Armstrong report says commerical warehousing market almost at $33 billion

Jeff Berman, Senior Editor -- Logistics Management, 5/23/2007

STOUGHTON, Wis.—A new report from supply chain consultancy Armstrong & Associates says that the commercial warehousing market in the United States has reached almost $33 billion.

And Armstrong added that the number of U.S.-based commercial warehouses is estimated at 7,900, with 1.25 billon square feet of space, while the growth rate for 2006 was 9.7 percent. A major takeaway of the report—entitled "Warehousing in North America-2007"—was that contract warehousing is growing at the expense of public warehousing. But it added that profitability is not inherent in either model, as that is typically owed more to company cultures and practices.

Evan Armstrong, president of Armstrong & Associates, told Logistics Management that managing warehouses in the United States poses two significant challenges. First, he said, being able to efficiently manage and staff warehouse operations is a" juggling" act. And second, capital outlays for warehouses and information technology can be considerable. To stave off this multi-million dollar proposition, most companies are leveraging commercial warehousing providers, he added.

Armstrong added that commercial warehousing provides shippers with myriad benefits to improve operations and processes.

"Commercial warehousing provides [shippers] with the ability to control costs, better manage inventory, and improve customer service levels," he said. "Many providers are moving toward a multi-client warehouse campus environment that allows them to ‘flex’ staffing between multiple customers to address shifting order volumes, and work demands. This ability can significantly reduce staffing costs. In addition, warehousing providers have often made significant investments in IT and tier-one warehouse management systems (WMS). Having the IT to support workers and provide for better task management can greatly increase warehouse efficiency, improve order fill rates, reduce on-hand inventory levels and in-turn increase inventory turns."

In assessing the standard components of warehouse pricing models, the report indicated that the major variables of this are space utilization, labor, administrative costs, and margins. And it added that this "standard costing methodology" is used for both contract and public warehousing. Other notable data takeaways cited in the report were: three-year warehousing contracts are viewed as standard for 54 percent of the market; and public warehousing pallet handling charges varied according to region from $5.75 to $6.79.

Armstrong & Associates’ "Warehousing in North America-2007" is now available. For more information, go to www.3plogistics.com or call 608-873-8929.