Warehouse giants

Our annual review shows the companies leading the way in North American warehouse space in private, 3PL and public refrigerated/freezer operations.

By Corinne Kator, Associate Editor -- Modern Materials Handling, 11/1/2006

North American distribution and warehousing space in three key sectors—private, third-party logistics (3PL) providers and public refrigerated/freezer—continues to grow.

Much of this growth is the result of business expansion among leading warehouse operators. Such expansion comes in a couple of different forms—new capacity and acquisitions.

And it is happening across all three segments of warehousing. As a result, some company rankings have changed dramatically since last year's report.

Nevertheless, the leaders still remain the leaders with the companies topping all three of last year's lists holding onto their top positions. United Parcel Service (UPS) remains the largest private warehouse operator. DHL Exel Supply Chain, previously known as Exel, remains the largest operator of 3PL warehouse space. And AmeriCold Logistics is still the largest operator of public refrigerated/freezer space, with more than twice the space of its nearest competitor.

As manufacturing continues to shift in the United States, retailers are beginning to dominate our list of the largest operators of private warehouse space. At the same time, many of them continue to grow noticeably.

Many retailers are growing as a result of consolidation in their industries. The merger of retail giants Sears and Kmart, for example, created Sears Holding Corp., which now ranks as the third-largest operator of private warehouse space. And the grocery chains on our list—Kroger (No. 8), SuperValu (No. 13) and Safeway (No. 14)—are all acquisitive companies operating grocery stores under numerous names across North America.

Other retailers are simply growing organically. Target (No. 4), The Home Depot (No. 5) and Lowe's (No. 7) for example, have recently built DCs to accommodate new stores and increased sales.

Wal-Mart, of course, also continues to build new stores and new DCs to stock them. Meanwhile, Wal-Mart is still the second-largest private warehouse operator behind UPS, but the gap between those companies is narrowing.

Total storage space for the top 3PL warehouse operators increased 58 million square feet over the total from last year's list. That 15% increase is due in part to acquisitions in the 3PL industry. In fact, Dick Armstrong, CEO of Armstrong & Associates, which compiles the 3PL list, says acquisitions are a major trend in the 3PL industry.

Schenker Logistics, for example, increased its square footage from 10 million square feet to 30 million, propelling Schenker from No. 17 in the rankings to No. 3. Much of this growth was the result of Deutsche Bahn, Schenker's parent company, acquiring BAX Global in January 2006.

Jacobson Companies also made a big move this year—from No. 20 to No. 11—thanks to a 105% increase in storage space. That growth has been a combination of strategic acquisitions and organic growth, says Jacobson spokesman John Rolf. Jacobson has continued to acquire new companies, such as Southwest Storage in Phoenix, and is likely to climb even higher on next year's list.

Also notable was the acquisition by Deutsche Post, the parent company of courier DHL, of Exel in September 2005.

Another trend in 3PLs is the growth of contract warehousing, says Armstrong. "There will be more and more contract warehousing going forward," he says. "And an important subset of that is multi-client contract warehousing," he adds, citing Menlo Worldwide (No. 17) as an example.

About 60% of Menlo's customers are in multi-client facilities, according to Armstrong. This arrangement allows Menlo to take advantage of variations in the quarterly and year-end business cycles of different clients. While one client's business is in a valley, Menlo can heavily service another client whose business is at a peak.

Another change to watch in the industry, says Armstrong, is the recent establishment of a warehouse network by Landstar Logistics.

Landstar has become one of the nation's largest trucking companies without owning a single truck. The company instead contracts with a network of thousands of independent truck owners. Landstar announced that it plans to apply this model to warehouse space.

"Smaller warehousing companies have been pressed because of a trend to have larger and larger contract warehouses," says Armstrong. "Landstar may have created a way for smaller companies to band together and compete against the big guys."

This year's ranking of the top 20 public refrigerated/freezer warehouse operations is truly a North American list for the first time.

"In the past, Mexico was not included on what was a narrower U.S./Canada list," says Benjamin Milk, vice president of the International Association of Refrigerated Warehouses, which compiles the refrigerated/freezer list.

One Mexican company, Frialsa Frigorificos (No. 16), made the list this year. "Frialsa is a sophisticated and important company in North America," says Milk, "and deserves to be recognized for the prominent role it plays in the industry and for the large customer base it serves."

The number of Canadian companies on the list grew this year with the addition of Congebec (No. 18). Headquartered in Vanier, Quebec, Congebec makes its inaugural appearance thanks to dramatic growth in space, from roughly 12 to 22 million cubic feet.

California-based P&O Cold Logistics, which ranked No. 4 last year, does not appear on this year's list. P&O was acquired by Versacold Group in December 2005. The acquired space raises Versacold from No. 5 on last year's North American list to No. 3 this year.

Also making big gains this year is Preferred Freezer Services, which added 57% to its storage capacity, raising it from No. 7 to No. 5.

According to the U.S. Department of Agriculture, refrigerated storage capacity in the United States totaled 3.21 billion gross cubic feet in late 2005, with public warehouses accounting for 76% of that space.

"The growth in PRW (public refrigerated warehouse) space is a tangible recognition of this industry's commitment to providing cost-effective storage and logistics services for the food industry," says Milk. "It reflects the PRW industry's investment in technology, accompanied by a 'can-do' customer orientation. To paraphrase the bygone Oldsmobile commercial, 'This isn't your father's cold storage company.'"

A growing trend in the PRW industry, says Milk, is the larger role PRWs are playing in transportation planning and management. Virtually all PRWs offer such services as scheduling, LTL and truckload freight, freight consolidation, claims processing, real-time information control, direct-store delivery, performance benchmarking and operations management, he says. And because of their high traffic volumes, PRWs can often negotiate better rates and better access to equipment.

With such attractive offerings, public refrigerated warehouse operators are likely to see their businesses continue to grow in the coming years.