Kansas City Smartport: The Regionalization of Logistics

Kansas City Smartport: The Regionalization of Logistics

Kansas City is after Chicago, the second most important rail transport hub in North America. The city acts as a large terminal organizing regional and continental freight distribution. Located two-thirds of the way between Los Angeles and Chicago, Kansas City is at the heart of a rich agricultural and manufacturing region, making it a substantial freight market but also an important intermediary location within North American trade routes. With the emergence of NAFTA, Kansas City saw a growth of a freight corridor with Mexico dubbed the “NAFTA highway”. KSC (Kansas City Southern), a class I railway company, expanded this corridor with the setting of a direct link with Mexico with its Mexican subsidiary (Kansas City Southern de México), all the way to the port of Lazaro Cardenas on the Pacific Coast of Mexico.

Towards the end of the 1990s, it became clear for regional stakeholders that there was a greater need to coordinate development strategies and the territorial organization of transportation and logistical activities within the metropolitan area of 2.2 million inhabitants. The growing quantity of freight being handled, the variety of origins and destinations, the lack of land in proximity to rail terminals in the central area were all factors inciting a more regional perspective about transport and logistics activities. Established in 2001, KC Smartport is a non-profit organization similar to a port authority and created by the Greater Kansas City Chamber of Commerce, the Kansas City Area Development Council, and the Mid-America Regional Council. It includes 18 counties, 50 cities, two states, several rail terminals (KCS, UP, and BNSF), logistics zones, and free trade zones. The Missouri River is also open for barge navigation for about 8 months each year and has recently experienced a growth in traffic of agricultural goods and chemicals. Several co-located logistics zones have been developed in combination with major terminal facilities such as KCI Intermodal Business Center (Kansas City International Airport) and the CenterPoint Intermodal Center (new KCS intermodal terminal).

Its Board of Directors includes a representative group of public and private actors related to transportation and commerce. Kansas City Smartport is not a logistic zone and does not directly manage any transportation assets. It is a cooperative governance model of a regional freight distribution system acting as a comprehensive inland port, which is in itself a cluster of assets. Under such a governance framework, issues of organizational purpose (strategy) are distinct from all other organizational issues (operations). While the Board of Directors focuses on strategic issues, the member companies and institutions are the main actors in operationalizing the strategies agreed upon by the Board. In such a setting, the Board exists on the members’ behalf and is accountable to the members in terms of the soundness and effectiveness of its strategies.

This governance model is considered one of the most advanced in North America in terms of its scale (a metropolitan area across two states) and scope (all freight modes represented). It can be considered as a “coopetitive” structure where actors agree upon strategies that promote common interests while many of them will be effectively competing in daily operations. KC Smartport has a broad mandate with the general aim of promoting economic growth in the region by attracting firms related to freight distribution as well as undertaking strategies to improve the efficiency of regional freight distribution. To meet these goals, KC Smartport is actively promoting three points:

  • Economic development. A standard marketing function to attract private investments in firms related to warehousing and distribution, third-party logistics, and manufacturing.
  • Trade data exchange. A form of freight community system (automated logistics data clearinghouse) to improve the supply chain visibility through inventory and shipment tracking, reporting, bill payment, and invoicing. This type of initiative enables a more effective of transport and logistical assets in addition to strengthen linkages between regional firms.
  • Business services. Attract firms that provide services to transport and logistics enterprises. One particular category concerns customs and foreign trade zone activities.

Kansas City was a pioneer in the setting of distributed foreign trade zones (FTZ), which conveys several operational advantages in managing freight distribution, particularly when foreign cargo is involved. Each FTZ is not a unique real estate asset at a single location, but a set of sites (sub-zones), each enabling to exploit a specific locational advantage such as an airport, intermodal rail yard, or highway interchange. A total of 14 FTZ sites accounting for 10,000 acres of land are available.

The development of transport and logistics activities requires a wide array of labor skills. Recruiting adequate labor is a common issue in areas having a high concentration of logistics activities that are “draining” the available regional labor. KC Smartport undertook an initiative grouping a critical mass of educational institutions to develop specialized training programs in critical sectors where there is a shortage of labor. The private sector offers several grants for those wishing to develop skills related to transportation and supply chain management. The outcome is creating an educational matrix where each institution offers specific programs based upon its resources.