By Nicholas Charalambous
Independent-Mail
January 10, 2004

The Walgreen Co. distribution center coming to Anderson County in 2007 is so technologically advanced, most of the machines haven’t been designed yet.

Forget the idea of four walls filled with shelves and pallets and workers milling around with clipboards filling orders.

Instead, think robotic cranes moving pallets on and off 100-foot-tall racks, guided vehicles moving boxes, flashing lights to tell workers where to find the items to pack and in what order and liquid crystal displays to tell them exactly how many items to pick.

The nation’s No.1 drugstore chain relies on that speed, efficiency and accuracy to keep more than 25,000 items on sale in each of its drugstores — and to have the ability to restock every item that’s sold within 24 hours.

"Each distribution center has to be faster, smarter, better and more efficient," said Dan Coughlin, Walgreen’s divisional vice president of distribution centers. "We really push it."

The announcement that Walgreens would invest $175 million to build a 700,000-square facility in the Alliance Industrial Park near Interstate 85 represents one of Anderson County’s biggest economic development coups of the last 10 years.

The 450 jobs, paying at or above the county average of $12.43 per hour under state requirements for incentives, will go a long way to providing blue-collar jobs for workers displaced by textile plant shutdowns and other manufacturing layoffs in a county with 6 percent unemployment.

The company also offers a full suite of health, retirement and insurance benefits as well as a nationally recognized profit-sharing program, and employees usually stay longer than average, Mr. Coughlin said. The corporation is a major United Way partner and matches the contributions of fund-raising by local employees, he said.

"This is the perfect example of the kind of company you always want to recruit," said Anderson County Economic Development Director John Lummus. "This is the kind of company that is going to be a solid, stable company for years, and they are going to be such a credit to the community."

Walgreens will add to the county’s stable of employers a company ranked No. 45 on Fortune Magazine’s list of top companies in the United States. In the process it will further diversify a county economy heavily dominated by automotive industries and still transitioning away from textiles.

But a significant aspect of the excitement came from the possibility that Walgreens would offer a loud signal to other, smaller companies that Anderson County was a good location to build their own distribution centers — a signal similar to the one Michelin sent to international companies in the 1970s.

"This Walgreens announcement really puts us on the map," said Anderson County Administrator Joey Preston. "We’ve been recognized as an automotive supplier. Now we’re into distribution."

Anderson County and South Carolina in general has put an increasing emphasis on pursuing distribution centers in recent years, state and local officials say. Walgreens will add to more than 50 major facilities in the state, including such household names as Wal-Mart, Target, and Belk.

Up until now, Anderson County only had one major distribution center, the Nutricia plant on U.S. 178, employing 430, which opened in 1998.

The potential for distribution centers is obvious: State officials can point to the state’s five major interstates, seaport and mid-Atlantic location, which puts a distribution center within reach of 163 million people from New York to Arkansas to Florida in a day’s truck drive.

Anderson County and the rest of the Upstate is particularly well placed between Charlotte and Atlanta, two of the largest and fastest-growing population centers in the southeast.

The Greenville-Spartanburg-Anderson metropolitan area was given four-stars (out of five) among the nation’s top 100 cities by Expansion Management Magazine last year in evaluating the best places for locating distribution centers.

In making sure South Carolina is economically competitive, "one solution is focusing on core competencies," South Carolina Gov. Mark Sanford said in a visit to Anderson to welcome Walgreens.

Academic and business experts, however, downplay the suggestion that Anderson County is uniquely positioned as a distribution hub. While there is clustering, — neighboring Greenville and Spartanburg counties do boast multiple distribution centers — distribution centers aren’t the type of investment that will see other companies move in to support them, said University of South Carolina management professor Manoj Malhotra, a specialist in operation management.

The potential number of distribution centers that might come to Anderson is difficult to predict, he said.

"There is no one generic strategy that companies follow," he said. "It depends on the firm, the kind of demands and its competitive priorities."

The choice of a location for such a facility is driven almost entirely by a company’s store pattern. In Walgreen’s case, it was originally scouting for Interstate 85 sites between Greenville and Atlanta, said Jodi Dalton, Walgreens’ senior real estate manager. The company ultimately chose Anderson instead of Commerce, Ga., because it anticipated more growth in the Carolinas than Georgia, she said.

The center had to be able to reach 500 to 700 stores from Virginia to New Orleans within 10 hours and restock them at least once a week, she said.

There is, however, little doubt that the need for distribution centers will increase as the southeast’s population does, Mr. Malhotra said.

Low-impact, but high-tech
Local officials say they look forward to attracting more multimillion investments in plants that don’t pollute and don’t put a strain on water and sewer infrastructure.

"The center has low resource impact," said Chuck Sitka, a member of the Anderson County economic advisory board.

In Walgreens case, the investment was bigger than typical because it places such a premium on automation and technology.
The Anderson facility — the company’s 13th — actually will be a model for future distribution centers, company officials say.
The facility "represents a huge jump in technology," Ms. Dalton said.

At the dawn of the 21st century, distribution centers have transformed themselves from a company’s ugly sister to its Cinderella.

Previously, products would be shipped in bulk to warehouses where items would sit for days or weeks gathering dust until they were ordered up and shipped to stores. When the products arrived, they’d often remain in back rooms and would only be gradually added to shelves as items were bought.

Besides tying up huge amounts of money in inventory, it also limited the number of items it was economic for a store to carry.

No longer. Walgreens boasts that its distribution center will communicate directly with stores, so that when an item is sold at one of its stores the distribution center can replace it within 24 hours if needed. Its processes are flexible and accurate enough to fill an order as small as one tube of toothpaste from any one of its drugstores.

The distribution center’s automation boosts productivity and its efficiency helps lower distribution costs, which combine to add big dollars to the bottom line.

"Balancing inventory flows and information flows can be a tremendous cost saver," Mr. Malholtra said.

But for Walgreens, the most important point is it’s ability to respond instantly to customer demand has become crucial in a world where customers always expect to choose from thousands of products always in stock and when they demand the opportunity to buy them in convenient locations close to home.

"Walgreens’ focus is that we are a convenience retailer ... so the customer who shows up at the store finds what the store says it has," Ms. Dalton said.

Nicholas Charalambous can be reached at (864) 260-1256 or by e-mail at charalambousnc@IndependentMail.com.

Copyright 2004, Anderson Independent Mail. All Rights Reserved.