1. Sponsored by New Economy Initiative Hosted by Detroit Regional Chamber of Commerce and Michigan State University Final Report May 31, 2010 Supply Chain Opportunity Assessment: Economic Development for SE Michigan

4. The Gateway Funnel

5. The Detroit Region’s NAFTA Advantage

6. Border Crossings and Network Flows

11. Regional Economic Opportunity

12. I-75, I-69 and I-94 Corridor

13. A Connected Region and Economy Highway and Rail Corridors Map: Courtesy of Gallis and Associates

21. Supply Chain Hub Strategy Creation Strategy and SCM Strategy Elements

26. Ability to serve global markets 1 of 2 Attribute Current State Implications Future State U.S.-Canada Trade Corridor Some infrastructure and institutional barriers Constrained opportunity for plant and DC locations Easier border flow; more systems for customs clearance; additional border crossing International/ NAFTA Transport Links Access to multiple transportation modes but limited integration Reduced ability to serve U.S., Canada, and global markets Achieve more integrated and coordinated transportation flow Access to Canadian Ports Provides competitive option between U.S. eastern ports and Canada Cost reduction through tax and competitive advantages Access to Canadian maritime ports opens competitive option for SE MI

27. Ability to serve global markets 2 of 2 Attribute Current State Implications Future State Customs house, forwarding, and related services Services already in place but benefits not fully realized Stronger than competing regions Extend competitive advantage Foreign trade zone facilities High quality, underutilized capability Reduced duties and fees Extend competitive advantage

29. Infrastructure and support capabilities 1 of 2 Attribute Current State Implications Future State Airport capabilities DTW airport capacity; frequent direct Asian flights; available capacity for dedicated and belly cargo freight Less congested than Chicago; draw for global fulfillment operations; dedicated air freighter and belly cargo to accommodate 100% screening rules Build on DTW aerotropolis and utilize Toledo, Windsor, Willow Run, Lansing, Flint, Pontiac, Saginaw, and other local airports Interstate highways Network of I-75, I-94, and I-69 is less congested than Chicago’s Good connectivity from Detroit south and west and through Canada Exploit current capacity and expand network

30. Infrastructure and support capabilities 2 of 2 Attribute Current State Implications Future State Railroad network US-Canada railroads pass through Michigan; shipper access to NS and CSX through Conrail; access to U.S. East coast and Chicago Access to Halifax and Montreal ports; Conrail connections to two railroads; access to U.S. east and west coast Railroad infrastructure improvements will improve access east and west; also need improvement in other states within the region Intermodal transportation capacity Several dispersed facilities with excess capacity Detroit ramp less congested; good connection to east coast cargo Potential for more centralized DIFT concept; new CN intermodal facility Distribution facilities Good private, leased, and public warehouse capacity Physical capacity and labor available for new business activity Extend competitive advantage; Build consol/deconsol, cross-dock centers

32. Government regulations Attribute Current State Implications Future State Higher weight limits Favorable to some shippers and industries Lower transportation costs; favorable for intermodal particularly in transition from rail intermodal Extend competitive advantage Carrier permitting process Multi-agency system Cumbersome process; not favorable for carriers and shippers Need “one stop shop” permit process; need reciprocal, bi-national permitting

34. Need for competitive tax climate Attribute Current State Implications Future State Michigan business tax Gross receipts intensity and surcharge issues Negative effect on Michigan businesses Reduce gross receipts intensity and eliminate surcharge Personal property taxes on equipment Relatively high Discourages investment in Michigan Reduce personal property taxes Personal income taxes Relatively low and flat Advantage for Michigan Extend competitive advantage Tax abatements and incentives Competitive, targeted Allows Michigan to compete for specific projects but results in higher general rates Targeted application

36. Availability of human, land, supplier, and financial capital 1 of 2 Attribute Current State Implications Future State Supply chain expertise Presence of supply chain institutions, companies, and universities Strong SCM managerial capabilities Advantage over other states; retain in-state talent; need firms to manage SCM risk Supply chain skilled labor Readily available labor Highly skilled Use retraining funds for skilled labor Technology enablers Good resources and capabilities: EDI, RFID, GPS tracking, demand, visibility systems, TMS, WMS, trade mgmt systems skills Good support technology for SCM operations Leverage capabilities into competitive advantage; create a critical mass in technology sector

37. Availability of human, land, supplier, and financial capital 2 of 2 Attribute Current State Implications Future State Land and facility availability Competitive real estate prices Advantage over other states Land is cheap; good place for DC’s Financial Capital Lack of venture capitalists and angel funding Problem for start-up firms Invest in hub; need long-term capital and policy commitment from users to occupy land Supplier and support capabilities Strong supply base Nearby supplier locations Extend competitive advantage

