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