Distribution and warehousing space in three key sectors - private, third-party logistics (3PLs) providers, and refrigerated/freezer - is up from 2003. While many companies spent the year consolidating operations, several cite more space due to both expansions and acquisitions, as well as increased efficiencies and higher productivity.

United Parcel Service again leads the private sector with a dominant 78.4 million square feet of space. In the 3PL space, Exel continues to overshadow its competitors with 73.3 million square feet of warehouse space - almost three times as much as its nearest competitor. And dominating refrigerated/freezer warehousing, by almost three times as much space as its nearest competitor, is AmeriCold Logistics with 624 million cubic feet.

Meanwhile, all three sectors noticed an important shift in how they run their warehouses. There is an across-the-board expansion of value-added service offerings to meet demand for increased customization of orders. Furthermore, many are looking to add transportation services as well.

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

With a total of 78.4 million square feet, UPS (#1) leads the ranking by square footage this year on Modern's exclusive list of privately owned DCs.

In fact, UPS added more than 3.6 million square feet through integration and consolidation of acquired companies this year. And given UPS' plans to add more warehouse space in 2005, the company's ranking is unlikely to change anytime soon.

General merchandiser Wal-Mart (#2) continued to possess the most warehousing square footage of any retailer on our list, with an industry-estimated 60.0 million square feet divided among the company's 120 DCs.

With 10 of them making the top 20, retailers dominate the list: Wal-Mart, Target Stores, Kmart, Home Depot, JCPenney, food retailer Albertson's, Lowe's Companies, Gap Inc., TJX Companies, and Big Lots. Together, they represent 204.5 million square feet of warehousing, or 50% of the total space on our list.

Unlike our survey a year ago, UPS' growth was not an isolated instance. In fact, 17 on our list operated either the same, or more, square footage in this most recent fiscal year than in the previous one. That growth in square footage will likely lead to increased capital equipment investments in 2005. Of the companies responding to our survey, 89% plan to spend the same amount or more in warehousing technology next year.

With higher productivity and larger facilities came fewer layoffs, too. Only 38% of respondents indicate a reduction of warehousing staff in 2004. Overtime was down too, with 88% 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.

Like the 3PLs, many private DCs offer an increasing number of value-added services. Of those, kitting/pick/pack services, merge in-transit, and application of hang tags (product identification, pricing, and security) led value-added activity, each offered by 40% of companies responding to our survey.

Exel maintained the top spot in 3PL square footage in 2004. With its purchase of Tibbett & Britten, the company added 16.8 million square feet, putting its North American contract logistics division at the $2.5 billion revenue mark. Exel was the exception, however, with the majority of the other 3PLs on the list spending the past year consolidating facilities, says Dick Armstrong, president of Armstrong & Associates (608-873-8929), who compiles the list.

'We're in a consolidation pattern that I see continuing for the next few years,' he observes. 'Going forward, we're more likely to see Tier 2 consolidation: the medium-sized and smaller players either merging or making acquisitions.' This is because customers are looking for a broader set of value-added solutions, Armstrong says. Furthermore, the pace of growth for many 3PLs doesn't keep up with the shifting requirements of the marketplace.

Value-added service offerings - ranging from vendor managed inventory and kitting/pick/pack services to light manufacturing/assembly, hazmat services and reverse logistics—continue to be an important trend. However, Armstrong sees the biggest growth in transportation management. 'More companies expect their 3PLs to have some kind of solution, or strategic partnership relationship, to help manage international traffic. Globalization continues to be a significant development for 3PLs.'

As for future predictions, Armstrong is keeping an eye on GENCO Distribution, Kenco Logistics, and Ozburn-Hessey Logistics (all tied at #6). He describes them as well-run, profitable companies that have proven themselves capable of taking business from larger 3PLs in the past year. Ozburn-Hessey rose from #13 last year to #6 due to the acquisition of Illinois-based Lanter Logistics and Lanter Refrigerated Distributing in April.

Overall, Armstrong notes a continued improvement in the marketplace's after-tax profitability with 2.7% of revenues. The U.S. market for 3PLs consists of 850 commercial warehouses and approximately $25.7 billion in net revenues.

Refrigerated/freezer warehouse and distribution companies generally posted slight decreases in cubic footage in the past year, likely due to consolidation, as well as possibly by the low-carb Atkins Diet fad. 'Anybody carrying bakery products and things like that may have lost some of their inventory,' speculates Bill Hudson, president and CEO of the International Association of Refrigerated Warehouses (703-373-4300), which compiles the list.

Leading the list is AmeriCold Logistics (#1) at 624 million cubic feet, making it larger than its next closest competitors - Atlas Cold Storage (#2), P&O Cold Logistics (#3), and United States Cold Storage (#4) - combined. (In this arena, facility size is measured in cubic rather than square footage.)

Overall, refrigerated warehousing had a good year, says Hudson. He notes that several new, more efficient refrigerated and frozen facilities featuring refrigerated dock space are under construction across North America - particularly in the north pacific and southeastern regions.

Also, 'more of our members are stepping up and offering more value-added services to the food industry,' he says. 'To call them public refrigerated warehouses is something of a misnomer because they do so much more now, including transportation management.'

Refrigerated and frozen warehouses continue to branch out into different markets for a larger customer base, including general retail, organic, health foods, and pharmaceuticals, making the industry's growth likely to continue in the coming years.

Click on the icon to view last year's report. (Warehouse heavyweights - Oct. 2003)