The Latest on North American Warehousing
Armstrong & Associates, Inc. (A&A) estimates that the total United States warehousing market for 2017 was $148.7 billion. Commercial warehousing accounted for $68.6 billion. The Third-Party Logistics (3PL) Value-Added Warehousing and Distribution (VAWD) market segment was $39.1 billion in 2016 and is estimated at $40.5 billion for 2017.
To track the most up-to-date costs, pricing, and practices in North American warehousing, A&A collected information from over 500 contract warehousing operations, almost 400 contract customers, and 100 public warehousing operations. The results are published in a report, “First Wave Pick: The Business of Warehousing in North America – 2018, Market Size, Major 3PLs, Benchmarking Costs, Prices and Practices.”
A&A’s Top 50 North American VAWD 3PL list—representing 3,827 facilities and 829 million square feet of warehousing space—includes data on leading 3PLs, including number of warehouses, total space, warehouse and value-added service capabilities, and warehouse management system (WMS) deployment. A&A estimates that there are 9,000 US commercial warehousing facilities of size with 1.9 billion square feet of space. The Top 50 have an average of 77 warehouses. The average size is 216,593 square feet.
Operating margins, both expected and actual, have fallen since A&A’s previous studies. Market competition and customer sophistication are two driving forces. Pricing, especially in light of scope creep, is always a challenge. A&A’s Transactional Pricing Guidelines, included in the report, are guidelines for handling charges, storage per month by number of turns, rates for pallets high/deep, costs per square foot, racking costs, inventory turn discounts, per-hour labor rates, and transactional charges. Operating margin benchmarks are also provided. Benchmarks are split, where applicable, by warehouse type (contract, VAWD 3PL, or public), size, and commodities handled.
North American ecommerce logistics revenues were $9.5 billion in 2016, and A&A anticipates that number will double by 2020. Ecommerce is changing the landscape of 3PL warehousing, amplifying the effects of nearly every major trend—a tight labor market, adoption of new technologies, increased rents, low vacancy rates, increasing capacity, and new development. In addition to ecommerce logistics costs, 3PL revenue, and growth rates, “First Wave Pick” includes, for the first time, ecommerce fulfillment benchmark rates.