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Sector Report- Logistics and Goods Movement in LA County


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This report is the result of a four-month study generated to assist program development at Community Career Development, Inc. (the non-profit operating agent of the Wilshire-Metro WorkSource Center in Korea Town, Los Angeles.) The non-profit hosts a Logistics Training Academy for un and underemployed job seekers in Los Angeles in partnership with the City of Los Angeles, The Aspen Institute and LA Community Colleges (among others.)

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Sector Report- Logistics and Goods Movement in LA County

  1. 1. Logistics and Goods Movement Jobs in Los Angeles County: An Industry Snapshot and Overview of Employer Needs Prepared on behalf of Community Career Development, Inc., and the WilshireMetro Worksource Center By Steven Simon and Deborah Helt December 2008
  2. 2. Table of Contents Executive Summary………………………………………………………………………1 Introduction ………………………………………………………………….…………....4 Scope of Report . …………………………………………………………….….............5 Industry Snapshot: Federal, State, and Other Datasets…………………..………….6 Logistics Employment and the Ports………………………………6 NAICS AND SOC Data ……………………………………………..7 Industry Snapshot: Field Interviews…………………………………………………….21 Methodology………………………………………………………….21 Company Types and Occupations Defined . …………………….24 Is Logistics A Los Angeles Growth Industry?.............................29 Entry Level Employment and CCD Standards…………………..35 Wages ……………………………………………………….35 Career Opportunities ……………………………………….38 Industry Hiring Practices ………………………………………………..……...40 Common Hiring Sources ………………………………….. 40 Background Issues and Hiring …………………………….43 Temporary Staffing Agencies and Hiring………………….45. Do Training Programs Provide an Edge?.........................47 Top 10 Suggestions for the LGMTA Curriculum………….49 Program Recommendations…………………………………………………….…….51 Curriculum……………...……………………………………………………….51 Two-Track Approach………………………………………...51 Working With Hard to Serve Populations………………….53 Type of Companies to Target……………………………….55 Staffing Services………………………………………………56 Achieving Industry Buy-In…………………………………………………….57 Developing the Employer Network…………………………58 Building CCD’s Public Image……………………………….59 Expanding the CCD Intern Program……………………….60 Conclusion………………………………………………………………………..…...61
  3. 3. Executive Summary Introduction and Methodology The purpose of this report is to improve the quality of placements and the effectiveness of programming of the Logistics and Goods Movement Training Academy (LGMTA) through a better understanding of the local industry presence and the needs of employers. Our goals for this research are twofold: 1. To gain an accurate quantitative and qualitative snapshot of logistics and goods movement facilities in Los Angeles relevant to LGMTA participants. 2. To evaluate the LGMTA’s current curriculum and program approach using insights gleaned from interviews with employers. This report was generated between August and December of 2008, during the sixth and seventh sessions of the Logistics and Goods Movement Training Academy (LGMTA). To address our core research questions, we gathered data from state and federal datasets and from a series of 43 interviews with local industry representatives. Key Findings Company Types. It is difficult to make across-the-board generalizations about firms and functions in the goods movement industry. Each type of company provides a wide variety of services. For the purposes of the LGMTA, we divided goods movement firms into three broad types: • Third party logistics companies (3PLs) • Public Storage Warehouses • Retail Distribution Centers Occupations. Based upon our interviews with employers, we have classified occupations into three major types: • Warehouse/Material Mover • Office Jobs • Other (includes driving and courier services) Is Logistics still a Growth Industry in Los Angeles? Despite rapid growth in Inland Empire logistics facilities, employers said that they believe Los Angeles will remain the center of the Southern California goods movement industry. • Los Angeles facilities are closer to the ports. Given the rise in fuel costs, many employers prefer the “fixed-cost” of the land in Los Angeles to the “variable cost” of fuel. • Los Angeles County locations are more amenable to serving varied and/or smaller customers. 1
  4. 4. Entry Level Employment and CCD Standards. Entry level opportunities are limited and tend to be low-paying. While the majority of entry-level jobs offer disappointing starting wages, almost all employers said there are substantial opportunities for career advancement. • Entry-level wages average about $9.00 per hour. • Targeted placements in specific industry sub-sectors will improve the chances of a higher starting wage. CCD will likely attain more placements at $10 to $15 an hour with strategic employer targeting. Industry Hiring Practices. Employers are using several different methods to find employees, but they still overwhelmingly prefer referrals from current employees and other trusted sources. Temp agencies are playing a growing role in hiring. • Common ways of searching for employees include: word of mouth, temporary agencies, internet job search sites, print classified advertisements, the company website, head hunters, career fairs, in- house staffing entities, “poaching,” and previous employees. Most employers are shifting to on-line applications, especially those that pay well. • LGMTA students should approach temporary work with caution and an open mind. Many employers want at least three months of experience. However, students should, as a rule, not spend more than six months in a temporary position. • When approaching applicants with criminal background issues employers tend to defer to the standards of customers or regulatory agencies in deciding whether or not to hire a person with a criminal record. About half of employers said they consider applicants with records “on a case by case basis.” • Offenses involving theft are especially hard to overcome for applicants seeking warehouse work. Program Recommendations. The current LGMTA curriculum is not optimally meeting the needs of jobseekers or employers. The program attracts hard-to-serve and more highly-skilled jobseekers but cannot effectively meet the needs of both. We recommend that the LGMTA be split into two tracks, designed to run consecutively: • Two-Week Logistics Job Search Academy will address key obstacles to obtaining warehouse floor employment. The curriculum will address jobsearch skills including a targeted computer skills class, assistance with the preparation of application materials, and key certifications such as OSHA and basic forklift. • The Two-Month Freight Forwarder Training Academy will direct participants toward a career in freight forwarding or import/export-related customer service. This program will be geared toward office work and students who may ultimately wish to pursue a professional logistics degree. 2
  5. 5. There are several elements that will be critical to the success of the new curriculum. CCD must improve its industry buy in by achieving and celebrating “flagship placements” and improving outreach with participating companies to develop “employer champions. CCD employers should do targeted outreach to companies that provide quality jobs. • We recommend older cold storage firms, large multinational logistics Firms, unionized firms and firms in heavily unionized sub-sectors. CCD must also realistically address the impact of staffing agencies on the industry. We suggest three potential courses of action: • Partner with existing temp agencies to place LGMTA graduates. • Advertise as an agency that can provide staffing services, such as training and pre-screening, but without providing the broader liabilities of a temp agency. • Become a full-fledged staffing company. CCD must also bolster its public image by participating broadly in industry events, publicly recognizing supportive employers with the help of high-profile partners and improving its website. 3
  6. 6. Introduction We researched and wrote this report from August through December 2008, during the sixth and seventh sessions of Community Career Development’s Logistics/Goods Movement Training Academy (LGMTA). The purpose of our report is to recommend ways for Community Career Development (CCD) to improve both the training and the job placement assistance that students in the LGMTA receive. This report relies primarily on two types of information: (1) statistics from state and Federal datasets, and (2) information taken from our own interviews with goods movement employers, industry organizations, and direct interaction with LGMTA students. For the duration of this project, CCD intended for us to employ a relationship-building research process, resulting in a network of industry employers willing to become involved with the LGMTA and eager to consider hiring graduates of the program. This remained our primary goal throughout our research, despite the challenges posed by a consumer economy that quickly went from sluggish to absolute freefall during the few months leading up to this writing. We have established several relationships with local companies, a few of which have already benefited the LGMTA during the sixth and seventh sessions. The end goal of the LGMTA is not simply job training and job placement. CCD has invested its resources in goods movement training because the conventional wisdom and first-hand experience point to the fact that logistics jobs offer a career ladder to under-skilled individuals with low educational attainment. We found this assumption to be mostly true (though not universally). CCD seeks to use the LGMTA as a springboard into living wage jobs with opportunities of advancement, and this end goal was also the focus of our research. 4
