A growth in inventory

Journal of Business
By Treva Lind

Spokane Valley provider of storage, distribution reports uptick recently

SPOKANE, WA-Inland Empire Distribution Systems Inc., a Spokane Valley-based warehousing and distribution company, has seen a rise in the inventories it handled at the end of 2011 and early this year. It’s the fastest growth pace since the recession hit about four years ago, says Jim Ewers, the company’s president and CEO.

The privately-held enterprise also has plans to expand into other Pacific Northwest cities by next year, Ewers adds, although he declines for competitive reasons to say specifically what cities it’s targeting.

IEDS is a large third-party logistics provider of warehousing, distribution, and transportation services with its headquarters in the Spokane Business & Industrial Park, at 3808 N. Sullivan. The majority of its 60 employees are in Spokane, but it also has operations in Pacso and Lewiston.

In the first quarter of this year, Ewers says, the company saw a 14 percent year-over-year revenue growth. He says it also experienced significant growth in the fourth quarter of last year, but that the pace of distribution and inventory services has also slowed somewhat for this quarter.

“We surpassed our projected revenue,” Ewers says, about the first-quarter 2012 results. “We’ve seen a surge in distribution in addition to growth in inventories. We’ve seen inventory coming back from the downturn of 2008 and 2009. During a recession, manufacturers, wholesalers, and distributors will pull back inventory very quickly.”

He says typically, companies want to see inventory turning fast or have solid projections that will do so before they’re willing to stock up significantly.

“When there’s an uptick in activity with inventory, it’s a pretty good market-leading indicator,” he says. “This past recession was so severe that a lot of inventory we saw was what you’d consider hand-to-mouth, which means manufacturers make just what they’re confident will turn.”

The company provides services for clients in four market sectors: industrial, forestry, chemical, and consumer grocery products.

For the industrial sector, its service related to the aerospace industry has become robust, Ewers says, but he adds that the aerospace segment never really slowed during the recession. “I’d say for a good three, four years, it’s been good,” he says.

Additionally, a Canadian company recently became the first customer to use a foreign trade zone established in late 2002 at the IEDS Spokane Valley site, which has 324,000 square feet of warehousing space.

The Spokane International Airport’s board of directors first established a foreign trade zone here in 1997 in hopes that it would be an economic development tool, and later extended the zone to IEDS in Spokane Valley.

“We have a Canadian customer utilizing our foreign trade zone and that moved 2,000 tons of sugar into our operations in Spokane between December 2011 and February of this year,” Ewers says, adding that equates to about 85 semi-truckloads.

Foreign trade zones are established throughout the U.S. to allow a company to defer duties, which are taxes on imports, until that company is ready to ship its products elsewhere. IEDS works closely with U.S. Customs and Homeland Security in the handling of inventory, Ewers adds.

As the company progresses through the second quarter, Ewers says the company and other U.S. third-party logistic companies are seeing inventory leveling off.

U.S. wholesalers restock inventories in March, but at a slower pace than in earlier months, a recent graph in the Wall Street Journal showed.

An accompanying explanation cited U.S. Commerce Department data that the value of inventories climbed 0.3 percent from February and 8.4 percent from a year ago to $480.4 billion. “Companies have been restocking goods such as vehicles and lumber since last summer, thanks to higher sales and increased confidence. But that restocking appears to be easing,” the graph explanation said.

Ewers adds that the one reason given by industry experts for the slight slowing of goods is a warmer East Coast winter, so a number of goods that typically move in the spring already have been distributed.

He says that other experts forsee a cautious pace of economic recovery because of the federal debt and its potential impact on taxes, interest rates, and inflation.

What’s going on in the marketplace has impacts as well, Ewers says.

“It’s usually someone at the end of the market who is buying less,” he says. “The market slows down, so it makes it more difficult to forecast inventory levels.”

IEDS handles goods for manufacturers, wholesalers, and distributors. Items it handles include forest products and building materials, as well as finished goods that go directly into the retail market and raw materials that go to manufacturers.

For the industrial sector, IEDS typically handles raw material for infrastructure projects or manufacturing, such as steel that goes into building bridges, and steel coil for furniture.

Kimball Office, which has a furniture manufacturing site in Post Falls, is one customer of IEDS, as is Kaiser Aluminum Corp.’s Spokane Valley Trentwood Works plant.

Beyond traditional warehouse services and storage, IEDS offers inventory programs, packaging, and cross-dock loading, which is a practice in logistics of unloading materials from incoming semi-trailer trucks or railroads and loading those materials directly into outbound trucks, trailers, or railcars, with little or no storage in between.

Secondary railroad lines from both the Burlington Northern Santa Fe and the Union Pacific Corp. lead into the company’s Spokane Valley facilities for individual railcar loading and unloading.

“We have one of the few locations in the entire Pacific Northwest that’s serviced daily by both railroads,” Ewers says.

He says more than 100 railcars a month are loaded or unloaded at its Spokane Valley facilities. Goods may be put in storage or loaded immediately onto semi-trucks.

The company provides less-than-truckload delivery within a 150-mile radius of Spokane, as well as freight management, which is a brokerage transportation service to arrange transport of goods to any point in North America.

The company employs18 truck drivers among its 60 employees, in addition to a handful of contract truck drivers.

Ewers says that regionally the company has more than 500,000 square feet of combined space, with a mixture of leased and owned facilities.

In addition to five warehouse facilities that it operates here and two rail yards, the company owns 30 acres of rail serviced property at the southwest corner of Flora Road and Trent Avenue, at the northeast corner of the industrial park, for future expansion of its rail service facilities, he adds. The Pasco operation includes five warehouses, while the Lewiston office services a transportation contract IEDS secured in 2008 with the consumer products division of Potlatch Corp., which now operates under a spin-off company, Clearwater Paper Corp.

IEDS was founded by Ewers’ dad, Bert Ewers, in 1983.

Today, it’s led by Jim Ewers and two brothers, Dan Ewers, general manager in Spokane, and Matt Ewers, vice president of business development, also based in Spokane.

Ewers claims IEDS is the largest third-party logistics storage and distribution provider in Eastern Washington, Idaho, and Montana. “There may be some companies who do part of what we do, but don’t provide all the services or serve all the market sectors we serve,” he asserts.

Looking ahead, Ewers says the company had aspirations prior to the recession to expand its operations, but now sees that happening because of its clients requests.

“We have customers who would like us to do that,” he adds.