attitudes about public transportation, Combs said.
“It is my hope that the pandemic strengthened the role of transit in our community. Our service is essential: We supported health care workers, grocery store workers and other essential workers by offering mobility through the height of uncertainty during last spring and summer,” he said.
AIRPORTS
- Blue Grass Airport
- Capital City Airport, Frankfort
- Central Kentucky Regional Airport, Richmond
- Cynthiana-Harrison County Airport
- Georgetown-Scott County Regional Airport
- Stanton Airport
- Stuart Powell Field, Danville
GENERAL AVIATION
- TAC Air
BUS TRANSPORTATION
- Greyhound
- Lextran
RAIL SERVICES
- Norfolk Southern Corp.
- CSX Corp.
- R.J. Corman Railroad Group
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