Las Vegas Real Estate and Business News

 

Fortune 500 company opts for North Las Vegas
By JENNIFER ROBISON
REVIEW-JOURNAL
Feb. 09, 2006
Copyright © Las Vegas Review-Journal

Legend has it that Chicago's " Windy City" moniker comes from residents' nonstop boasting about their hometown.

Today, however, North Las Vegans have their own reason to bluster, as a Fortune 500 company based in the Chicago suburbs prepares to open its biggest shop of all near Interstate 15 and Craig Road.

CDW Corp.'s new 513,000-square-foot Western distribution center supplants the computer-technology reseller's 450,000-square-foot headquarters in Vernon Hills, Ill., as the company's largest warehousing hub.

The structure is also the largest single-building distribution center in Southern Nevada. Its floor space covers more than 11 acres, and it has more than seven miles of conveyor belts. On its first day of official operation, the center's managers hope to ship out around 5,000 boxes of computer products -- 10 percent of the 50,000-box capacity the center now has. It will be moving about 12,000 boxes a day by the end of March.

What's more, the center is only 60 percent built-out. Executives say it's too early to pinpoint expansion time lines, but when the center is complete, it will have a shipment capacity of 96,000 boxes a day. CDW's Vernon Hills operation can handle 40,000 boxes a day.

"(The warehouse) will allow us to better serve our customers based in the Western United States, and it allows us additional capacity," said Ray Nair, director of the center. "We'll have the flexibility of keeping products at both the North Las Vegas and Chicago locations. This facility will also allow us to be ready for future growth."

The distribution center is opening with about 120 employees. By the end of 2006, it will have 180 workers on staff; about 25 of those employees will work in the operation's enterprise configuration center, adding and removing components and software based on customers' specifications.

And while the Illinois base was cobbled together in three phases, the North Las Vegas center's unified design and construction process allowed the company to "apply best practices," said Clark Walter, a CDW spokesman. The warehouse also employs newer distribution technology. For example, automatic box makers use bar-codes to quickly route boxes through the center via a conveyor system.

Said Nair: "We've built in efficiencies in the way products travel. From a revenue standpoint, that will keep us going and keep our customers happy."

CDW's second distribution center landed in the Las Vegas Valley following a regional, multistate search for the right market.

"We had done our research, and we just found Southern Nevada to have a very friendly business climate," Nair said. "A lot of companies are moving here, and the cost of doing business is favorable. Everything just clicked."

Analysts say the new operation will give CDW a number of advantages.

Bill Fearnley Jr., a senior analyst covering personal-computer and enterprise hardware for FTN Midwest Securities in Cleveland, said the added distribution capacity is essential because CDW was running out of space in its existing center. Fearnley said the new operation also gives CDW redundancy -- the ability to back up the functions of its headquarters center if bad weather, natural disasters or other obstacles interrupt order fulfillment there. Finally, the center places CDW closer to Southern California's Port of Long Beach, which receives shipments of computers and other products from high-tech companies in Asia.

"There should be freight savings and quicker delivery times to West Coast customers," said Brian Alexander, senior vice president of Raymond James & Associates in St. Petersburg, Fla. "And this new facility is more advanced from an automation standpoint and has more configuration space for the company to perform value-added services around the hardware they sell."

Those improvements will come at a short-term price.

CDW's 2005 financial results, released in late January, revealed that the company spent $2.7 million in administrative costs in December to prepare for starting up the North Las Vegas center.

In addition, Walter said the company will spend about $35 million on tenant improvements and distribution systems inside the warehouse through early 2007.

Analysts said those expenses could shave dollars from CDW's earnings in 2006, but Fearnley said those expenses would benefit CDW in the long run.

"CDW is in a position where they're investing for growth, whereas a lot of other tech companies have to spend money to fix problems," Fearnley said. "I think investors understand CDW is investing to make the company bigger, and adding another enterprise configuration center will help improve gross margins and grow revenue."

The CDW name is well-known in technology-sector circles. It's ranked No. 347 on the Fortune 500 list, and it posted $6.3 billion in sales in 2005.

But Alexander said CDW's local operation is more distribution center than sophisticated tech operation. Its configuration jobs require more technical expertise than a typical warehousing job, but they're not the kinds of positions that require engineering degrees, he said. He added that he hadn't heard much talk regarding the possibility that other tech companies would follow CDW in establishing operations in Southern Nevada.

But Fearnley said CDW's Western distribution center could raise awareness of the Las Vegas Valley as a good place for business among other tech companies. For example, CDW deals with a number of original equipment manufacturers, which buy computers in bulk and customize those computers for specific applications. Those manufacturers "will certainly take notice" of CDW's new North Las Vegas location, Fernley said.

"It is a high-profile move for CDW. Anyone dealing with CDW knows about the new distribution center," Fearnley said. "I think it's good for ( Southern Nevada). CDW is voting with a significant investment. It's moving people and putting its name on the building. CDW is very well thought-of as a technology reseller, so its new operation is bound to have a positive effect on the area."

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