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[IMGCAP(1)]DALLAS-With crude oil climbing past $140 per barrel, US companies are beginning to discuss if changes to their distribution channels and supply chains are warranted to offset increased operating costs. Experts in Dallas/Fort Worth say rumblings are just now starting, making it far from being a trend as yet.

Thomas O. Pearson and Chris Teesdale, executive vice presidents for Colliers International in Dallas, confirms for GlobeSt.com that companies are starting to reassess their strategies, which could be a windfall for Dallas/Fort Worth and third-party logistics providers. For some companies, their push in recent years toward centralized distribution centers could fall victim to rising diesel fuel prices, driving a possible return to numerous locations to combat fuel costs and keep wares within closer striking distances of customers.

“There is no question that there is change afoot with virtually every company right now,” Pearson says. “But, every company is different. It will be based on business, where the goods are coming from and where the stores are located.”

The subject already has surfaced during Colliers’ monthly conference call for the multi-modal services group. “The consensus is a lot of the major distribution users are stepping back and re-evaluating their distribution models as a result of the price of fuel,” Teesdale says.

[IMGCAP(2)]Jeff D. Thornton, senior vice president in Dallas for Indianapolis-based Duke Realty Corp., and Greg Fuller, COO of Dallas-based Granite Properties, say they haven’t heard about any distribution center break-ups or requests for multiple locations in one market, but that doesn’t mean there isn’t some change in the air. The developers sit at opposite ends of the spectrum in the region: Duke with a one-million-sf box midway between Dallas and Fort Worth and Granite with smaller, brand-new industrial buildings in select high-demand suburban corridors.

“I’ve had discussions with other real estate people that the trend could reverse,” Thornton says. “But the reality is as of today, I can’t say I’ve heard it from a user. It does make sense to me, though. But, it would have to go up pretty high and we’re just in the early stages of this.”

Fuller says the chief consideration will be whether or not the savings is greater than the cost of leasing and staffing additional warehouses. He foresees national companies will rely more on railroads and outsource to third-party logistics providers as alternatives whereas a local company is more likely to lease several small locations to service daily runs for local customers.

[IMGCAP(3)]Fuller says Houston already is starting to reflect the change because it’s more spread out than Dallas. “The bad news is we’ve got high fuel costs. The good news is we’re going to change the way we do things,” he says. “I don’t know if it’s just fuel costs, but it certainly is forcing them to look at it the higher that goes.”

Pearson steadfastly believes Dallas/Fort Worth will be the chief benefactor if rising fuel prices force changes in distribution and supply chain routes. “You’ll see more companies that haven’t been here, come here,” he says. As for companies that are in the region, he says there are a lot of three-year renewals getting done these days to buy time to see what’s going to happen.

[IMGCAP(4)]Teesdale adds that the increased fuel cost could cause companies to lower their threshold for shipping by rail. Today’s watermark is 480 miles from the distribution point, but he says he can see that dropping to 250 miles if fuel prices continue to skyrocket.

Teesdale says the problem has been exacerbated because fuel costs have risen so fast for so long. “If it was gradual, then it would be a different story. You just can’t, all of a sudden, pass that cost onto the customer,” he says.

All four professionals say the mood could change if diesel prices drop or at least hold at today’s level of roughly $4.50 per gallon. “I don’t know if there’s a magic number because there are so many factors that go into the decision,” Pearson says. “But, I think you’re at a point that’s causing everyone to look at it now.”

Teesdale says companies, eyeing change, are faced with a two-edged sword because they’re being forced to evaluate distribution and other operating costs during dire economic times. “I don’t think you’re going to see any decisions until people get comfortable with the economy,” he says. “It doesn’t make sense to change your whole distribution model if the price is going to come back down.”

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