The Business of Warehousing in North America in the E-Commerce Era - Market Size, Major 3PLs, Benchmarking Costs, Prices and Practices - Armstrong ...
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The Business of
TRENDS
WarehousingIN
in
North/America
3PL CUSTOMER
in the
E-Commerce Era
RELATIONSHIPS
Market Size, Major 3PLs, Benchmarking Costs,
Prices and Practices
January 2021
November 2016
Phone: +1-800-525-3915
Website: www.3PLogistics.com
Email: Armstrong@3PLogistics.com
ABOUT ARMSTRONG & ASSOCIATES, INC.
Armstrong & Associates, Inc. (A&A) was established in 1980 to meet the needs of a newly deregulated domestic
transportation market. Since then, through its leading Third-Party Logistics (3PL) market research and history of
helping companies outsource logistics functions, A&A has become an internationally recognized key resource
for 3PL market information and consulting.
A&A’s mission is to have leading proprietary supply chain knowledge and market research not available
anywhere else. As proof of our continued work in supporting our mission, A&A’s 3PL market research is
frequently cited in media articles, publications, and securities filings by publicly traded 3PLs. In addition, A&A’s
email newsletter currently has over 88,000 subscribers globally.
A&A’s market research complements its consulting activities by providing continually updated data for analysis.
Based upon its unsurpassed knowledge of the 3PL market and the operations of leading 3PLs, A&A has
provided strategic planning consulting services to over 30 3PLs, supported 23 closed investment transactions,
and provided advice to numerous companies looking to benchmark existing 3PL operations or outsource
logistics functions.
All Rights Reserved.
No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by
any means, electronic, mechanical, photocopied, recorded or otherwise, without the prior permission of the
publisher, Armstrong & Associates, Inc.
The facts of this report are believed to be correct at the time of publication but cannot be guaranteed. Please
note that the findings, conclusions and recommendations that Armstrong & Associates delivers will be based
on information gathered in good faith from both primary and secondary sources, whose accuracy we are not
always in a position to guarantee. As such, Armstrong & Associates can accept no liability whatsoever for
actions taken based on any information that may subsequently prove to be incorrect.
©2021 Armstrong & Associates
Contents
North American Warehousing Overview 1
Top North American Warehousing 3PLs 3
Cold Chain Warehousing 7
A&A's North American Warehousing Survey 2019 9
Current Warehousing Trends 10
Qualifying Services or Differentiators 11
Five Critical Areas of VAWD 13
Contract Warehouse Pricing Guidelines 15
Calculating Market Storage Rates per Pallets 16
Fulfillment Fees 18
Contract Warehousing 19
Contract Lengths, Warehouse Sizes and Operating Margins 19
Owned vs. Leased 26
Primary Warehouse Handling Types 27
Metrics 28
Warehousing Information Technology (I.T.) Cost 29
Warehouse Management Systems (WMS) 29
Revenue Breakdowns - Contract Warehouses 30
Advanced Breakdowns by Commodities 32
VAWD 3PL Customers 36
Current Warehouse Rental and Vacancy Rates 39
E-Commerce Fulfillment and Value-Added Warehousing 42
and Distribution (VAWD)
U.S. E-Commerce 3PL Market Segment 43
E-Commerce Fulfillment & Branding Study 47
©2021 Armstrong & Associates
Overview
North American Warehousing Overview
Since 2004, Armstrong and Associates, Inc. (A&A) has published several reports covering warehousing
in North America. Our concentration has been on commercial warehousing, particularly contract
warehousing, which has grown rapidly over the last 40 years.
Figure 1 provides some basic historical and forecast data for the U.S. Warehousing Market. For 2019,
A&A estimates the U.S. Warehousing Market at $173.4 billion with Commercial Warehousing Revenue
(comprised of Value-Added Warehousing & Distribution (VAWD) and Public Warehousing Revenue)
at $79.9 billion. By 2021, we expect the U.S. Warehousing Market will reach $179.2 billion and the
Commercial Warehousing Market will reach $82.6 billion.