  7. 7. Scope of Report For the most part, we have kept the geographical scope of this project to Los Angeles County. We visited a few goods movement firms just over the border between Los Angeles County and Orange County, and none in the major logistics center of Riverside and San Bernardino Counties. All LGMTA participants live in Los Angeles County, so we limited our study to the 30 mile radius surrounding CCD’s Koreatown, Los Angeles location. We have made an attempt to solicit information from firms across the spectrum of logistics employment: couriers, 3PLs, global shippers, public warehouses (cold and dry storage) retail distribution centers, freight forwarders, and even packing and crating operations all contributed to our findings. Further, in an attempt to determine the profile of companies likely to benefit LGMTA participants, we have attempted to survey small, medium, and large companies. This report relies on a minimum of technical language (as do those working in the industry, generally). We define any terms that beg clarification in the text. We use the terms “logistics” and “goods movement” interchangeably, referring always to the widest net used by CCD – any occupations involved in the transportation of goods. As stated, living wages and career opportunities are the focal point of this study. The concept of “living wage” has primarily colloquial meaning and career opportunities are hard to determine until a person is placed in a given job. However, CCD has one official guideline that we have used as a baseline in determining whether wages are sufficient: for contractual reasons, jobs must start at $11.00 to $14.00 per hour. In general, we do not cite sources by name when we quote them. Several of our sources seemed uncomfortable with the idea that they might be quoted, and one in particular required anonymity as a condition of our interview. (The 3PL in question runs a chemical distribution facility, and the source cited federal law as the reason for this condition.) It is reasonable to assume that our other sources did not expect us to circulate details about their hiring woes, major accounts, and the details of their temporary staffing arrangements. 5
  8. 8. Industry Snapshot: Federal, State, and Other Datasets LOGISTICS EMPLOYMENT AND THE PORTS The Los Angeles and Long Beach ports together are the biggest generator of employment in Southern California. Most LGMTA graduates will be seeking employment tied to port activities. Figure 1 Goods movement and logistics operations in Los Angeles have flourished because of their proximity to the Los Angeles and Long Beach ports. Overall, the twin ports generate an estimated 500,000 jobs in the Southern California region, making them the largest generator of employment in California. Together the Los Angeles and Long Beach ports comprise the busiest port complex in the U.S. and the fifth busiest in the world. At present, approximately 43% of all the goods that enter the United States and over 70% of containers handled at major West Coast ports are handled at the Los Angeles and Long Beach port complex. (See Figure 1) Total container trade at the twin ports grew by 296% between 1995 and 2007. Growth rates in container trade volumes at the ports have leveled off in the last two years, but even at vastly reduced rates of growth, both ports are still anticipating a severe crisis of capacity within the next ten years. Port authorities are developing plans to address the impending needs of infrastructure, labor and the environment. Figure 2 A recent SCAG study predicts that an additional 1.3 million jobs will accompany infrastructure improvements to the ports in the near future. A significant portion of these jobs will be related to the inbound transportation and distribution of goods entering the ports. Most LGTMA graduates will be seeking 6
  9. 9. positions tied to port activities and most will likely fall within the Transportation and Warehousing Sector. NAICS AND SOC DATA This report uses government data sets to offer a broad quantitative snapshot of the logistics industry in Los Angeles. The majority of data is from the North American Industry Classification System (NAICS) Sector 48-49: Transportation and Warehousing, and the Standard Occupational Classification System (SOC), Occupational code 53: Transportation and Material Moving Occupations. Data indicate that the industry is growing both nationally and locally. Government data for the Transportation Sector is described by NAICS data and SOC data. The North American Industry Classification System (NAICS) classifies businesses into different industries, while the Standard Occupational Classification System (SOC) classifies occupations by job duties. NAICS classifies major industries by codes based on how a business produces a product, (or by the technology and processes used,) not by what the actual product is. Major sectors are defined by two-digit codes, while sub-sectors are classified with three to six digits, growing larger with degree of specificity. For example NAICS sector 48-49 covers Transportation and Warehousing categories. Within this category Air Transportation, NAICS 481 is then further broken down into smaller sub-sectors called Scheduled Air Transportation, NAICS 4811 and Non-scheduled Air Transportation, NAICS 4812. For the purposes of this research, we analyzed NAICS sector 48-49 Transportation and Warehousing and seven key sub-sectors, focusing mainly on employment and wage data. For additional occupation and wage data we analyzed a selection of SOC codes related to NAICS 48-49. The U.S. Census Bureau defines NAICS 48-49 as the following 1 : The Transportation and Warehousing sector includes industries providing transportation of passengers and cargo, warehousing and storage for goods, scenic and sightseeing transportation, and support activities related to modes of transportation. Establishments in these industries use transportation equipment or transportation related facilities as a productive asset. The type of equipment depends on the mode of transportation. The modes of transportation are air, rail, water, road, and pipeline. The Transportation and Warehousing sector distinguishes four basic types of activities: • Subsectors for each mode of transportation • Subsectors for warehousing and storage 1 7
  10. 10. • Subsectors for establishments providing support activities for transportation. • Subsectors for establishments that provide passenger transportation for scenic and sightseeing purposes, postal services, and courier services. The seven sub-sectors most relevant to our study are described in more detail below: Table 1: Definitions of seven selected sub-sectors from Transportation and Warehousing NAICS 48-49 NAICS Sub-Sector Definition Industries in the Air Transportation subsector provide air transportation of passengers 481 Air Transportation and/or cargo using aircraft, such as airplanes and helicopters. The subsector distinguishes scheduled from nonscheduled air transportation. Industries in the Rail Transportation subsector provide rail transportation of passengers and/or cargo using railroad rolling stock. The railroads in this subsector primarily either operate on networks, with physical facilities, labor force, and Residual-Rail 482 equipment spread over an extensive geographic area, or operate over a short Transportation distance on a local rail line. Scenic and sightseeing rail transportation and street railroads, commuter rail, and rapid transit are not included in this subsector. Industries in the Truck Transportation subsector provide over-the-road transportation of cargo using motor vehicles, such as trucks and tractor trailers. The subsector is Truck subdivided into general freight trucking and specialized freight trucking. This 484 distinction reflects differences in equipment used, type of load carried, scheduling, Transportation terminal, and other networking services. Each of these industry groups is further subdivided based on distance traveled. Industries in the Transit and Ground Passenger Transportation subsector include a variety of passenger transportation activities, such as urban transit systems; Transit & Ground chartered bus, school bus, and interurban bus transportation; and taxis. These 485 Passenger activities are distinguished based primarily on such production process factors as Transportation vehicle types, routes, and schedules.In this subsector, the principal splits identify scheduled transportation as separate from nonscheduled transportation. Industries in the Support Activities for Transportation subsector provide services that support transportation. These services may be provided to transportation carrier Support Activities establishments or to the general public. This subsector includes a wide array of 488 for Transportation establishments, including air traffic control services, marine cargo handling, and motor vehicle towing. The Support Activities for Transportation subsector includes services to transportation but is separated by type of mode serviced. Industries in the Couriers and Messengers subsector provide intercity and/or local delivery of parcels. These articles can be described as those that may be handled by one person without using special equipment. The restriction to small parcels Couriers & 492 partly distinguishes these establishments from those in the transportation Messengers industries. Messengers, which usually deliver within a metropolitan or single urban area, may use bicycle, foot, small truck, or van. Warehousing & 493 Industries in the Warehousing and Storage subsector are primarily engaged in Storage 8