39. Economic competitiveness and lowest total cost to serve Attribute Current State Implications Future State Hub operations cost Higher cost to operate Are there offsetting productivity advantages? Lowest cost to serve; lowest weather risk during transportation Hub service levels Managerial and skilled labor may create advantages; northern fringe location may inhibit access to entire U.S. Service advantages could offset cost disadvantages Better service potential for combined U.S./Canadian market for intermodal imports Outbound empty trucks Trade imbalance; excess empty containers Low outbound rates Fill outbound trucks

41. Supply chain sustainability Attribute Current State Implications Future State Customer service and reliability Increased uncertainty due to congestion Increased cost and reduced service Customers requiring more reliability and closer suppliers to lower cost and improve service Security Consumers and regulators expecting increased security Increased freight monitoring Need technology and facilities to monitor freight Green/ environmental aspects Firms strongly focus on low cost suppliers Firms looking for suppliers who can minimize environmental impact Firms looking for closer suppliers or transporters that have less environmental impact

43. Collaboration and partnership Attribute Current State Implications Future State One integrated regional plan Regional support from all stakeholders of the integrated SCM plan Champion Need a “champion” or major player to act as an anchor; early investment and commitment

45. Supply Chain Hub Strategy Creation Strategy and SCM Strategy Elements Industries offering Value Add Potential

46. Economic Model: Industry Sectors 1 Crop and animal production 2 Forestry, fishing, and related activities 3 Oil and gas extraction 4 Mining, except oil and gas 5 Support activities for mining 6 Utilities* 7 Construction 8 Wood product mfg. 9 Nonmetallic mineral product mfg. 10 Primary metal mfg. 11 Fabricated metal product mfg. 12 Machinery mfg. 13 Computer and electronic product mfg. 14 Electrical equipment and appliance mfg. 15 Motor vehicle, body, trailer, and parts mfg. 16 Other transportation equipment mfg. 17 Furniture and related product mfg. 18 Miscellaneous mfg. 19 Food, beverage, and tobacco product mfg. 20 Textile and textile product mills 21 Apparel, leather, and allied product mfg. 22 Paper mfg. 23 Printing and related support activities 24 Petroleum and coal products mfg. 25 Chemical mfg. 26 Plastics and rubber products mfg. 27 Wholesale trade 28 Retail trade 29 Air transportation 30 Rail transportation 31 Water transportation 32 Truck transportation 33 Transit and ground passenger transportation* 34 Pipeline transportation 35 Other transportation and support activities* 36 Warehousing and storage 37 Publishing including software 38 Motion picture and sound recording industries 39 Broadcasting and telecommunications 40 Information and data processing services 41 Fed. Reserve banks, credit intermed. & related svcs 42 Securities, commodity contracts, investments 43 Insurance carriers and related activities 44 Funds, trusts, and other financial vehicles 45 Real estate 46 Rental, leasing svcs. & lessors of intangible assets 47 Professional, scientific, and technical services 48 Management of companies and enterprises 49 Administrative and support services 50 Waste management and remediation services 51 Educational services 52 Ambulatory health care services 53 Hospitals and nursing and residential care facilities 54 Social assistance 55 Performing arts, museums, and related activities 56 Amusements, gambling, and recreation 57 Accommodation 58 Food services and drinking places 59 Other services* 60 Households

47. Economic Model: Industries from workshop one 1 of 3 Industry code Industry description Industry/Cargo (workshop notes) 1 Crop and animal production 1. Agriculture products (1110) 2. Shipping for greenhouses in Windsor (1110) 3. Home grown diverse food producing 4. Short shelf-life products (flowers from Africa) (1110) 111110 Soybean Farming 3 Oil and gas extraction 4 Mining, except oil and gas 1. Raw material exports: sand (2123), iron ore (2122), coal (2121); platinum; salt; water "Salt, common, mining and/or beneficiating" 212393 Other Chemical and Fertilizer 2. Water Mineral Mining "Salt, rock, mining and/or beneficiating" 212393 Other Chemical and Fertilizer Mineral Mining "Sodium chloride, rock salt, mining and/or beneficiating" 212393 Other Chemical and Fertilizer Mineral Mining Rock salt mining and/or beneficiating 212393 Other Chemical and Fertilizer Mineral Mining 6 Utilities 8 Wood product mfg. 1. Wood product (3210) 9 Nonmetallic mineral product mfg. 1. Carbon fiber manufacturing (3359, 331B, 3270) 2. Glass production (3270) 3. Advanced composites (331B) 10 Primary metal mfg. 1. High security commodities: platinum 11 Fabricated metal product mfg. 1. Machining capabilities (3332, 332B, 3335) 13 Computer and electronic product mfg. 1. Battery technology/recycling (3359) 2. Electronics (3341, 3344, 3345) 3. Defense (electronic equipment) (334A)

