3PL news: Armstrong report says U.S. commercial warehousing market is at $37.5 billion

Jeff Berman, Group News Editor -- Logistics Management, 6/4/2008

STOUGHTON, Wis.—New research recently published by supply chain consultancy Armstrong & Associates indicates that the commercial warehousing market in the United States has hit $37.5 billion.

This tally tops last year’s data, which came in at almost $33 billion. And the report stated that the number of U.S.-based commercial warehouses is estimated at 8,000 with 1.3 billion square feet of space, both exceeding last year’s figures of an estimated 7,900 U.S.-based commercial warehouses and 1.25 billion square feet of space.

Armstrong also pointed out that the market growth rate for 2007 was 7.7 percent for 2007, compared to 9.7 percent in 2006, and it said that commercial warehousing comprises one-third of the entire U.S. warehousing market.

Richard Armstrong, president of Armstrong & Associates said in an interview there are a few different factors behind the continued growth of the U.S. commercial warehousing market.

“I think [shippers] continue to look at outsourcing activity, because they can use someone who performs commercial warehousing tasks as a core competency and then concentrate on what their companies do best,” said Armstrong. “It is a matter of finding somebody who will economically provide high-level service…and there are a host of those kinds of providers that have developed these services in the U.S. market in particular.”

As far as the day-to-day services that the contract warehousing model provides for shippers, Armstrong cited the following as the most common examples:

• IT capability and familiarity with a host of warehouse management systems, especially when a third-party logistics provider (3PL) has picked a particular system it has emphasized, resulting in quick implementation; and how
• most 3PLs have a lot of experience and repeatable processes that can be very useful for potential customers in that they can upgrade how their value-added warehousing distribution activity is being done and leverage the experience that 3PLs have accrued.

Armstrong cited Kenco, Genco, Menlo, UTI Contract Logistics, Kuehne and Nagel, and Saddle Creek as some of the major players in the U.S. commercial warehousing marketplace.

In terms of what the standard components of warehouse pricing models are for contract and public warehousing pricing, the report cited space utilization, labor, administrative costs, and target profitability margins as the main variables. Some other data takeaways included: how three-year contracts are standard and cover 54 percent of the contract warehousing market; and public warehousing and pallet handling charges varied according to region from $5.79 to $6.79.

Armstrong & Associates “Warehousing in North America—2008” is now available. For more information, go to www.3plogistics.com or call 608-873-8929.