Value‐Added Warehousing & Distribution (VAWD) reflects the contracted warehousing market in
North America which was $57.2 billion in 2019 with the U.S. accounting for $47.2 billion in VAWD Gross
Revenue.1 This estimate is based on the revenue results of third-party logistics providers (3PLs)
comprising over half of the total VAWD market. Most of these providers are privately held but report
revenues to us annually. Others are publicly held, have public annual reports and are generally helpful
with clarifications.
In 2020, due to the pandemic, the U.S. VAWD Market is expected to slightly decrease to $46.9 billion but
pick up in 2021 to reach $48.8 billion.
Public Warehousing, which was the dominant form of warehousing in the U.S., now accounts for about
40% of the commercial warehousing market.
Figure 1. U.S. Warehousing Market – 1996-2021E
$180.0 11
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US$ Billions
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U.S. Warehousing - A&A (US$ Billions) Commercial Whse Revenue (US$ Billions) Public Whse Revenue (US$ Billions)
VAWD Gross Revenue (US$ Billions) Inventory Space (Billion Sq. Ft.)
1 VOLATILE: Latest Third-Party Logistics Market Results and Predictions for 2020
©2021 Armstrong & Associates 1Overview
Table 1 details A&A’s VAWD Gross Revenue, Commercial Warehousing Revenue, Warehousing Market,
and Inventory Space estimates for the U.S. In Commercial Warehousing Revenue the most significant
difference is that public warehouses tend to offer a short-term place to store inventory and provide
very few value-added services, while most VAWD 3PLs operate on three-year contracts and provide
customers with a host of value-added services such as pick/pack, kitting, and labeling to name a few.
The estimates reflect a Compound Annual Growth Rate (CAGR) of 4.6% in the U.S. VAWD Market from
2010-2019.
Table 1. U.S. Warehousing Market – Recent Values (US$ Billions)
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020E 2021E
VAWD Gross Revenue 31.4 34.0 36.0 36.5 37.4 38.4 39.1 40.1 43.3 47.2 46.9 48.8
Commercial Warehousing Revenue 52.3 56.7 60.0 61.0 63.0 65.0 66.2 67.9 73.3 79.9 79.4 82.6
U.S. Warehousing – A&A 112.0 120.0 127.2 132.0 137.5 141.0 143.7 147.3 159.1 173.4 172.3 179.2
Inventory Space (Sq. Ft. Billions) 6.9 7.0 7.1 7.3 7.7 8.2 8.4 8.6 9.3 10.1 10.2 10.6
As detailed in Figure 1, U.S. Warehousing has seen stronger growth than Commercial Warehousing.
This growth can be attributed in part to e-commerce expansions in the past decade particularly
by e-commerce players led by Amazon. Amazon is in the private warehousing sector as is much of
e-commerce B2C (business-to-consumer) expansion. Amazon had $40.2 billion in fulfillment costs in
20192 and its global fulfillment network comprised an astounding 272.2 million square feet of space.3 We
estimate its North American warehousing space specific to 3PL at 136.8 million square feet in 2019 with
the U.S. alone accounting for 129.1 million square feet.4
2019 was a great year for VAWD with gross revenue growth of 9% to $47.2 billion. It was the best growth
the segment has realized since 2010 when VAWD posted a 12.9% increase. VAWD net revenues grew
9.2% to $36.1 billion. The average contract warehousing agreement has a three‐year term, and while
there is significant market‐driven pricing pressure, it allows for pricing stability over the life of the
contract.
With COVID-19 stay-at-home orders and business shutdowns in March, VAWD had significant growth in
business-to-consumer (B2C) e-commerce fulfillment activity during the first half of 2020, while business-
to-business (B2B) activity waned. Most VAWD 3PLs entered 2020 with full warehouses, so significant
storage fees were still being paid. As 2020 progressed and the shutdowns were initiated, in-and-out
activity and non-e-commerce related value-added service activity declined and overall inventory levels
trended down leading to less storage revenue. The overall impact for the first half of 2020 was a VAWD
gross revenue decline of 7.1% and a net revenue decrease of 5.8%. We have seen incremental increases
in Q3 and Q4 as the economy continues to comeback in spits and spurts, and as VAWD customers rush
to restore inventory levels. We are expecting an overall 0.6% contraction for VAWD by the end of 2020.