  11. 11. operating warehousing and storage facilities for general merchandise, refrigerated goods, and other warehouse products. These establishments provide facilities to store goods. They do not sell the goods they handle. They may provide a range of services, often referred to as logistics services, related to the distribution of goods.. Bonded warehousing and storage services and warehouses located in free trade zones are included in the industries of this subsector. Additional sub-sectors not included in this study are: Scenic and Sightseeing Transportation (NAICS 487), Pipeline Transportation (NAICS 486), and Postal Service (NAICS 491). These sectors were not included because they were the least relevant to the content of the LGMTA curriculum. Standard Occupational Classification (SOC) codes. The Standard Occupational Classification (SOC) groups workers into categories by occupations, outlining duties, skills, education and experience involved in a particular job. There are 23 major, 96 minor, 449 broad and 820 detailed categories. The SOCs relevant to our purpose mostly lie in major category 53: Transportation and Material-Moving Occupations. This category is sub-divided into seven major subcategories. Table 2: List of Occupations under Transportation and Material Moving Occupations SOC Major Minor Transportation and Material 53-0000 Moving Occupations 53-1000 Supervisors, Transportation and Material Moving Workers 53-2000 Air Transportation Workers 53-3000 Motor Vehicle Operators 53-4000 Rail Transportation Workers 53-5000 Water Transportation Workers 53-6000 Other Transportation Workers 53-7000 Material Moving Workers Employment Development Department Data. Selected EDD data used in this research is part of the Quarterly Census of Employment and Wages (QCEW) program, a set of data on employment and wages by 6-digit NAICS code collected at the National, State, and County levels. EDD derives data from quarterly tax reports required by California employers subject to State Unemployment Insurance (UI) laws. EDD edits and processes the data which is then send to the Bureau of Labor Statistics (BLS) for dissemination. 9
  12. 12. Bureau of Labor Statistics Data The Current Employment Statistics (CES) are the result of a monthly survey of about 150,000 businesses and government agencies, representing approximately 390,000 individual worksites regarding employment, hours and earnings from nonfarm payrolls. Results are reported to the Bureau of Labor Statistics. Transportation and Warehousing (NAICS 48-49): U.S. Table 3: U.S. Establishments, Revenue, Payroll and Employees for NAICS 48-49 Annual Payroll Revenue (in Paid Year Establishments (in thousands thousands) Employees of dollars) 2002 199,618 382,152,040 115,988,733 3,650,859 1997 178,025 318,245,044 82,346,182 2,920,777 12.1 20.1 40.9 25 Percent Change Source: 2002 U.S. Economic Census Between 1997 and 2002 (the most recent data available from the U.S. Census), the number of establishments in the U.S. Transportation and Warehousing Sector grew by 12.1%, while the number of employees grew by 25%. The sector grew by 20.1% in revenue during the same period, while revenue per employee dropped by 4%, from $109,000 to $105,000. 2 According to CES data, national employment levels in the sector have grown at an average of 1.6%, since 1990. The highest growth rates occurred between 1995 and 2000, with a high of 3.5% in 1998. Figure 3 2 U.S. Census Bureau **Data Source: Econ Census/All Sectors/2002/Economy-Wide Key Statistics 10
  13. 13. Of the six sub-sectors selected from NAICS 48-49 for this report (Rail Transportation figures are not reported in the 2002 Economic Census) Truck Transportation comprised 41% (1,435,210,000) of the total U.S. employment in our reduced sample group, followed by Couriers and Messengers (561,514,000) and Warehousing and Storage (565,533,000) both at 16%, then Support Activities for Transportation at 13% (465,616,000), followed by Transit and Ground Passenger Transportation at 11% (398,383,000). Wages. The average hourly earning of production employees nationally for NAICS 48- 49 was $18.07 in 2007. Figure 4 According to CES statistics, California generates the most revenue and has the most employees in the Transportation and Warehousing Sector than any other U.S. State. Table 4: California Establishments, Revenue, Payroll and Employees for NAICS 48-49 Revenue % Annual payroll Paid Description Establishments Revenue ($1,000) of U.S. (in thousands) employees California 19,012 45,507,276 11.91 13,129,272 397,266 Source: 2002 U.S. Economic Census Los Angeles County Employment. In Los Angeles County, as of 2007, the largest sub-sector in the NAICS category 48-49 in terms of employment was Support Activities for Transportation (NAICS 488) with 31% (47,900 jobs), followed by Truck Transportation (NAICS 484) with 18% (28,100 jobs), Couriers and Messengers (NAICS 492) with 15% (22,100 jobs), Air Transportation (NAICS 481) with 13% (19,500 jobs), and Warehousing and Storage (NAICS 493) with 11% (17,200 jobs) in that order. 11
  14. 14. Figure 5 Source: Employment Development Department, Labor Market Information Division The Transportation and Warehousing sector as a whole grew by an average of .42% between 1990 and 2006, and grew fastest between 1995 and 2000 at a rate of 3.12%. During this period, the surrounding Counties of Riverside-San Bernardino-Ontario MSA grew by an average of 6.2% between 1990 and 2007. : Figure 6 12
  15. 15. Between 1990 and 2007, Support Activities for Transportation (NAICS 488) grew the fastest of the seven major sub-sectors at an average rate of 3.7% and a high rate of 12.7% in 1998 (just after the passage of NAFTA). Employment levels in Truck Transportation (NAICS 484), Couriers and Messengers (NAICS 492) and Transit and Ground Passenger (NAICS 485) have remained consistent, while Rail Transportation (NAICS 482), Air Transportation (NAICS 481) and Warehousing and Storage (NAICS 493) have declined moderately since 1990, at rates of -.93%, -3.07% and -.32% respectively. Figure 7 Wages. According to the Bureau of Labor Statistics, the average wage for NAICS sector 48-49 as of 2006 was $915 per week and $47,548 per year. The highest paying sub-sector that year was Support Activities for Transportation (NAICS 488) at $1,164 per week, $60,525 per year. Figure 8 13 Source: BLS Quarterly Census of Employment and Wages
  16. 16. Average hourly wages for the sectors break down as follows: Air Transportation, $28.07, Rail Transportation, $19.83, Truck Transportation, $19.35, Transit and Ground Passenger Transportation, $13.65, Support Activities for Transportation $29.10, Couriers and Messengers, $17.60, and Warehousing and Storage, $20.18. Figure 9 Establishments. In Los Angeles County, Truck Transportation and Support Activities for Transportation have the most reported establishments of our seven targeted sub-sectors, 38% (2,086 establishments) followed by Air Transportation, Couriers and Messengers, Transit and Ground Passenger Transportation and Warehousing and Storage. Warehousing and Storage Nation-wide, employment in Warehousing and Storage grew faster between 1998 and 2006 than any other occupation in the Transportation and Warehousing Sector. While growth in Warehousing and Storage Southern California has been slow, the sub-sector retains a significant presence and is an important source of entry-level employment for LGMTA graduates. 14
  17. 17. Figure 10 Warehousing and Storage Establishments and Distribution Size: Los Angeles County Figure 11 According to the Employment Development Department, there are 441 warehousing employers in Los Angeles County. General Warehousing and Storage (362 establishments) account for 82% of the total Warehousing and Storage establishments, followed by much smaller numbers in Refrigerated Warehousing (40 establishments), Other Warehousing and Storage (36 establishments), and a small group of Farm Product Warehousing and Storage Facilities (four establishments.) Los Angeles is still the biggest presence in the industry, despite rapid increases in establishments in Riverside and San Bernardino Counties that occurred as land around the ports became scarce. The most recent available Census Data indicates that of the total Warehousing and Storage establishments in the four-county region, Los Angeles has 57%, San Bernardino has 19%, Orange County has 15% and Riverside has 9%. 15
  18. 18. Table 7: Southern California Warehousing and Storage Establishments: 2006 Los San NAICS Industry Angeles Bernardino Riverside Orange 493 Warehousing and Storage 441 150 72 114 49311 General Warehousing and Storage 362 130 56 96 Refrigerated Warehousing and 49312 Storage 40 10 6 5 Farm Product Warehousing and 49313 Storage 4 1 2 0 49319 Other Warehousing and Storage 36 9 8 13 Source: Employment Development Department, Quarterly Census of Employment and Wages, 2007 Since 1990, growth rates in San Bernardino and Riverside have been consistently higher than those in Los Angeles and Orange County. Between 1990 and 2006, Warehousing and Storage establishments grew by an average of 2.82% in Los Angeles and by 2.75% in Orange County. During the same period, Warehousing and Storage establishments grew by an average of 10.23% in San Bernardino and 7.5% in Riverside. Between 2000 and 2006 the number of Warehousing and Storage establishments in Los Angeles and Orange Counties fell by .73% and .42% respectively, while San Bernardino and Riverside counties grew by 5.55% and 5.91% respectively. Size Distribution. In the Warehousing and Storage sector in Los Angeles, data indicate an inverse relationship between number of establishments and number of employees. Within the Warehousing and Storage sector (NAICS 493,) 83% of total establishments employ less than 50 people and 33% of total establishments employ between one and four people. This pattern remains largely consistent, even when the Warehousing and Storage sector is broken down into sub-sectors. The only substantial outlier is a spike in refrigerated warehousing and storage at the 20- 49 employees category. 43% of total establishments in refrigerated warehousing and storage lie within the 20-49 employees category alone. 85% of the 40 total establishments in Refrigerated Warehousing and Storage have fewer than 49 employees. Table 8: Warehousing and Storage (NAICS 493): Establishment Size Distribution: Los Angeles, 2006 250 500 Total 5- 10- 20- 50- 100- 100 1-4 - - Establishments 9 19 49 99 249 0+ NAICS Industry 499 999 493 Warehousing and Storage 478 157 80 82 80 43 25 4 7 0 49311 General Warehousing and Storage 356 116 64 64 49 37 18 4 4 0 49312 Refrigerated Warehousing and Storage 40 8 5 4 17 4 1 0 1 0 49313 Farm Product Warehousing and Storage 1 1 0 0 0 0 0 0 0 0 49319 Other Warehousing and Storage 81 32 11 14 14 2 6 0 2 0 Source: U.S. Census, County Business Patterns, 2006 16