48. Economic Model: Industries from workshop one 2 of 3 Industry code Industry description Industry/Cargo (workshop notes) 14 Electrical equipment and appliance mfg. 1. Electric engine mfg for infrastructure (3353) 15 Motor vehicle, body, trailer, and parts mfg. 1. Automotive (3361): auto parts (336A) 2. Defense (vehicles) (3361) 3. Automotive charging (??) 17 Furniture and related product mfg. 1. Office furniture (3370) 18 Miscellaneous mfg. 1. Wind turbines (3336): alternative energy; Medical Technology (3391); devices and prosthetics; 2. Defense industries (Armaments, troop supplies) (332A) Security/Defense: TACOM, TARDEC; 3. High speed rail components; Nuclear pre-fabricated parts (3339, 336B) 19 Food, beverage, and tobacco product mfg. 1. Alcohol/spirits (3121) Foodstuff (3110) Perishables: high regional consumption of cognac; Europe import; local wineries (3121) canning (3110) home grown food processing (3110) 22 Paper mfg. Paper goods (3222) 25 Chemical mfg. Chemicals and polymers (Dow – Kuwaiti Dow) (3251, 3253, 3259) Advanced composites; Nuclear (non specified); Battery technology/recycling (3359) Bio-fuels (3240) 30 Rail transportation Bulk materials (non spec) (4820) 32 Truck transportation Parts distribution; (4840) Premium delivery

49. Economic Model: Industries from workshop one 3 of 3 Industry code Industry description Industry/Cargo (workshop notes) 35 Other transportation and support activities Heavy aircraft maintenance (3364); Aircraft parts distribution (3364); Recruit supply chain service industries to relocate to Detroit area (ex: Indy): inbound for consumer goods, retail distribution, containerized cargo, flexible containers, deconsolidation, cross-dock, add-on services, labeling, rework, consolidating services, demand aggregation and disaggregation, common shipments across industries, home delivery, data warehouse for shipping data, fulfillment centers, mfg goods that require sub-assembly (4930) 36 Warehousing and storage Distribution facilities; (4930) 47 Professional, scientific, and technical services Plant science (research, not a product) 50 Waste management and remediation services Recycling/reclaiming (5620); Waste paper/metal/scrap (5621, 5622, 5629)

54. Value Propositions by Industry Cluster Strong private sector message Collaboration and partnership Minimal uncertainty Reliable weather Minimal uncertainty Reliable weather Minimal uncertainty Reliable weather Supply chain sustainability Reduced cost of uncertainty due to less congestion Reduced cost of uncertainty due to less congestion Reduced cost of uncertainty due to less congestion Economic competitiveness and lowest total cost to serve Technical talent and global SC skills Available DC capacity Technical talent and global SC skills Technical talent and global SC skills Availability of human, land, supplier, and financial capital Ideal for heavy manufacturing Competitive tax climate Load limits Load limits Government regulations Infrastructure and labor skill Infrastructure and support capabilities Technical skill and global air-motor-rail interface Technical skill and global air-motor interface Technical skill and global air-motor-rail interface Ability to serve and be served by global markets Distribution Light Manufacturing Heavy Manufacturing SCM Element

55. Supply Chain Hub Strategy Creation Strategy and SCM Strategy Elements Industries offering Value Add Potential Economic and Job Creation Impact

57. Economic Model: Geographic Scope

58. Three Stages of SCM Economic Activity Stage 1 (Current) Economic activity associated with SCM Stage 2 (+3 years) Economic activity associated with SCM following recovery Stage 3 (+7 to10 years) Enhanced economic activity associated with SCM scale and industry attraction

59. What Does it Take to Go from Stage 2 to Stage 3? Stage 2 (+3 years) Economic activity associated with SCM following recovery Stage 3 (+7 to10 years) Enhanced economic activity associated with SCM scale and industry attraction Stage 1 (Current) Economic activity associated with SCM

63. Industry Forecasts – Heavy Manufacturing 1.13 Opportunistic and Innovative Defense 1.19-1.40 Opportunistic and Innovative Electronics - industrial 1.11 Organic and Innovative Chemical processing 1.30 Opportunistic and Innovative Carbon fiber manufacturing 1.08-1.65 Organic and Innovative Alternative energy 1.20-1.30 Organic and Innovative Automotive renewal Growth Potential Growth Opportunity Industry