However, VAWD 3PLs continue to benefit from growth in retail e‐commerce business, which continues
to be the fastest growing domestic 3PL segment.
2 “Amazon’s Logistics Cost Explosion” e-commercDB, February 2020, https://ecommercedb.com/en/blogPost/2115/amazons-logistic-costs-ex-
plosion#:~:text=While%20shipping%20costs%20amounted%20to,US%2440.2%20billion%20in%20total
3 “2019: Amazon.com Annual Report,” Amazon.com, Inc., April 2019, http://www.annualreports.com/HostedData/AnnualReports/PDF/NAS-
DAQ_AMZN_2019.pdf
4 Amazon Global Supply Chain and Fulfillment Center Network, MWPVL International, Inc., April 2020
©2021 Armstrong & Associates 2TOP WAREHOUSING 3PLs
Top North American Warehousing 3PLs
Table 2 lists the Top 50 North American Warehousing 3PLs based on warehousing space within North
America. It also includes their value-added services capabilities and latest warehouse management
systems (WMS) used.5 Overall, our Top 50 VAWD 3PLs have 3,825 facilities totaling 940.1 million square
feet. They also have an average of 71 warehouses covering 310,973 square feet. DHL Supply Chain leads
the pack with 139 million square feet of warehousing space within North America, XPO is second with
90 million square feet, and Ryder SCS is third with 56.4 million. When comparing Amazon on a more
apples-to-apples basis to the “traditional” 3PLs listed, it ranks second with 136.8 million square feet of
space within North America.6
Warehousing Space within North America – 2019
5 A&A’s Who’s Who in Logistics Online Guide
6 Amazon Global Supply Chain and Fulfillment Center Network, MWPVL International, Inc., April 2020 (including Fulfillment Centers, Supple-
mental Centers and Returns Centers; Pantry/Fresh Food Fulfillment Centers and Whole Foods Retail Grocery Distribution Centers, and exclud-
ing Prime Now Hubs, Sortation Centers, Delivery Stations, Airport Hubs and Data Centers)
©2021 Armstrong & Associates 3TOP WAREHOUSING 3PLs
Table 2. A&A’s Top 50 VAWD 3PLs by Warehousing Space within North America – 2019
Warehouse/
Third-Party Logistics Providers (3PLs) Value-Added Services Capabilities WMS
DC Capabilities
Avg. Sq. Ft. (000's)
Store Support/ Delivery
Returnable Container Mgmt.
Sequencing/ Metering
Main Brand(s) Used
Inventory Control/ Vendor
Specialty Packaging
Reverse Logistics
Merge-in-Transit
Warehouses
Total Sq. Ft.
Cross Docking
Customization
Sub Assembly
Temp. Control
Repair/Refurb.
Number of
Whse. Mgmt.
Mfg. Support
Call Centers
(Millions)
Refrigerated
Lot Control
Rail Siding
Pick/Pack
Pool Dist.
Labeling
KanBan
Third-Party Logistics Providers
Frozen
Kitting
Rank
Mgmt.