  19. 19. Figure 12 Table 9: Southern California- Average Employment, Weekly and Annual Wages Average Average Average 2006 Weekly Annual Employment Wages Wages NAICS 493: Warehousing and Storage Los Angeles 16,536 $807 $41,962 San Bernardino 7,193 $690 $35,881 Riverside 5,330 $627 $32,599 Orange 5,365 $973 $50,611 Source: EDD, California Regional Economies Employment Data Wages. In order to contextualize Los Angeles Wages in Warehousing and Storage, we also looked at Orange, Riverside, and San Bernardino Counties. Orange County reported the highest wages of four Southern California counties, 18.3% more than the next highest wages reported for Warehousing and Storage (NAICS 493) and General Warehousing and Storage (NAICS 49311) in Los Angeles County. San Bernardino wages were an average of 16.3% percent lower than Los Angeles County and 41.7% percent lower than Orange County. Riverside County wages were on average 29.1% lower than Los Angeles and 57.3% lower than Orange County for the same sub-sectors. 3 San Bernardino and Riverside Counties have both the highest overall growth rates in the Warehousing and Storage sector and the lowest average 3 The reasons for this significant disparity are beyond the scope of this research. More research is needed regarding the specific types of firms locating in Orange County and/or other discrepancies in the data. 17
  20. 20. wages. Wages in San Bernardino County were on average 11.1% higher than wages in Riverside County. 4 Figure 13 Los Angeles reported the highest wages in Refrigerated Warehousing and Storage (NAICS 49312) by $5,708, or 14.1% over the same category in San Bernardino, and $11,395 or 32.7% higher than in Orange County. Occupations. The following occupations were selected from SOC Code 53:000 as the most likely to employ LGMTA graduates based upon anecdotal data from past placements.(See Table 5 for a survey of wages for Los Angeles Occupations.) Average hourly wages vary widely from an average of $9.26 to $28.16 for a Supervisor position. The overall average of the 15 selected occupations is $16.30, which includes both entry-level and supervisory positions. Laborers and Truck Driving occupations selected occupy the largest share of the employment population. Laborers and Freight, Stock and Material Movers, Hand (SOC 53-7062) and Packers and Packagers (SOC 53-7064) comprise 39% of the total population of May 2007 employment estimates for all of Transportation and Material Moving Occupations (SOC 53-000). The average overall wage of the two occupations is $12.92. The two selected trucking occupations: Truck Drivers, Light or Delivery Services (SOC 53-3033) and Truck Drivers, Heavy or Tractor Trailer (SOC 3032) comprise 19% and have an average overall wage of $16.84. 4 Based upon 2006 EDD data for the following sub-sectors: Warehousing and Storage (NAICS 493), General Warehousing and Storage (NAICS 49311) 18
  21. 21. Table 5: Los Angeles County Wage and Employment Data: Selected Occupations within Transportation and Material Moving Occupations (SOC 53:000) 50th May 2007 25th Percentile 75th SOC Occupational Title Employme Mean Mean Percentile (Median) Percentile Code nt Hourly Annual Hourly Hourly Hourly Estimates Wage Wage Wage Wage Wage Transportation and Material Moving 53-0000 Occupations 312,580 $14.95 $31,091 $8.88 $12.02 $17.99 Packers and 53-7064 Packagers, Hand 37,080 $9.26 $19,254 *8.00 $8.62 $9.58 Cleaners of Vehicles 53-7061 and Equipment 15,740 $9.88 $20,563 *8.00 $8.88 $10.68 Laborers and Freight, Stock, and Material 53-7062 Movers, Hand 86,080 $11.86 $24,656 $8.54 $10.12 $13.41 53-3031 Driver/Sales Workers 11,000 $12.03 $25,014 *8.00 $9.12 $14.56 Motor Vehicle 53-3099 Operators, All Other 2,610 $13.45 $27,981 $8.77 $10.17 $16.22 Service Station 53-6031 Attendants 1,990 $13.00 $27,039 $9.06 $13.63 $16.44 Material Moving 53-7199 Workers, All Other n/a $13.99 $29,096 $8.99 $11.10 $17.45 Truck Drivers, Light 53-3033 or Delivery Services 29,370 $14.46 $30,057 $10.37 $13.49 $17.71 Conveyor Operators 53-7011 and Tenders 1,210 $15.63 $32,523 $12.91 $15.33 $17.82 Refuse and Recyclable 53-7081 Material Collectors 3,890 $18.83 $39,163 $15.93 $17.61 $19.62 Truck Drivers, Heavy 53-3032 and Tractor-Trailer 30,700 $19.21 $39,971 $15.99 $19.01 $22.47 First-Line Supervisors/Managers of Helpers, Laborers, and Material Movers, 53-1021 Hand 8,340 $21.26 $44,216 $15.86 $20.15 $25.24 Aircraft Cargo 53-1011 Handling Supervisors n/a $21.00 $43,695 $15.19 $18.00 $25.64 Transportation 53-6099 Workers, All Other 3,830 $22.54 $46,887 $20.14 $22.66 $26.55 19
  22. 22. 53-1031 First-Line Supervisors/Managers of Transportation and Material-Moving Machine and Vehicle 7,290 $28.16 $58,570 $20.65 $27.67 $35.49 Source: Department of Labor, Occupational Employment Statistics Table 6 shows average employment projections for SOC codes relevant to LGMTA graduates that have an anticipated growth rate of more than 25% and low barriers to entry. This data is projected based on statewide averages. Table 6: Selected Occupations within Transportation and Material Moving Occupations (SOC 53:000) with Projected Growth Rages over 25% Projected Average Average Employment Employment BLS Training 2006 2016 Percent Level Short-Term On-the- Driver/Sales Workers 800 900 50.0% Job Training Moderate-Term On-the-Job Truck Drivers, Heavy and Tractor-Trailer 5,100 6,300 33.3% Training Short-Term On-the- Truck Drivers, Light or Delivery Services 1,800 2,200 33.3% Job Training Short-Term On-the- Conveyor Operators and Tenders 400 500 30.0% Job Training Short-Term On-the- Laborers and Freight, Stock, and Material Movers, Hand 13,900 15,300 28.6% Job Training Moderate-Term On-the-Job Tank Car, Truck, and Ship Loaders 200 300 26.7% Training Source: Employment Development Department Labor Market Division Data Inadequacies. NAICS category 48-49 does not capture all logistics activities. One of the most egregious discrepancies in this data is the fact that the self-reported numbers do not catch large retail distribution centers in the correct sector. Even though these facilities are amongst the largest in warehousing and storage, they are most often categorized under their retailer umbrella. In addition, NAICS does not yet have a clear category for third-party logistics firms and some of the other newer types of logistics firms that are emerging. 20
  23. 23. Industry Snapshot: Field Interviews The foregoing data are useful in providing a bird’s eye view of the industry as a whole. EDD and BLS data in particular give a sense of proportion and allow us to see the regional significance of the logistics industry in Los Angeles County when compared to nearby counties. It is also helpful to note that the historical trend is toward growth, a rare assurance as of this writing, as we receive news of goods movement firms nationwide closing up a substantial portion of their operations, and local companies have dramatically reduced hiring. However, the data also have the limitations discussed above. In particular, the data draw arbitrary lines between categories of firms and occupations, and offer little on-the- ground guidance to workforce development practitioners concerned employing customers at individual firms rather than analyzing the entire industry’s economic impact. The following synopsis of interviews with dozens of industry representatives is an attempt to characterize what will be most useful to CCD in continuing to implement the LGMTA and place participants in goods movement firms. METHODOLOGY This report culls information from 45 interviews with representatives from goods movement firms and other industry representatives. It represents the perspective of a range of company sizes and types throughout the industry. Throughout our research, our goal was to capture an accurate snapshot of the industry by soliciting input from the widest variety of companies involved in the logistics sector, with a special focus on warehouses and third party logistics firms (3PLs), as CCD targets such companies in its placement efforts. We attempted to survey public storage warehouses as well as large private and retail distribution centers, employing from 1 to 25 people, 26 to 75 people, 76 to 150 people, and over 150 people. Many of the 21
