3PL-warehousing: New Armstrong report says U.S. commercial warehousing market will hit $50 billion

By Jeff Berman, Group News Editor
October 20, 2010 - LM Editorial

A new report from supply chain consultancy Armstrong & Associates Inc. states that United States-based commercial warehousing revenue will hit $50 billion in 2010.

The report notes that combined contract and public warehousing revenues are expected to top 2008 levels by 2 percent after a 2009 decline. And it added that the contract and public warehousing market now represents 45 percent of the entire U.S. warehousing market.

Richard Armstrong, chairman of Armstrong & Associates, told LM that a slowly recovering economy is the main reason for a 2010 rebound in the commercial warehousing market.

“Increasing activity is a direct reflection of the economic recovery,” said Armstrong. “The economic recovery is gradual and will take a while, but the rebound is due to the recovery.”

Warehousing activity that is increasing for various companies represents a snapshot of what is happening in different vertical markets, said Armstrong.

He cited automobile sales, which have lagged, as an example of warehousing and third-party logistics (3PL) activity in that sector that remain previous levels. The same goes for anything related to housing and new home construction, which work directly with big box retailers like Lowes and Home Depot and other building materials suppliers for the housing industry, he said.

But the news is not as bad for other sectors, like food and beverage, which are not likely to have any lag and may actually see a slight increase in 2010, due to U.S. population growth, said Armstrong.

“Healthcare should grow this year, and I don’t expect there will be any [drop-off] for defense or aerospace,” said Armstrong. “And when it comes to telecommunications-related merchandise like cell phones and the IT sector as it relates to all the applications available now like smart phones and portable computers are all likely to hold their own throughout this year.”

Included in the report is a list of the top 25 commercial warehousing services providers, which includes 3PLs. It is also comprised of updates on facility sizes, capacity, revenues, pricing, regional variations and vertical industries, according to Armstrong & Associates.  And data on operating margins, EBITDA and EBIT margin distributions are provided for contract warehousing operations. 

The firm said in a statement that the results show that profitability is not inherent to either of the models, but is determined by company cultures and pricing practices.  And it said that expected operating margins and profitability measures are compared to actual results.  Statistical analyses, said Armstrong, detail the effects of open book relationships and leasing, versus ownership on overall warehouse profitability, with practitioners providing insight on the role and benefits of gainsharing relationships. 

Another feature of the report highlighted by Armstrong are components of standard warehouse pricing models whose major variables are space utilization, labor, administrative costs and target profitability margins.  This standard costing methodology is used for both contract and public warehousing pricing, according to Armstrong. 

For more information on the report, go to http://www.3PLogistics.com .



About the Author

Jeff Berman headshot
Jeff Berman
Group News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).


Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

As was the case for the second quarter, third quarter earnings results for publicly-traded less-than-truckload (LTL) carriers are again strong. Signs of solid earnings results from carriers that have posted earnings to date include tonnage increases, gains in weight per shipment and average daily shipments, higher yield, and revenue per hundredweight.

While the holiday season is known to bring good tidings and cheer to all, it may also come with another thing that is not so pleasant: higher rate freights. That was the thesis of a commentary written by Mark Montague, industry pricing analyst and chief market-watcher for DAT, a Portland, Ore.-based subsidiary of TransCore.

Earlier this week, FedEx said it is expanding its International First service for early deliveries with the addition of 31 new origin countries, which will bring the total number of origin markets for the service to 97.

Monday, December 22 is pegged as UPS's peak delivery day, as the company expects to deliver more than 34 million packages that day, adding that it expects to see six days in December top last year’s peak shipment day delivery record of 31 million packages.

The time has come again for less-than-truckload (LTL) general rate increases (GRI), with various carriers recently announced their respective rate hikes in recent days.

Article Topics

News · Warehouse · 3PL · Armstrong & Associates · All topics

About the Author

Jeff Berman, News Editor
Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman.

Comments

Post a comment
Commenting is not available in this channel entry.


© Copyright 2013 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA