This article briefly examines the importance of the distribution sector in Tennessee.supply chain management

David A. Penn

English

Research Papers in Economics

Tennessee is home to a number of world-class transportation 
companies responsible for more than 60,000 jobs.
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TENNESSEE LOGISTICS
19
s explained in this issue, logistics has
to do with how companies manage the
transportation, storage, and inventory
of raw materials, intermediate inputs, and fin-
ished outputs. Unfortunately, getting a handle
on just how important logistics is as a source of
payroll and employment is difficult, since in
many cases these functions are produced inter-
nally and employment records do not distin-
guish supply chain functions from other
activities. However, we do know quite a lot
about certain industries that are entirely
engaged in logistics: wholesale trade, trans-
portation, and warehousing. This article briefly
outlines the importance of these sectors for the
Tennessee economy.
First, it is important to note that Tennessee
is home to a number of world-class transporta-
tion companies, including FedEx (Memphis),
U.S. Xpress (Chattanooga), Covenant Transport
(Chattanooga), Northwest Airlines (Memphis),
Ingram (Nashville), and Technicolor Distribu-
tion Company (Nashville).
These companies are responsible for more
than 60,000 jobs in Tennessee, with an annual
payroll of more than $3 billion.
Wholesale trade, transportation, and ware-
housing are an important source of jobs in Ten-
nessee. In 2006, wholesale trade employed
132,500 Tennesseans, with an additional
143,800 employed in transportation and ware-
housing. Transportation represents a wide array
of enterprises that move goods and people from
one place to another including airlines, rail-
by David A. Penn
A
continued on page 20
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x20
roads, water transportation, local transit compa-
nies, trucking, freight, and associated support
activities. Trucking alone employs 64,400 Ten-
nesseans in jobs across the state.
A review of payroll and employment data
reveals that wholesale trade, transportation, and
warehousing are much more important sources
of jobs and payroll in Tennessee than for most
other states. Figures for 2005 show that whole-
sale trade accounts for 5.7 percent of wages in
Tennessee, compared with 5.0 percent for the
U.S. economy. Tennessee ranks seventh among
the 50 states in share of total payroll generated
by wholesale trade, behind North Dakota, New
Jersey, Texas, Illinois, Georgia, and Oregon.
Transportation and warehousing generated
5.0 percent of employment and 5.9 percent of
wages for Tennessee in 2005, ranking the state
second only to Alaska in the importance of
these industries as a source of jobs and wages.
It is not surprising that transportation and ware-
housing are very important in several southeast-
ern states, with Tennessee, Arkansas, Kentucky,
and Georgia ranking in the top 10 nationally.
Adding wholesale trade to transportation
and warehousing, we find that Tennessee ranks
first in the nation in terms of the proportion of
payroll and employment in these sectors. Ten-
nessee’s locational advantage is the primary rea-
son for the sector’s strong presence in the state,
along with well-maintained highways and a busi-
ness-friendly regulatory environment.
Over the longer term, 1990 to 2006,
employment in transportation and warehousing
in Tennessee increased at a faster rate than total
nonfarm employment, but wholesale trade rose
somewhat more slowly, as shown in the figure.
During this period, nonfarm employment
increased by 27 percent, while transportation
and warehousing employment gained a much
larger 47 percent. In fact, trucking employment
increased 64 percent. 
The figure shows that employment in trans-
portation and wholesale trade is sensitive to the
business cycle, especially for trucking employ-
ment. After an impressive increase during the
late 1990s, trucking employment dropped
sharply during the 2001 recession, recovering
nearly to pre-recession employment by 2006.
Transportation and warehousing also shows
cyclical sensitivity but much less than trucking.
By 2006, employment in transportation and
warehousing had surpassed its pre-recession
peak in 2001. Wholesale trade, on the other
hand, has not quite fully recovered from the
recession, with employment still one percent
lower than the pre-recession peak in 1999. 
David A. Penn is the director of the Business
and Economic Research Center and an associ-
ate professor in the Department of Economics
and Finance at MTSU.
continued from page 19 In many cases
[logistics] functions
are produced
internally and
employment
records do not
distinguish supply
chain functions from
other activities. 
Employment Growth: Transportation, Warehousing, and Wholesale Trade,
Tennessee, 1990-2006
Index (1990 = 100)
160
Wholesale Trade
Truck Transportation
Transportation and Warehousing
Total Nonfarm
150
140
130
120
110
100
1990 1995 2000 2005

Tennessee Logistics: Importance to the Economy

http://www.mtsu.edu/~berc/tnbiz/supply/penn.pdf

Tennessee Logistics: Importance to the Economy

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