  24. 24. individuals we interviewed represented just one of several company facilities in the Southern California region. We turned to the California Employment Development Department (EDD) as our starting point for research, downloading relevant Los Angeles County employer lists from their website. 5 We also used a similar list of employers provided by the EDD per CCD’s earlier request. (These two lists overlapped significantly.) It is important to stress, however, that these lists served only as a foundation for our research. The majority of our sources came either from other industry contacts, or from searches for specific facilities or types of facilities. For example, many large retail distribution centers are not counted in the Transportation and Warehousing NAICS category, as their umbrella companies are categorized elsewhere. Such companies are major logistics employers, but must be individually targeted for contact, as they are hard to locate in EDD Labor Market Info reports. Having secured sources for our research, we set out to make contacts in the industry. Every week, we cold-called companies that we targeted from the EDD lists and web searches, with the intention of setting up at least three meeting with company representatives for the following week. We asked each contact for a face-to-face interview where we would discuss their company, the logistics industry in Los Angeles County, and the skills workers need to succeed in the industry. The main factor that determined which companies we visited was whether or not an individual was willing to meet with us, but we attempted to maintain a balance between different industry sub- sectors and company sizes, as noted above. We secured 45 meetings total, out of approximately 200 phone requests. These meetings took place from September 20 to October 31, 2008. We made an effort to set up as many meetings as possible before the height of the industry’s peak season of September through December. However, it is not clear whether the peak season affected companies’ willingness to speak with us, as we were able to schedule nearly 25 interviews for the mid-peak month of October, 17 of which we kept (we cancelled the rest due to other commitments at CCD). We also made no attempt to schedule interviews during the months of November and December, aside from those we cancelled. In general, we met with company representative in three types of settings: typically in face-to-face interviews with one to three representatives; three times by phone; and twice as members of a larger “meet and greet” event organized by the company. Whenever possible, we asked for site visits and photo opportunities, though companies declined photographs almost without exception. Face-to-face interviews and “meet and greet” events have significant benefits over phone conversations, as well as any other methods of finding qualitative or anecdotal 5 “Employers by Industry.” California Employment Development Department. 7 December 2008. <>. Path: Labor Market Info>Data Library>Industries>Find Employers>Employers by Industry. 22
  25. 25. information about this industry. Face-to-face interviews offer the opportunity to build rapport over a meeting that typically approaches or exceeds an hour in length. Most industry representatives seemed to genuinely enjoy our interviews, and their enthusiasm encouraged them to explain the issues with greater detail than we received by phone. On more than one occasion, face-to-face interviewees introduced us to new contacts either in person or by phone. (One interview even led to an impromptu visit to a trucking yard, where the owner of a 3PL was tending to some damaged cargo - a Bentley headed for Ghana. His longtime friend in the industry asked for resumes from the LGMTA, and we forwarded him five of them.) One final benefit of face-to-face meetings is that we were able to leave promotional material about CCD with each interview, and answer questions about the LGMTA. Meet and greet events with multiple participants offer a unique opportunity to engage with representatives when their guard is down. In a face-to-face meeting, a rapid-fire succession of questions about a company’s practices can send off a red flag. Sometimes it is easier to get this information when a company has already put together a presentation that answers many questions and makes other questions seem more appropriate and less threatening. It is worth noting that we intended to do a series of interviews with representatives from industry associations and temporary staffing agencies (often referred to hereafter as “temps agencies” that place “temps” in jobs.) Industry associations such as the Foreign Trade Association, the Council of Supply Chain Management Professionals, the Los Angeles Customs Broker Association, Warehousing Education and Research Council, the Los Angeles Transportation Club, and the Harbor Transportation Club are important in disseminating information and networking, and as such they are a potentially valuable resource for the LGMTA Advisory Board. Temporary staffing agencies, as we will discuss in this report, are one of the primary doors into the goods movement industry today. We hoped to find out whether it is possible to identify temporary staffing agencies that provide higher wages or are more likely to lead to permanent hire. However, other demands at CCD prevented us from 23
  26. 26. keeping several of these interviews, and consequently, only two industry associations and one temporary staffing agency are represented in this report. It would be a good idea to continue outreach to both types of organization. (Keep in mind that temporary staffing agencies take more convincing before they will meet, as the industry is not only competitive, but also aware of the stigma associated with temporary staffing.) COMPANY TYPES AND OCCUPATIONS DEFINED It is hard to make across-the-board generalizations about firms and functions in the goods movement industry. We divide goods movement firms into three broad types: third party logistics companies (3PLs), public storage warehouses, and retail distribution centers. Each type of company provides a wide variety of services, carried out by workers in several different occupations, mostly in the office or on the warehouse floor. We have already mentioned how government datasets make arbitrary distinctions between the companies and occupations in the industry, making the accuracy of some statistics less useful for workforce development practitioners. Our sources described a web of industry relationships, occupations, and specialties that similarly defies easy categorization, and requires some generalization. It became clear very quickly that industry representatives define their own businesses by the work that their own employees do, and by their relationships with customers and contractors. After the first few interviews, it was clear that employers require their workers to also think in these terms. As CCD’s goal is job training and placement, we have also chosen to define the industry in broad categories: major services offered, which determine employee tasks; generic types of firms, which sum up a company’s relationship to others in the supply chain; and employee occupations, which are determined by the other two areas. These definitions are important to understand if CCD intends to gain credibility in the industry as a whole, and to have a more intuitive understanding of the components that must go into training. Major Services Offered While we visited a wide variety of companies representing several industry niches, all companies offered some variety of the following services. Break-bulk. Break bulk cargo traditionally refers to non-containerized cargo moved in individual units such as crates, drums, and barrels. We find that many companies use the term more generally, referring to any non-containerized or even containerized cargo that must be repacked for separate destinations. Examples of such cargo include chemical pellets, liquids, grains, even conventionally packaged freight heading for several different endpoints. 24
  27. 27. Case picking. Companies with any storage component require workers able to operate a variety of forklifts for case picking. This is simply taking a crated, boxed, or otherwise contained product and moving it to a staging area for assembly into a larger package. Cross-docking. Cross-docking is simply the act of moving goods from one vehicle to another, often vehicles of the same type. For example, most large ground transportation companies have a hub where goods come in through one truck dock, and leave for a distribution center or other facility on another truck. Customs Clearance. Many companies offer significant customs services, processing necessary import and export documents, calculating duties and taxes, and abiding by a web of regulations from different government agencies. Typically customs clearance is one part of a larger freight forwarding function, and goods awaiting clearance sit in a sequestered container freight station (CFS) on site. In most customs operations, all customs employees work under one supervisor’s customs broker license. Drayage. This is simply the act of picking up a shipment from the port and bringing it to its next destination, typically a transloading facility or warehouse. Freight consolidation. Most of the individuals who referred to “freight consolidation” used this as an umbrella term for any warehouse activity that involved taking goods out of a shipping container and reassembling them into unique shipments to be sent to the customer, usually by palletizing them. Freight consolidation includes both pick and pack and case picking functions. Freight forwarding. Freight forwarders are non-asset based companies that make shipping arrangements for other companies. Such arrangements can include arranging drayage, booking space on an oceanliner, an airline, a freight train, or a freight truck, arranging storage, processing customs clearance, and tracking freight. Typically, a company that refers to itself as a 3PL provides some or all of these functions, including - at minimum – arranging ground transportation. Pick-and-pack. All storage companies of any size offer pick-and-pack services. Essentially a more detailed version of case picking, pick-and-pack requires workers to locate containers, disassemble the goods inside, and reassemble and label them for their next destination. Public Storage Warehousing. On its own this refers to a more traditional conception of “warehousing.” Public storage companies sell space in their warehouse for their customers’ goods. A very limited public storage operation will usually offer both racked storage, “high-pile” storage, or both, pick and pack freight assembly, and freight consolidation. some Sub-groups of public storage include general dry storage, cold storage, and chemical storage. 25
  28. 28. “Your average freight forwarder is a warehouse, three cubicle, and forklift type of operation. Dirty, nothing special. ” – President, small South Bay 3PL Transloading. This service is similar to cross-docking, but most references to transloading specify moving goods from one mode of transportation to another; for example, unloading a shipment from a rail car onto a freight truck. Value-added. Value-added services are usually services that were once provided at the point of manufacture – for example, labeling, tagging, hanging clothing, or assembling store displays. Types of Companies An individual company in the goods movement industry can provide any number of the services described above, and presumably others. Some companies that we contacted provide all of these services, and some provide just one or two. Further complicating things, companies that provide identical services often use different terms to identify themselves. For example, many asset-based public storage warehouses that arrange refer to themselves as 3PLs, as long as they arrange rail or truck transportation for their customers. Similar warehouses use the term “3PL” only when referring to the trucking companies they contract with. In addition, industry representatives often refer to other companies by the more famous function of a parent company. For example, while all the ocean shipping lines have separate 3PL divisions, a trucking company may still refer to this 3PL division as “an oceanliner from China,” or a similarly generic term. Given this lack of uniformity in describing the industry, any system of classification is bound to have problems. While some of our own sources may disagree with the broad categories presented below, we think that they are useful for a workforce development program in conceptualizing the industry. 3PLs. Third party logistic firms are companies that provide any of the services mentioned above on a contract basis, for other companies. These companies fall into a wide spectrum, from small transportation companies to multi-national companies with a global presence. Companies that perform third party logistics services often refer to themselves simply as 3PLs. However, companies that provide an identical range of services may also identify as “just a freight forwarder,” or “a transportation company,” or “a logistics company.” They may also object to being characterized as any of these, though our sources used all of those terms interchangeably at times. As mentioned, most international shippers have a logistics arm that provides third-party logistics service, including running entire distribution centers for individual customers. While we refer to DHL, FedEx, and UPS as “package delivery” firms elsewhere in this report, we also count them as 3PLs because 26
  29. 29. they have sophisticated logistics divisions. Many industry representatives also call them “freight integrators,” though this term seems to refer to any one-stop shop for freight forwarding. Public Storage Warehouse. This is a company, typically asset based, which focuses on short- or long-term storage of customers’ goods. While very little remains of what could be called “pure storage,” there are still companies whose main source of revenue is floor space dedicated to other people’s freight. Case picking and pick-and-pack is central to their operations, and they may or may not also offer drayage, provide or arrange ground transportation, or operate a CFS. Public storage warehouses are further divided into dry storage and cold or refrigerated storage facilities. (Public storage warehousing is not to be confused with personal “public storage” or “mini-storage” spaces that people use for their personal belongings, though such businesses are classified as “transportation and warehousing” under the NAICS system.) Retail Distribution Centers. These distribution centers are typically non-asset based, meaning that they lease all or most of their facilities, including building, trucks, and even forklifts. They are owned by retail chains, grocery chains, automotive companies, and other large businesses focused on distributing their goods to their own outlets or to other companies’ retail shelves. They work with either 3PLs or different company divisions to arrange pick-and-pack, freight assembly, shipping, transportation, and value-added services. (In some instances a 3PL will take over the entire operation of a company’s distribution center. We define this as a 3PL function.) Occupation Types There are a variety of specific entry-level jobs in goods movement, and each firm differs in the variety and requirements of the occupations required by its own operations. In general, most entry level jobs can be grouped into two types: warehouse jobs and office jobs. Both types of entry-level jobs are typically open to individuals who do not have a bachelor’s degree. Typically warehouse jobs require little skilled work, and often they require some familiarity with Microsoft Word and Microsoft Excel. Office jobs require a higher level of computer proficiency, including typing skills. Warehouse/Material Mover Jobs Pick-and-pack and/or “lumper”. This is the most general and least skilled of all the occupations, and one that many LGMTA participants have performed in the past. Material movers perform pick-and-pack duties, sort packages, and load and unload packages weighing up to 50 pounds. The term “lumper” connotes more truck unloading than pick-and-pack duties, but many view the terms as synonymous. Forklift Driver. Forklift drivers load and unload pallets into containers and trucks, and do case picking and assembly of orders to be shipped. Many LMGTA participants have performed these duties in the past. 27
  30. 30. Value-added. Typically the domain of women by industry custom, value-added services such as tagging, hanging clothes, and other last-minute minor alterations are often the lowest paying jobs. Office Jobs Sales. Sales representatives solicit new customers and maintain relationships with existing customers. Many companies have entry-level sales representative positions, while others require some experience before hiring. Customer Service. Customer service representatives often work with sales departments and accounting departments, and can perform a wide range of miscellaneous duties. Typically these include answering customer calls, tracking orders, filing, and handling overflow from other departments. Import or Export Agent. Import and export agents sometimes make up the bulk of a logistics company’s workforce. Agents negotiate payment, book ocean, air, rail, and ground transportation within the company or from other companies, and prepare many of the documents required in customer transactions. Customs Agent. Customs agents classify goods, prepare documents that must be submitted to customs officials, and see shipments through the customs process. Accounts. All logistics firms require some kind of in-house team that deals with arranging and receiving payments. The Los Angeles locations of large companies often handle accounts nationwide. Dispatcher. Dispatchers are central to the operations of any company that does some kind of ground transportation, including drayage. They route trucks, respond to any issues that come up in the transportation of goods, and fit each day’s orders into the tight schedule of the workday. In Los Angeles County, dispatchers must be able to adjust and coordinate multiple pick-ups and drop-offs for every driver in the fleet. Dispatch is not actually an entry-level job, as most companies require at least a year or two of experience in a related position. Commonly, dispatchers started as drivers or in a clerical warehouse job. Still, some LGMTA participants have done dispatch in past job, and others may qualify for dispatch positions as well. Other Types of Jobs Driver. This is an entry-level position in the sense that the only educational or professional requirement is a Class A Commercial Driver’s License (CDL). Courier. Due to the rigors of the job, drivers are always in demand, and several of our sources stress that a CDL gives an individual more options in the industry. 28
  31. 31. Courier. Courier and messenger services typically perform many of the package delivery services that DHL, FedEx, and UPS do. However, they tend to operate only on a regional or local scale. These companies are not necessarily what LGMTA participants think of when they apply for a logistics training program, but according to the EDD, couriers make up a larger industry subsector than companies specifically designated as warehouses. 6 They also have a number of driver jobs that often do not require a CDL. IS LOGISTICS A LOS ANGELES GROWTH INDUSTRY? Industry representatives shared a unanimous opinion that Los Angeles will be the center of the Southern California goods movement industry for the foreseeable future. Los Angeles County locations are close to the ports, allow for lower transportation costs, and are more suited to serving varied (and often smaller) customers. One of CCD’s major goals for this report was to determine whether logistics is a growth industry in Los Angeles County. We take the term “growth industry” to mean several things: opportunities for individual career growth, wage increases, and perhaps most obviously, growing or at least stable opportunities for entry-level employment for the foreseeable future. The short answer is yes, logistics is a growth industry in Los Angeles County. According to the industry representatives we spoke with, we can count on goods movement to be a major source of entry-level jobs in the long-term. Our survey interviews yielded a unanimous belief that goods movement is in Los Angeles County to stay, regardless of the remarkable growth of the industry in the Inland Empire counties of San Bernardino and Riverside, and the current recession. At first glance, the Inland Empire seems like it should be more attractive to companies across the board – land, labor, and city taxes are generally all cheaper there, while weight restrictions on individual freight trailers are less stringent than in Los Angeles County. However, employers cited a number of reasons that Los Angeles County remains central to the goods movement industry in the Southern California region. (Much of what follows compares Los Angeles County and the Inland Empire, but leaves out discussion of Orange and Ventura Counties, which also have substantial logistics industry presence. This is due in large part to the fact that the Inland Empire continually came up in our interviews, since many companies have locations in both Los Angeles County and the Inland Empire.) Proximity to the port. As one interviewee put it, “San Pedro is beachfront property. I look out my office window and I see the gantry cranes.” Eighteen of our sources offered 6 “California Regional Economies Employment Series, Los Angeles.” California Employment Development Department. 23 December 2008. <> Path>Labor Market Info>Data Library>California Regional Economies Employment Series>Los Angeles County. 29
