The I-39 Logistics Corridor: Moving Cargo Here, There and Everywhere

Roger Hopkins named Corridor Administrator
February 25, 2017
I-39 Corridor seeing sparks of tech efficiencies and a steady road of development
February 25, 2017

The I-39 Logistics Corridor: Moving Cargo Here, There and Everywhere

Boxes filled with frozen foods wait to be delivered from Sara Lee’s largest U.S. distribution warehouse in Rochelle, Ill. (Dustin Waller photo)

BY OR NORTHWEST QUARTERLY.COM

To corporate logistics managers, I-39 is more than just a highway. It’s a key artery for shipping goods and services, and it easily connects to rail, air and river transportation. With wide-open roads and lots of available land, it’s easy to see why this is a rising star.

Boxes filled with frozen foods wait to be delivered from Sara Lee’s largest U.S. distribution warehouse in Rochelle, Ill. (Dustin Waller photo)

Sara Lee’s regional mixing center in Rochelle, Ill., is much like a beehive; the 400,000-square foot distribution warehouse is constantly abuzz.

Every day, trucks packed with frozen foods come and go. They arrive from processing plants around the Midwest and depart to the Midwest and to the West Coast.

Sara Lee’s largest American distribution center is in Rochelle for good reason: The warehouse is just minutes from two major interstates and Union Pacific’s giant intermodal rail hub. Through these routes, foods are shipped to any location overnight or in less than two days. Every minute counts, when you’re moving as many as 200,000 cases of food every day.

“With that much volume, it’s critical for us to have easy access for transportation,” says Bill Doeksen, director of operations and logistics for Sara Lee. “We’ve got Interstate 39 and Interstate 88 right here, and Interstate 90 isn’t far away. We can access major east-west networks and go as far south or north as we need.”

Rochelle’s wide-open access is in striking contrast to the crowded streets around Sara Lee’s global headquarters in suburban Downers Grove, Ill. There, trucks compete with commuters for space on clogged highways and streets.

Doeksen was well aware of Rochelle’s advantages when he helped bring the distribution center to the city in 2002. Based on various cost models, he says, northern Illinois has a strategic advantage for shipping goods around the country. “The advantage is really pretty simple,” says Doeksen. “It’s just moving boxes in the cheapest, most efficient way we can. I constantly have to ask, ‘How do we handle that box for the shortest amount of time and with the fewest number of transfers?’”

A Wide-Open Pipeline

Sara Lee was ahead of the curve, but I-39 has garnered increasing attention as a logistics corridor over the past decade. The highway connects central Illinois with Wisconsin, bisecting highways that run west to Iowa and east toward Indiana and Chicago. The corridor is more than just pavement. Years of investment have equipped it with rail, air and river transportation assets, all easily accessed through the highway.

Good logistics – moving things from Point A to Point B with maximum efficiency – requires speed, and that’s something the I-39 corridor can offer. As local economic development leaders see it, the corridor is a wide-open pipeline loaded with amenities that any logistics-dependent business could desire. They’re working together to sell the I-39 corridor’s transportation assets to Chicago-area developers, who can bring new warehouses and major employers to town.

That’s why, around 2002, economic development leaders joined with real estate brokers and industrial developers to attract Chicago-based firms and their clients, largely Fortune 500 companies looking to expand. Calling itself the I-39 Logistics Corridor Association, the 40-member group hails from Janesville to Bloomington-Normal and includes locations along I-88, such as DeKalb and Ottawa. Its main focus is to sell the area’s logistics potential as an alternative to Chicago. Members pool their resources to buy magazine advertising and attend networking sessions with the Chicago-based Association of Industrial Real Estate Brokers.“If all of the highway corridors in our region are arteries, and the heart is somewhere around Rockford, the beautiful thing is that the aorta, the main muscle, is I-39, and it doesn’t need any surgery,” says Bob O’Brien, executive director of the Chicago Rockford International Airport (RFD). “It’s in great condition. It can handle anything you can put in it right now, and it will be that way for many years to come. We all know the experience of driving down I-90. Out here in Rockford, the capacity still exists such that we don’t have traffic jams. The more you drive toward Chicago, to 10 minutes this side of O’Hare [International Airport], it becomes very challenging. Having I-39, I-88 and I-80 in your backyard – that’s a powerful thing.”

