Overall, the total warehousing and distribution center (DC) space in three key sectors—private, third-party logistics (3PLs) service providers and refrigerated/freezer—has held steady of late. While some companies have consolidated their operations to weather economic doldrums, several cite more space (often due to acquisitions), increased efficiencies and higher productivity. Especially notable is an across-the-board emphasis on value-added service offerings that meet current demand for increased customization of orders prior to shipment.

The United Parcel Service leads the private sector (with a dominant 74.8 million square feet of space). In the 3PL space, Exel continues to overshadow its competitors with 56.5 million square feet of warehouse space—more than twice as much as its nearest competitor. Meanwhile, dominating refrigerated/freezer warehousing, also by almost twice as much space, is Atlas Cold Storage with 277.8 million cubic feet.

Here are the highlights from each of the three Top 20 lists, which rank the companies by space from their most recent fiscal years.

With a total of 74.8 million square feet, UPS (#1) leads the ranking by square footage this year, having added almost 4.3 million square feet through integration of acquired companies. With UPS planning to add more warehouse space in 2004 through continued growth, its ranking is unlikely to change anytime soon. (Two other warehouse heavyweights, the Defense Distribution Center and the United States Postal Service, are not included in this ranking because they are government-owned.)

General merchandiser Wal-Mart (#2) continued to possess the most warehousing square footage of any retailer, with an estimated 62.0 million square feet divided among the company's 84 Wal-Mart DCs, 19 Sam's Club DCs and 37 McLane DCs (dedicated to grocery distribution). In May of this year, Wal-Mart sold McLane to Berkshire Hathaway. This will actually have some impact on the company's total distribution square footage in next year's rankings.

With 11 making the Top 20, retailers dominated the list: Wal-Mart, Target Stores, Kmart, JCPenney, food retailer Albertson's, Home Depot, Gap Inc., TJX Companies, Lowe's Companies, Best Buy and Ace Hardware. Together they represent 198.02 million square feet of warehousing, or 52% of the total space on the list.

Overall, however, UPS' growth was the rare instance. All of the other companies surveyed for the Top 20 list operated either the same or less square footage in this most recent fiscal year than in the previous one. Efficiency improvements were the reason most often cited.

Corresponding to fewer DC square feet were fewer workers, with 75% of respondents indicating a reduction in warehousing staff. Overtime was down too, with 92% of companies indicating the same or less than in the previous year. Again, an increase in productivity and efficiency were the reasons most often cited.

Many private DCs offer an increasing number of value-added services. Of those, kitting and pick and pack services dominated value-added processes, offered by 75% of companies responding to our survey.

Keep your eyes on a few key players in the 3PL sector, advises Dick Armstrong, president of Armstrong & Associates (608-873-8929), notably Exel (#1), APL Logistics and UPS Supply Chain Solutions (tied at #2).

Exel has business in all the right places and offers a great mix of capabilities that have grown out of freight forwarding and out of contract warehousing, he says. APL Logistics moved up on the list with its purchase of GATX Logistics (adding 21 million square feet) back in 2001.

"UPS Supply Chain Solutions has continued to grow, and management understands that supply chain services are a very significant and important part of their future so they continue to make it profitable and continue to expand it," observes Armstrong. He points out that UPS' primary competitor, FedEx, has de-emphasized broader supply chain services in favor of emphasizing transportation.

The single biggest trend in commercial warehousing is the transition from simply offering storage to offering a broader range of value-added services. "One part of that is simply that they're going to be changing their marketing and identifying themselves as logistics service providers. The other part is that they really understand that they must have a broader range of services," Armstrong explains.

These services are as numerous as they are varied. They range from vendor managed inventory and kitting/pick/pack services to light manufacturing/assembly, hazmat services and reverse logistics.

Overall, Armstrong notes an improvement in the marketplace's profitability by about 1% against total revenues, a trend he feels will continue. The U.S. market for 3PLs consists of 800 commercial warehouses at approximately $22.5 billion in net revenues.

Refrigerated/freezer warehouse and distribution companies generally posted an increase in cubic footage in the past year. Leading the list are Atlas Cold Storage (#1) and P&O Cold Logistics (#2), which carved up space previously owned by CS Integrated. United States Cold Storage (#3) also grew, increasing its cubic feet by 21.8 million in 2002. Dominating the marketplace, the top three companies comprise almost half of the total cubic footage represented by the Top 20 companies on this list.

Overall, refrigerated warehousing had a good year in 2002, says Bill Hudson, president and CEO of the International Association of Refrigerated Warehouses(703-373-4300). "There was smart growth, with many of our members getting more into the organic and health foods, pharmaceuticals which need refrigeration, flowers—which are a huge import item—primarily from South America, and the broadening chilled market," he explains.

The increase in space across refrigerated warehousing is also attributable to corresponding growth in the market's customer base, notes Hudson. "The manufacturers and distributors of perishable foods are getting a greater return on investment by putting money back into their core competencies, so they're relying more on public refrigerated warehouses," he says.

In turn, the refrigerated warehouses have implemented technologies such as bar codes and voice technology, offering a greater range of value-added services. These include order selection, inventory control, and broader services such as blast freezing and packaging.