Why is Reno a logistics hub? It all starts with location

An old mantra states that the three most important things in a retail business are "location, location, location." If location is so critical to a retail business, it follows that in supplying retail establishments, or manufacturing facilities, or local wholesale networks, location should be a significant consideration too.

Have you ever stopped to wonder why there are so many warehouses in our Biggest Little City? Why did General Motors, Sherwin Williams, K-Mart, and Barnes and Noble choose Reno/Sparks for their operations? Why is the industrial park at Tracy/Clark Station about to become home to a new Wal-Mart distribution Center? The logistics industry (the moving and storage of goods along the supply chain from raw material to end consumer) is the second largest business in town occupying millions of square feet of warehouse space.

The warehouses are here because it doesn't get any better than Reno.

Donner Pass presents the most effective way of crossing the Sierra

Nevada Mountains.

In 1865 the Central Pacific Railroad laid track through the pass and on through Reno as it contributed to the first transcontinental railroad.

Interstate 80 follows much of the old railroad bed as it snakes its way to Sacramento.

Freight trains and tractor-trailer rigs are constantly shuttling east and west over the pass, bringing goods to Reno warehouses from Asia, and delivering goods to the heavily populated California cities.Additionally,U.S.

Highway 395 allows carriers to avoid crossing the Sierras until the trucks are deep in Southern California and weather issues are minimal.

But if the people are in California, why aren't the warehouses there? Long before California's most recent fiscal down turn,Nevada, and specifically Reno's lower property costs, lower property taxes, lack of an inventory tax, and more rational wage scale made the extra drive to the California population centers economically attractive.

Portions of the Reno/Sparks industrial areas were designated with "Freeport Status" postponing import tariffs until after the goods were sold and shipped out of the Freeport, which further reduced the expense.

And to seal the deal the carriers took advantage of Reno's unique geographical advantage over any city in California.

If a company wants to establish two distribution centers to service the West Coast, then they have scores of options.

If they only want to have one (this is a major consideration since warehouse rent is often the largest item in a distribution center's operating budget) then Reno is where it should be.

Only from Reno can you achieve next-day ground service of a shipment to San Diego and Seattle; to Salt Lake City and Phoenix.

If a company chooses to store its goods in Fresno, they can't achieve overnight delivery to Seattle or Salt Lake without an airplane or a dedicated truck.

Sacramento can't make Phoenix overnight, and the shipment would get in to Seattle too late to do a customer any good.

Next-day service to Los Angeles is routine coming out of Reno.

The reverse trip is somewhat touchier even in good weather, as the truckers need to fight LA traffic before they hit open road, whereas the Reno driver pulls in to LA (at 3 or 4 in the morning) after the madness has stopped for the day and before it can start anew.

In addition to the lower fixed costs of needing fewer warehouses, Reno-based wholesale firms compete with their California-based competitors on a fairly even keel.

Large stocking orders generally travel LTL (less than truckload) via common carriers like USF or Oak Harbor Freight Lines.

The nature of LTL operations are hub and spoke such that pick-up drivers acquire their loads in the afternoon; take them back to their terminal, where an evening dock crew off loads the trailer full of merchandise and stages it for the trailers assigned to the shipments' destination terminal cities.

The dock crew then loads those trailers and they leave for their destination terminal city, travel by night; arrive at the destination terminal, and are unloaded and staged for the individual delivery routes leaving in the morning.

If the destination city is the same city the pick up was made in, that trailer waits at the dock until the next morning, when the customers are open, to leave on its delivery run.

So two orders placed at the same time with one supplier in Los Angeles and the other in Reno could arrive at the L.A.

customer's place of business at about the same time on the following day.

As Reno warehouses overcome the potential shipment transit time competitive advantage of the locally based competitors in the markets we serve, Reno does so at admittedly higher transportation costs.

Not only are those increased transportation costs far outweighed by the operational savings outlined above, but the incremental cost difference is disproportionately lower than the respective distances involved.

Those distances are significant; 700 miles to Seattle; 660 miles to Phoenix.

The distances become more formidable within the limitations, that a truck driver can travel approximately 500 to 550 miles in a day.

The overnight run to Seattle is accomplished with a sleeper team of two drivers; one sleeps in a bunk in the back of the cab while the other drives.

The overnight run to Phoenix resembles a Pony Express route with drivers switching in Tonapah and Las Vegas.While the cost of covering those distances may be substantial, the bulk of the transportation cost is incurred in the hub-and-spoke terminal operations in the origin and destination cities.A cross town shipment in LA that weighs 200 pounds would cost $50 depending on cargo classification.

That same shipment out of Reno might cost $60.

These combined factors of lower costs and optimum location have enabled the logistics industry to flourish in Reno for years, adding hundreds of thousands of square feet of warehouse space annually over the past two decades.

California's most recent financial difficulties compound that growth.A light manufacturing firm newly relocated from California to the Reno area still has all of its customers located in the Golden State.

However in addition to all of Reno's other costs benefits, this firm's workers compensation insurance premiums in Nevada are $495,000 a year less than they were in California.

A company can move a mountain of freight over Donner Pass for half a million dollars.

All of us who live in the Truckee Meadows know just how special this area is.

For those of us living here and making our living in the logistics business, it doesn't get any better than this, and to steal a phrase from the RSCVA,"We Love this Place." Robert Newberg is president of the Sparks-based Nevada Association of Transportation and Distribution.