64. Economic Evaluation: Heavy Manufacturing 6.4 28.4 22.0 1,181 5,250 4,069 Electronics -Industrial 41.2 213.3 172.1 5,074 26,324 21,250 Total 1.0 3.8 2.8 312 1,231 919 Forestry and bio-fuels 4.7 28.7 24.0 722 4,461 3,739 Defense 8.8 65.4 56.6 1,035 7,717 6,682 Chemical processing 1.5 5.5 4.0 299 1,056 757 Alternative energy 18.8 81.5 62.7 1,525 6,609 5,084 Automotive renewal Increase Resulting from Hub (000) Stage 3 Job Activity with Hub (000) Stage 2 Job Activity (000) Increase Resulting from Hub ($M) Stage 3 Economic Forecast with Hub ($M) Stage 2 Economic Forecast ($M) Industry

65. SCM Industry Activity – Heavy Manufacturing $ ? Jobs ? $ 21,250M Jobs 172,100 $26,324M (23.8% increase) Jobs 213,300 (23.4% increase) Stage 1 (Current) Economic activity associated with SCM Stage 2 (+3 years) Economic activity associated with SCM following recovery Stage 3 (+7 to10 years) Enhanced economic activity associated with SCM scale and industry attraction

66. Industry Forecasts – Light Manufacturing 1.19 Innovative Water technologies 1.23 Innovative Medical technologies 0.87-1.11 Organic, Opportunistic, and Innovative Food processing Growth Potential Growth Opportunity Industry

67. Industry Forecasts – Distribution 1.20-1.40 Innovative Waste Management 0.91-1.34 Opportunistic and Innovative Retail importing and value add 1.04-1.15 Organic, Opportunistic, and Innovative Beverage and alcohol distribution Growth Potential Growth Opportunity Industry

68. Economic Evaluation: Light Manufacturing, Distribution 3.8 14.9 11.1 1,243 4,902 3,659 Warehouse & storage 25.5 169.5 144.0 5,476 31,750 25,851 Total 3.3 18.5 15.2 626 3,572 2,946 Waste management 5.2 20.3 15.1 1,741 6,864 5,123 Retail trade 6.8 26.8 20.0 1,554 6,127 4,573 Wholesale trade 6.4 89.0 82.6 735 10,285 9,550 Food, beverage Increase Resulting from Hub (000) Stage 3 Job Activity with Hub (000) Stage 2 Job Activity (000) Increase Resulting from Hub ($M) Stage 3 Economic Forecast with Hub ($M) Stage 2 Economic Forecast ($M) Industry

69. SCM Industry Activity – Light Manufacturing/Distribution Stage 2 (+3 years) Economic activity associated with SCM following recovery Stage 3 (+7 to10 years) Enhanced economic activity associated with SCM scale and industry attraction $ ? Jobs ? $ 25,851 M Jobs 144,000 $ 31,750 M (22.8% increase) Jobs 169,500 (17.7% increase) Stage 1 (Current) Economic activity associated with SCM

70. Total SCM Industry Economic Activity $ ? Jobs ? $ 47,101 M Jobs 316,100 $ 58,074 M (23.3% increase) Jobs 382,800 (20.8% increase) Stage 1 (Current) Economic activity associated with SCM Stage 2 (+3 years) Economic activity associated with SCM following recovery Stage 3 (+7 to10 years) Enhanced economic activity associated with SCM scale and industry attraction

71. Total SCM Industry Economic Activity 66.7 K Jobs! $ ? Jobs ? $ 47,101 M Jobs 316,100 $ 58,074 M (23.3% increase) Jobs 382,800 (20.8% increase) Stage 1 (Current) Stage 2 (+3 years) Stage 3 (+7 to10 years)

72. Supply Chain Hub Strategy Creation Strategy and SCM Strategy Elements Industries offering Value Add Potential Economic and Job Creation Impact Economic Development

76. Enabling Economic Development SCM strategy elements Targeted industries Industry Value Proposition Economic development Job creation Policy refinements

77. Enabling Economic Development SCM strategy elements Targeted industries Industry Value Proposition Economic development Job creation Policy refinements Collaboration and communications

78. Enabling Economic Development: Policy Refinements SCM strategy elements Targeted industries Industry Value Proposition Economic development Job creation Policy refinements

87. Enabling Economic Development: Collaboration and Communications SCM strategy elements Targeted industries Industry Value Proposition Economic development Job creation Policy refinements Collaboration and communications

93. Georgia Center for Innovation and Logistics

98. Example Hub Organizational Concept Government Universities Industry Public Private Development Entity

101. Summary: Supply Chain Hub Strategy Strategy and SCM Strategy Elements Industries offering Value Add Potential Economic and Job Creation Impact Economic Development