  32. 32. detailed comparisons of the logistics industry in Los Angeles County and the Inland Empire. Eleven of those 18 mentioned the Ports of Los Angeles and Long Beach as the primary reason for the long-term significance of goods movement firms in Los Angeles County. Goods that come into either port are just a mile or two from warehouse hubs like Wilmington or Long Beach, just 20 miles from major inland distribution hubs such as Vernon and Commerce, and 20 miles from Los Angeles International Airport (LAX) and countless air freight operations clustered near there. By contrast, Inland Empire logistics hubs like Ontario are 50 miles from the ports. The fact that many companies prefer real estate closer to the ports may seem obvious, but companies cited a surprising number of unique reasons that close proximity to the port makes good business sense. • Ability to make up to three trips to and from the ports per day, versus one trip per day in the Inland Empire. • Lower fuel and labor costs due to less time spent on the road and in heavy traffic. This translates to a lower drayage cost from the port to the warehouse or distribution center. • Drayage from the port to a Los Angeles facility takes considerably less time than drayage from the port to an Inland Empire facility. • Los Angeles has a larger workforce, “and labor in the Inland Empire is not necessarily cheaper in every instance.” • More temporary staffing agencies. • Facilities of a size and configuration that allow public distribution companies to be more flexible, in response to the needs of multiple small vendors. • Proximity to customers. Other reasons for companies to locate in Los Angeles County all connect in one way or another to these benefits. Transportation costs. Transportation is at the root of all activities in the logistics industry. Indeed, several of our interview subjects do not even count non-transportation functions such as materials handling in their own definitions of the word “logistics.” The cost of transportation, particularly ground transportation, is something of an obsession among warehouse and transportation managers. There is little wonder why: one warehouse manager told us that by saving one-tenth of a mile per gallon in truck fuel costs, he saved his company $1.2 million in one year. Even in the best of times, the cost of getting goods from the ports to the Inland Empire is much higher than it is to most Los Angeles County locations. As the Operations Manager of a large shipping company’s logistics arm described: You have all these costs to get things out from the port, and they go up if you’re going to the Inland Empire. There’s fuel, and the time it takes to get there. Riverside [a major freight destination] is off of Highway 60, which is the worst road in Southern California between 3:00 PM and 8:00 PM, with all the 30
  33. 33. congestion. You’re not only paying for the fuel to sit in traffic, but you’re also paying a lot more for the labor to sit there in the truck. It is important to note that we conducted our survey during a period of serious volatility in diesel costs. The cost of a gallon of diesel fuel on the west coast typically varies by several cents at most from month to month, and never varied by more than $0.25 month to month from January 1994 to August 2005. 7 (Comprehensive pre-1994 diesel rates are not available.) By contrast, diesel costs in 2008 were erratic, changing by over $0.25 in 8 months of the year, and as much as $0.70 from on month to the next. West coast diesel costs topped out at a record-setting $4.85 per gallon in June and July 2008, up $1.47 from the beginning of the year, and marking an increase of $3.22 from the beginning of 2004, when costs began to increase dramatically. Figure 14: West Coast Price of Diesel Fuel Cost per Gallon Diesel Fuel, West Coast Cost per Gallon (Dollars) $6.00 $5.00 $4.00 Dollars $3.00 $2.00 $1.00 $0.00 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Date Cost per Gallon (Dollars) Noting the volatility of diesel prices, one interview subject went past the frustration of dealing with freeway congestion and suggested that industry insiders now see fuel costs in a fundamentally different light. “What we have to look at now is, land may be more expensive in L.A., but land cost is a fixed cost. Fuel used to be sort of a fixed cost, but now we have to look at it as a variable cost. So it can make fuel [to the Inland Empire] and labor [in Los Angeles County] almost equal in cost.” 7 “Weekly Retail Gasoline and Diesel Prices.” Energy Information Administration. 20 December 2008. <>. Path: Petroleum>U.S. Data>Prices>Weekly Retail Gasoline and Diesel Prices. 31
  34. 34. “Los Angeles County has great infrastructure, and it’s central, which means you’re closer to your customer.” – Warehouse Manager, South Bay freight forwarder The owner of a Vernon 3PL struck a similar note when he compared the costs and benefits of Los Angeles County and the Inland Empire. quot;We've looked at the Inland Empire, but transportation costs outweigh the lower land cost now. Transportation to the Inland Empire would add $100 to each container we send out.” If the extreme unpredictability of fuel costs in 2008 does have the long-term effect of redefining fuel as a serious variable cost instead of “sort of a fixed cost,” then this will resonate throughout the industry for some time. The consensus seems to be that logistics firms will think twice before locating further from the ports, causing retrenchment of the industry in Los Angeles County. It seems unlikely that major distribution centers would relocate to Los Angeles County from elsewhere, given their need for more land and newer buildings than much of Los Angeles County has to offer. (We deal with this at length below.) But industry representatives are in agreement that transloading facilities, cold storage facilities, “mid- sized companies,” and companies with a client base in Los Angeles County or a large number of customers will all prefer Los Angeles County in large part because transportation from the port to Los Angeles County is so much cheaper than the alternatives. Needs of individual companies. There are clear differences between the types of goods movement companies that cluster in Los Angeles County and those that tend to locate in the Inland Empire. In general, the Inland Empire’s larger facilities serve few companies, and often just one company, reducing the complexity of packaging activities and benefiting from automation of facilities. By contrast, Los Angeles County facilities are smaller, but they also have the flexibility to serve a wide variety of customers. The real estate market is perhaps the single greatest factor determining these differences. The goods movement industry in Los Angeles County stretches back to the 19th century. Only a relative few buildings in Los Angeles County are this old, but most are significantly older than those in the Inland Empire, and there is very little land available for newer facilities. Industrial land in Los Angeles County is expensive – one interviewee put it at a monthly lease cost of $1.60 per square foot, compared to $0.52 per square foot in the Inland Empire -- which makes it nearly impossible to acquire and redevelop enough land for a modern distribution facility. 8 This means that the Inland Empire is now the domain of the large distribution centers, essentially stopover and processing facilities for one company’s products. A drive 8 Give the whole thing about land downtown being more valuable as residential as an interesting side note. FIX 32
  35. 35. through the area makes this clear, as buildings occupied solely by Toyota, Wal-Mart, K- Mart, Target, Nordstrom’s, Ford, Staples, Mattel, and companies of comparable size dot the landscape of cities in Riverside and San Bernardino Counties. These buildings are typically between 200,000 and 500,000 square feet, though it is not unheard of for one company’s distribution facilities in the Inland Empire to surpass 1 million square feet. (There are, of course, public storage warehouses, transloading facilities, and other logistics functions in the Inland Empire. Still, our contacts emphasized that the overall trend is toward large distribution centers.) This is not to say that there are no large distribution centers in Los Angeles County. Grocery chains with stores in Los Angeles County also require distribution centers there, and Anheuser-Busch’s Van Nuys production and distribution facility is just one example of a massive local distribution center. Several of the people we met with described Gardena, Torrance, and Carson as rich with distribution centers, and companies such as Huffy, Kubota Tractor, Frito-Lay, Honda, Toyota, and Smart & Final do have facilities in those cities. But by and large, Los Angeles County is home to a wider variety of goods movement companies that can work with the land and facilities that are available here. Such companies include the following: • Air freight forwarders. These companies locate near (LAX), and often use warehouses as small as 10,000 square feet. • Transloading and cross-docking facilities for 3PL’s. Large 3PLs locate these facilities in Los Angeles County for their ground transportation divisions. Typically such facilities have no storage and focus only on moving freight from inbound vehicles to outbound vehicles. • Package delivery services. Companies such as DHL, UPS, and FedEx do the work of 3PLs as well as traditional package delivery. FedEx and UPS in particular are decentralized operations with a variety of truck yards and processing facilities throughout the Southern California region. The combined freight of the ports and LAX lead these companies to locate some of their largest cities between the two, in South Bay cities like Torrance and Redondo Beach. • Public dry storage facilities. The more traditional asset-based warehouses are found wherever there is even a small goods movement presence. They thrive in the older warehouse of up to 200,000 square feet. • Public cold storage facilities. Refrigerated cargo is more expensive to transport and store, which makes Los Angeles County more attractive for several reasons. Representatives from cold storage companies agree that most refrigerated freight is not worth the additional cost of draying it to the Inland Empire. Refrigerated storage companies that we spoke with pay from $20,000 to $50,000 per month on electricity, and would pay up to 5 percent more if they moved further inland. The City of Vernon owns its own electric utility, and offers cheaper rates that have attracted an agglomeration of cold storage firms for years. • Courier services. These companies perform many of the package delivery services that UPS, FedEx, and DHL perform, but often with more specialized goods such as medical supplies or supplies for local businesses. 33