“Most logistics projects are decided by site consultants,” says Janyce Fadden, executive director of the association, and head of the Rockford Area Economic Development Council (RAEDC). “Site consultants are in the Chicago area, so our job is to connect the association to the site consultants so they can understand what’s out here.”

The I-39 Corridor Advantage

And what’s out here is opportunity. Along I-90, near O’Hare International Airport, nearly 166,000 vehicles pass by every day. By contrast, in Cherry Valley, Ill., about 53,000 vehicles pass the interchange at I-90 and I-39 every day, according to the Illinois Department of Transportation. About 30 percent of that traffic – nearly 16,000 a day – is truck traffic. South of Rockford, where Baxter Road meets I-39, nearly 30,000 vehicles – about 9,000 trucks – pass by each day.

In her day job as director of the RAEDC, Fadden knows what those numbers mean to a logistics company: Time and money. Trucks have easier access to their destinations when roads are less congested. And, thanks to the area’s manufacturing heritage, there’s ample workforce trained in moving goods quickly and efficiently.

“Logistics is one area in which we have a lot of assets that have value to clients,” says Fadden. “Companies want to be in a place because it’s cost-effective for their goods or services to pass through it, and because there’s a great workforce. Rockford has that combination.”

Fadden assumed leadership of the corridor association in 2007, at a time the group was celebrating new businesses and expansions. More followed. Lowe’s put a 1.4 million-square-foot facility near Bypass 20 in Rockford. Staples built a 400,000-square-foot distribution center in the Beloit, Wis. Gateway Business Park. Target built a 1.5-million-square-foot distribution center in DeKalb, Ill. Sara Lee has twice expanded its Rochelle facility, and 3M is finishing a fifth building at its DeKalb campus. Fadden says the association has achieved its initial goal.

Mark Goode, a principal with Venture One Real Estate, Lincolnshire, Ill., wanted to show his clients a better option. After landing developments in DeKalb and Loves Park, Ill., it became apparent to him that the open roads and land availability there created a natural opportunity. Goode joined with leaders in DeKalb, Rockford and Rock County, Wis., to spread the word.“Before this association started, if you asked a lot of Chicago real estate people, ‘Where’s I-39?’ or ‘Name some cities along I-39,’ they couldn’t have done that,” says Fadden. “So we’ve done a good job of educating them about the corridor. At a luncheon last year, they said to us, ‘Now we know where I-39 is and you’ve done some work to make it easier for us to decide whether or not this is something we want to show our clients.’”

“It was all about the brokers in Chicago,” says Goode. “We wanted them to know there was this highway, and to let them know about the wide-open highways and the intermodal facility in Rochelle.”

The association’s first step in promoting the region was to place ads in high-profile publications and directories used by commercial developers. Pooling resources enabled smaller communities to join the promotional effort and market themselves.

The association also sponsored logistics studies on the area, compiling what Goode calls a “library of information” that makes it easier to sell the region.

“We tell people that within five minutes of most sites along I-39, your truck is up and running at rated highway speed,” says Fadden. “That’s not going to happen in Chicago.”

Location, Location

Question: What has 700,000 square feet of warehouse space, 67 truck bays, shelters up to seven rail cars and is just a mile from I-90/39 in a logistics-friendly neighborhood?

Answer: A warehouse in Janesville, Wis., which, in a former life, was a just-in-time parts supplier to GM. It’s newly remodeled, bright, clean and ready for tenants.

Walking through the warehouse on a cold February morning, he points out how the space, subdivided into three warehouses, has high ceilings for cranes, is connected to a railroad track and is in move-in ready condition. It’s a perfect spot for light manufacturing and located close to the highway.Gregg Tatge, business resource manager for Helgesen Development, Janesville, helps companies to acquire the incentives they need to move into a space like this.

“Location is a key factor,” says Tatge. “This is a big facility with a rail line connection. It’s fairly new and it’s right off the interstate. You can easily move things north to St. Paul or Madison, or south to Chicago, Rockford and St. Louis.”

Bill Mears knows the value of that location. From his Janesville office, just up the highway from Helgesen’s empty warehouse, the commercial real estate broker watches trucks go up and down I-90/39 all day long. He’s also within easy view of two trucking centers, one for Farm & Fleet, the other for Grainger, an industrial supply company.

