Special Report: Top 20 warehouses

Third-party logistics providers and public refrigerated warehouse operators held steady in their rankings, showing some insulation from economic chills.

By Allison Manning, Associate Editor -- Modern Materials Handling, 11/1/2008

How many commercial warehouses does it take to store America's frozen chicken, pharmaceuticals, paper products and other goods using about 1.25 billion square feet of space? About 8,000, according to a report by consulting firm Armstrong and Associates (608-873-8929, www.3plogistics.com).

For Modern's purposes, the 900 commercial warehousers of size in North America this year were whittled down to the 20 biggest third-party logistics (3PL) operators. On the refrigerated side, Modern referenced the rankings of the International Association of Refrigerated Warehouses (703-373-4300, www.iarw.org) to determine the 20 biggest public refrigerated warehouse (PRW) operators.

For the 3PLs, DHL & Exel supply chain (86 million square feet) again holds a wide margin over second-ranked GENCO (37 million square feet).

The major change for public refrigerated operators was the joint formation of Eimskip-owned Atlas Cold Storage and VersaCold. The joint venture, identified as VersaCold, is now ranked No. 2, edging closer to the biggest PRW, AmeriCold. (Read last year's ranking.)

Despite the fluctuating economy, warehouses haven't experienced much change. Products still need to be stored, especially food. Dick Armstrong, chairman of Armstrong and Associates, acknowledges that because of the slow economy, customers haven't been able to maintain the volumes they have in the past, but the 250 3PLs his organization looked at are “pretty good at ups and downs.”

“I think the guys on this list have all had more available capacity this year than they would have had last year,” says Armstrong. “But these guys are the cream of the crop. Anytime they have space, they can go out and fill it.”

Third-party logistics providers

DHL Contract Logistics (Excel) continues to be the biggest 3PL in terms of space and revenue, with its logistics division doing $2.5 billion in North America. No. 12 UPS and No. 6 Caterpillar Logistics Services also reported more than a billion dollars, a significant cut of the $27.6 billion in gross revenue for the 2007 fiscal year, according to Armstrong and Associates.

Most operators reported modest growth. Armstrong predicts about a 7 or 8% growth rate in dollars and 2 to 3% growth in volume in the next year. The disassociation between volume and dollar growth is due to increased costs for fuel, utilities and labor. “Pretty much a flat year,” he says.

Much of the change seen in Armstrong's 2007 and 2008 lists are because of more detailed analysis of warehouse operations. UPS Supply Chain Solutions, for instance, was ranked second last year with 35 million square feet. This year, it dropped to No. 12, with 20 million square feet. Of the 1,238 facilities recorded last year, it was found that only 100 were actually warehouses.

“Last year, we included space that was really packaging,” Armstrong says. “We had it all lumped together.”

Armstrong says more warehouses will become multi-client spaces, rather than single user, with multiple companies using the same facility. For many companies, it is no longer realistic to have enough product or business to fill an entire warehouse on their own.

A 50,000 square foot warehouse could hold between three and eight clients, allowing an operator to use labor effectively around different industries' peaks and valleys. A single “anchor client” is secured, and other clients are brought in to fill the space around that central client.

“Many multi-client warehouses are very efficient operations,” says Armstrong, highlighting No. 15 Menlo Worldwide. “They offer customers real value.”

VersaCold and AmeriCold, Nos. 8 and 9 on the 3PL list and Nos. 2 and 1 on the PRW list, are multi-client operations.

Methods of pricing, driven by reporting regulations, will also shift, says Armstrong. Working in a unit cost operation, where clients are charged by the carton, makes reporting under the Sarbanes-Oxley Act easier.

Another issue, Armstrong said, is increased visibility and inventory control, driven by better technology in the warehouse management system and track and trace industries. “There's an absolute threshold requirement for 3PL ability to keep the customer informed of all handoffs on inventory,” he says.

No. 2 GENCO, a leader in reverse logistics, and No. 3 CEVA are particularly good at productivity and inventory tracking, says Armstrong.

Refrigerated warehouse operators

Cold warehouse storage, estimated by the U.S. Department of Agriculture at 3.4 billion cubic feet, is about more than just lowering the temperature. Handling a time and temperature sensitive product adds another layer of complexity to the supply chain, says Bill Hudson, president and CEO of the IARW. Further complicating operations is a revolving labor force and intense compliance regulations.

Top operators on the refrigerated list stayed mostly the same, with most experiencing at least minor growth. One of the most significant changes to the IARW's list was the formation of a joint operation between Eimskip-owned VersaCold and Atlas Cold Storage. Last year, Atlas Cold Storage and VersaCold occupied the second and third rankings, respectively, with 415.3 million cu ft between the Canadian companies. Under the name VersaCold, the company ranks second with 416.3 million cubic feet, behind Georgia-based behemoth AmeriCold (509.6 million cubic feet).

Nebraska-based Millard Refrigerated Services jumped onto the list at No. 23, reporting 275 million cubic feet.

In the next year, Hudson says he expects to see more integration with traditional public refrigerated warehousing companies, collaborating to provide transportation services. Growth in developing markets like India and China has prompted the IARW to establish offices in Latin America, India, China and Russia within the last two years to meet its members' needs.

Despite worldwide slowdown in the economy, people still need to eat, requiring effective food storage. The public refrigerated warehouse business can be insulated to major economic shifts, Hudson says, because of its nature and critical importance to the food industry. PRW operators are actually in expansion mode, he says, trying to meet industry demand.

“Often, during a downturn in the economy,” Hudson says, “companies will turn even more aggressively towards third party logistics rather than putting their own money into brick and mortar.”

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