  36. 36. “There are over 40 [goods distribution facilities] empty in the Inland Empire. If you go to San Pedro, there is only 1 or 2.” – Operations Manager, 3PL branch of international shipping line Local economic development officials worry about the age and obsolescence of Los Angeles County industrial buildings, and as we did not consider this question a part of our research, we cannot disagree with their concern. However, it seems to be the case that for the type of business noted above, Los Angeles County and its “obsolete” buildings have some real benefits over newer, more state of the art buildings in the Inland Empire. As the owner of a textile-distributer-turned-3PL said: The Inland Empire was attractive 10 years ago because of cheaper rates, new infrastructure, and an educated labor force – you have colleges with Logistics A.A. degrees there. They have these larger warehouses of 200,000 to 500,000 square feet, but with a facility that size, every customer needs to bring in $60,000 per month in revenue to keep it running. Customers who pay $2,000 to $5,000 per month prefer Los Angeles County. Transportation to the building is cheaper here. Also, larger warehouses are not equipped for the different procedures required by smaller companies. [Such differences include: freight shipped in a variety of sizes, different labeling positions required by different companies, and different handling procedures.] This individual’s assertions imply something beneficial for the labor market as well. While automation in the logistics industry as a whole threatens to reduce the labor force, Los Angeles County is home to the type of firms that will continue to need employees. Their customers require flexibility, which means that their operations are more labor intensive – and as automation is not suitable for such flexibility, this is not likely to change soon. An overwhelming majority of our sources see Los Angeles County as the long-term center of the Southern California goods movement industry. This is consistent with CCD’s understanding of the industry as a large long-term employer for county residents. However, the question of whether the industry meets some of CCD’s other job placement needs is a more complicated one. 34
  37. 37. ENTRY LEVEL EMPLOYMENT AND CCD STANDARDS The logistics industry provides limited entry-level opportunities for CCD wage targets, but good long-term career prospects. Entry-level wages across the industry average approximately $9.00 per hour. By targeting placement efforts to certain industry sub-sectors, CCD can expect to make some placements at $10.00 to $15.00 per hour. Wages While we kept an eye on a variety of factors in evaluating jobs in the goods movement industry, wages remained our point of departure throughout our research. This is for two reasons: first, the obvious fact that a paycheck is the individual’s first reason for taking a job, but also because CCD has specific income targets required by Workforce Investment Act (WIA) and other contracts that fund the organization’s work. These contracts require CCD to place customers in employment at a starting wage between $11.00 and $14.00 per hour. We have wage rates at individual companies for more warehouse jobs than office jobs, as our understanding early in the research was that LGMTA participants were likely to seek employment on the warehouse floor. However, several of our early interview subjects mentioned that starting office wages were higher than those on the warehouse floor, so we began to track those wages as well. While the following focuses primarily on warehouse wages, interviewees indicated that entry-level office jobs often pay from $10.00 to $15.00 per hour, and as high as $25.00 per hour. (This is probably due in part to the fact that such jobs are seen as skilled work. As noted in the “Occupation Types” section, office employees must be very good with computers.) Figure 15 35
  38. 38. “If a guy has a forklift certificate, it makes my life easier. I’ll pay him $12.00 instead of $8.00” – President, Gardena public warehouse and distribution center With CCD’s target wage range as a starting point, the results of our research are mixed. Of the 45 interviews that we conducted, we have wage data for at 31 companies. Three companies declined to discuss wage data. Several other industry representatives were from trade organizations instead of companies, and a few conversations with employers were similarly focused on the entire industry instead of their individual company, and so we have no wage data for those companies. In general, starting wages among the companies we interviewed are well below CCD’s $11.00 to $14.00 target. For jobs on the warehouse floor, the median starting wage among all companies that provided wage data is $9.00 per hour. Some of our sources weighed in on their own justification for low entry-level wages. Generally, employers cited the competitive nature of the industry, due to the proliferation of companies and an industry-wide lack of consolidation. Potential customers have a number of options for storage and distribution, which allows them to require low rates. Because payroll costs more than energy or other overhead, companies offer low rates by lowering wages or reducing hiring when possible. This is not to say that CCD’s entry-level wage targets are impossible to reach, or even that workers will not eventually exceed CCD’s targets. The mean starting warehouse wage in our pool of interviews is $10.42 per hour, so while half of the companies we spoke offer entry-level wages of $9.00 or less, seven companies balance out the average with entry-level wages of $12.00 to $18.00 per hour for warehouse work. (Most of these are unionized companies or in heavily unionized subsectors, as discussed below.) In addition, the highest hourly wage earners at most companies take home between $15.00 and $25.00 per hour. Even among companies that start employees out at minimum wage, the typical hourly wage ceiling is nearly $15.00. (The lowest hourly wage ceiling we recorded was $12.25 per hour, though it bears mentioning that this was at the retail outlet of an outdoor goods chain, the only retail establishment that we interviewed.) The distinction between office work and warehouse work was perhaps most obvious in the way people referenced each. After discussing wages, one employer said in reference to office jobs, “Oh, they get taken care of.” Similar comments were not uncommon, with another responding, “Oh, those positions are salaried, so you’re talking $30,000 to start.” By contrast, one freight forwarder had the following to say about the warehouse floor: “You had good wages in the 1970’s, but not really now.” Two others 36
  39. 39. mentioned that wages on the warehouse floor have stagnated or gone down during their careers. 9 Another interview subject mentioned that this decline has also affected drivers, saying, “[At a specific major grocery chain] 10 years ago, you could make $18.00 to $20.00 dollars an hour, but you can’t make that kind of money now.” We interviewed a unionized branch of the grocery chain he mentioned, and their contract does give them from $18.00 to $20.00 per hour. However, this interviewee’s comment may still be true. The company has split in the last several years, and he may have been referring to drivers employed by either of the new companies, or a 3PL that works for one of them. Either way, this wage marks a decline in real terms during the time period he mentioned – among earners in the Los Angeles region, $18.00 to $20.00 today is equivalent to $13.49 to $14.99 in 1998. 10 Our discussions with industry employers represent a survey of a wide range of companies, but the wage situation is very similar across the board. CCD is unlikely to place many participants in entry-level warehouse jobs that pay $11.00 or more per hour. However, by targeting job placement efforts, CCD can find such jobs. In particular, forklift jobs and office jobs offer wages at $10.00 and often above. Such jobs require relatively little training, and they are available to people who do not have college degrees. 9 Of all of the employers we spoke with, only one admitted to ever paying less than minimum wage. His company, a small air freight forwarder, used to employ primarily undocumented workers for $7.00 per hour, until the government cracked down on such behavior in recent years. 10 “Consumer Price Index, All Urban Customers” (Los Angeles-Riverside-Orange County, CA). Bureau of Labor Statistics. 23 December 2008. < > Path: Subject Areas>Inflation>Inflation & Prices>Databases>All Urban Consumers>Multi-Screen Data Search. 37