“Our clients are looking for the best value out of their locations,” says Mears. “That could have a lot to do with where the property is situated, because it impacts transportation, labor and business costs.”

Mears is a corridor member who’s been successful bringing logistics-related companies to the area. Recent clients include a candy maker and a taxidermy supply company. “Everything I’ve been doing over the past two years is with available buildings,” he says. “There aren’t a lot of new construction deals. Some companies have expanded, but you’re not seeing industrial buildings going up.”
In a booming economy, something like the former GM supply space would have been snatched up in a hurry, says Tatge. The company also has several new developments ready to go, with plans drawn and permits signed, just waiting for clients.

Location was a key factor for Lowe’s, when it built a 1.4 million-square-foot distribution center in Rockford in 2007. From Bypass 20, it’s just minutes from I-39 and I-90. About 800 employees pack up nearly 32,000 house fans, lawn mowers, paint buckets, weed-whackers and other supplies into truckloads each day, sending them off to stores throughout Illinois, Iowa, Wisconsin and Michigan.

By Road, Air, Water & Rail

Years of investment have readied the area for more than efficient trucking. With a cargo and passenger airport in Rockford and an intermodal rail hub in Rochelle, companies have options.

Cargo planes at RFD arrive and depart throughout the day and night. Situated just south of Rockford, the airport is minutes from Route 20 and I-39. Similar to the way the corridor association promotes the region’s lack of vehicle congestion, O’Brien touts open skies.

“Planes fly to O’Hare and get in the traffic pattern, and burn 6,500 gallons of fuel an hour doing that,” he says. “So an extra 30 minutes of flying means a lot of extra fuel. Touchdown to engine shutdown at RFD is just under five minutes. The average cargo plane at O’Hare takes 21 minutes.”

It helps, too, that the airport is situated on more than 3,000 acres of largely undeveloped land at the edge of Rockford. RFD ranks 21st in landed cargo weight, among airports in the United States, and for those cargo shippers already here – UPS and DB Schenker – the advantages are obvious. The UPS facility handles nearly 30 daily flights and moves some 121,000 packages every hour, more than anyplace else in the world, except its Louisville, Ky., hub.

“RFD flies in about 1 billion pounds of cargo, plus or minus, every year,” says O’Brien. “All of that comes in from the planes. Sixteen percent of that stays and gets delivered throughout the region via ground transportation. Sixteen percent gets on UPS trucks that go to Chicago, Milwaukee, Iowa, Wisconsin or southern Illinois.”

O’Brien dreams of filling his runways with more cargo planes, and he’s reaching out to international carriers, selling them on the airport’s ability to move goods faster and more efficiently than O’Hare.

RFD holds the corridor’s only foreign trade zone status, a government designation that allows carriers to expedite cargo through customs. Atlas Air has tested several flights to Rockford, and O’Brien says he’s offering other companies a chance to bring test flights through the airport.“[International carriers] find it initially hard to imagine how you can land a plane at RFD, offload its cargo and deliver it – by truck – to a plane at O’Hare, faster than they could have taken the product into O’Hare in the first place,” says O’Brien. “They can save a minimum of 30 minutes to 3 hours, with a cost savings of $15,000. It doesn’t seem to make sense.” But it actually makes a lot of sense.

“We’re out there looking for people who are doing business in the Chicago/Milwaukee area or who want to,” says O’Brien. “We’re out there creating solutions that deal with their challenges.”

Digital Logistics, Too

With its crisscross of rail lines giving it a competitive advantage, Rochelle, population 10,000, operates independently from the corridor association. Its rail lines lead to the Union Pacific’s intermodal rail hub, southwest of the city. The hub serves intermodal freight – train cars that also piggyback on semi trucks. At full capacity, the hub can process some 25 trains and 3,000 containers a day. That’s a lot of freight, and Rochelle offers another advantage in the transportation game: it sits at the junction where I-39 meets I-88, offering speedy access north, south, east and west.

“We offer companies multiple assets of being on two highways, with railroads, city rail, fiber optic connectivity, intermodal and a small airport that’s expanding,” says Jason Anderson, director of economic development for Rochelle. “We offer companies a choice of many logistical transportation options.”

Anderson sees Rochelle as an up-and-coming hotspot for data-based logistics, too. Allstate Insurance and Northern Bank & Trust store massive amounts of digital data at their facilities in a new tech park adjacent to I-39. With a high-speed, fiber-optic broadband network available throughout the city, there’s opportunity for others to join them.

Through those efforts, Rochelle has attracted new distribution centers and helped motivate others to expand. Sara Lee has expanded its facility twice since 2007. The Rochelle Foods/Hormel plant has expanded three times, and a company that builds rail cars is constructing a new manufacturing plant. Anderson currently has nine separate projects in the works.In 2008, Anderson developed TEAM ROCHELLE, to improve communication on new developments. The consortium includes local colleges, elected officials and city staff who contribute their resources and expertise.

“More than enough development is coming,” says Anderson. “TEAM ROCHELLE has laid the groundwork for big things to happen here.”

Small Towns, Big Assets

Ottawa, Ill., is another small town with a big story to tell to potential distributors.

“We’ve had companies tell us we’re a logistics dream,” says David Noble, Ottawa’s community development director. “We have barges on the river, we’re just off I-80, we’re right near I-39, and we have rail connections.”

The city of 19,000 people, on the Illinois River, has landed several big projects since joining the corridor association. A new PetSmart distribution center opened in 2005, followed by a Kohl’s distribution center in 2008. A titanium powder manufacturer expects to open this year. “The ability to let people know the benefits of your area is huge,” says Noble.

Like Ottawa, smaller Illinois cities like Dixon, Monroe Center and Mendota are benefitting from joining forces. Through the corridor association, they attract attention they otherwise couldn’t.

“A small community like Princeton, for $500, can be connected into some advertising into Chicago,” says Fadden, corridor association director. “They can’t even begin to buy an ad for themselves or an ad program for that amount of money, so that’s really what it’s about – how we can combine money so that there’s a presence for them in the marketplace, with something they couldn’t pay for by themselves.”

DeKalb, too, has found value in collaboration. Located less than 15 miles east of Rochelle, along I-88, it’s close to Chicago, yet in easy reach of I-39.

“It’s convenient and timely to receive or distribute products from DeKalb,” says Paul Borek, executive director of the DeKalb County Economic Development Corporation. “The Midwestern states and the Chicago metro area are easily accessible while avoiding congestion within Chicago. Union Pacific’s intermodal facility is nearby for shipping and receiving, and the airport system is easily accessible, too, with O’Hare, Rockford’s UPS air sorting hub, and the DeKalb Taylor Municipal Airport for corporate air fleets.”

Small cities aren’t the only underdogs finding value in the corridor association. Smaller companies like Reload Inc., Rockford, benefit from the chance to improve business connections.Materials producer 3M has long had a presence in DeKalb, and is completing the fifth building on its campus. Food producer Nestlé has an 868,000-square-foot distribution center, while tire maker Goodyear has a 1 million-square-foot distribution center. In 2005, Target joined the area, with a distribution center totaling 1.5 million square feet.

Owned by a national transportation company, Reload specializes in transferring goods between semi truck and rail car. It doesn’t work with the Rochelle hub, but Bob Cunningham, general manager for Reload, says the highway and nearby rail lines offer easy access for his clients.

“A lot of facilities like us are on one railroad, so it limits your costs and your freight movement,” says Cunningham. “Rockford is connected to every railroad, so we can offer clients a lot more options.”

The Future We Make

Not surprisingly, development has been slow, since the recession began in 2008, but leaders say things are picking up.

“The past two years have been kind of quiet,” says Fadden. “But prior to that, we tracked more than 8 million square feet of development taking place within the I-39 corridor.” Ample space remains.

Back at RFD, director O’Brien is dreaming big. As he continues to spread the word about his airport’s assets, he knows that I-39, too, will play a key role in the region’s future.

“I would say that the future is what we make out of it,” says O’Brien. “We can say whatever we want to say, but the question is, ‘Are we ready to put the energy into making that happen?’ Talk is cheap. Action is king. The good thing is that we have the tools. We have this I-39 asset. We have this interchange. We have this airport and we have leaders in this local region who are embracing change. Change is inevitable. You either affect change or it affects you.”