(3PLs)
RedPrairie,
DHL Supply Chain North Manhattan, HK
1 493 139.0 281.9 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ●
America Systems, Insight,
Proprietary
Proprietary, Infor
Provia, SIMS, Reflex
2 XPO Logistics 400 90.0 225.0 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● 400, Infolog,
RedPrairie, Cadre-
Accuplus, SAP, Nulogy
Servigistics V3,
Manhattan,
3 Ryder Supply Chain Solutions 328 56.4 172.0 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ●
RedPrairie, Accellos,
Flux
Manhattan, FourSite,
4 NFI 145 49.6 342.1 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ●
Softeon
Infolog, Zethcon-
5 GEODIS North America 142 44.0 309.9 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● Synapse, Manhattan,
RedPrairie
6 Americold 163 42.7 262.0 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● JDA
HighJump, Infor,
7 Lineage Logistics 190 37.0 194.7 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ●
Proprietary
Infor/EXCEED 4000,
Manhattan,
8 FedEx Logistics 110 30.7 279.1 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ●
JDA/RedPrairie,
Proprietary
HighJump, RedPrairie,
9 Kenco Logistic Services 90 26.0 288.9 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ●
SAP WM, Manhattan
[In-house] GSISS-
WMS, AilisXE-WMS, n-
10 CJ Logistics North America 66 24.9 377.3 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● WMS, Smart-WMS,
Integrate WMS, CPG
WMS
JDA (i2), Flux, RT
11 Penske Logistics 70 24.6 351.4 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● Systems, MARC,
Proprietary
Infor/EXE, SAP,
12 DB Schenker North America 91 23.7 260.4 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ●
TECSYS, RedPrairie
Infor WMS, RedPrairie
13 Saddle Creek Logistics Services 70 22.5 321.4 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ●
WMS, Softeon
CIEL Warehouse,
14 Kuehne + Nagel North America 87 18.7 214.9 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● Provia FourSite, KN
SwiftLOG
JDA, Manhattan
15 CEVA Logistics North America 119 18.1 152.1 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ●
Associates
Infor/EXE, Manhattan,
16 UPS Supply Chain Solutions 144 17.3 120.1 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ●
LMS, Proprietary
17 Warehouse Services 30 14.0 466.7 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● Oracle
17 WSI 52 14.0 269.2 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● Oracle-EnterpriseOne
Manhattan WMi,
LogFire, OWMS,
18 APL Logistics North America 44 12.7 288.6 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● Proprietary-WMSp &
WMSz, eLMS, CMS,
Irista
19 Radial 21 11.7 557.1 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● Manhattan Associates
Proprietary-Expeditors
19 Expeditors 133 11.7 88.0 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● Distribution
Management System
Proprietary, Just-in-
20 Universal Logistics Holdings 40 10.6 265.0 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ●
Time Sequencing
Ingram Micro Commerce & Proprietary (GOFOS,
21 38 10.4 273.7 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ●
Lifecycle Services IM-First, Provia)
SAP, JDA RedPrairie,
22 Neovia Logistics 49 10.2 208.2 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ●
Proprietary
23 United States Cold Storge 37 9.6 259.5 ● ● ● ● ● ● ● ● ● ● ● Proprietary
Manhattan--SCALE;
24 Performance Team 24 9.0 375.0 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ●
Softeon
Blue Ribbon Transport -
25 20 8.3 415.0 ● ● ● ● ● ● ● ●
SpartanNash
©2021 Armstrong & Associates 4TOP WAREHOUSING 3PLs
Table 2. A&A’s Top 50 VAWD 3PLs by Warehousing Space within North America – 2019
Warehouse/
Third-Party Logistics Providers (3PLs) Value-Added Services Capabilities WMS
DC Capabilities
Avg. Sq. Ft. (000's)
Store Support/ Delivery
Returnable Container Mgmt.
Sequencing/ Metering
Main Brand(s) Used
Inventory Control/ Vendor
Specialty Packaging
Reverse Logistics
Merge-in-Transit
Warehouses
Total Sq. Ft.
Cross Docking
Customization
Sub Assembly
Temp. Control
Repair/Refurb.
Number of
Mfg. Support
Whse. Mgmt.
(Millions)
Refrigerated
Call Centers
Lot Control
Rail Siding
Pool Dist.
Pick/Pack
Labeling
KanBan
Third-Party Logistics Providers
Frozen
Rank
Kitting
Mgmt.
(3PLs)
26 FW Logistics 16 7.8 487.5 ● ● ● ● ● ● ● ● ● ● ● Proprietary
26 Peoples Services 42 7.8 185.7 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● Proprietary
RedPrairie, Infor/EXE,
27 DSV Panalpina North America 43 7.6 176.7 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ●
Logimax
Manhattan--SCALE,
28 LEGACY Supply Chain Services 36 7.5 208.3 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ●
Synapse, Proprietary
29 Schneider Logistics 35 7.2 205.7 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● HighJump
30 syncreon 44 7.0 159.1 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● Proprietary
31 Hub Group 16 6.6 412.5 ● ● ● ● ● ● ● ● ● ● ● Proprietary
32 Wagner Logistics 23 6.5 282.6 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● RedPrairie DLx
32 Technicolor Global Logistics 12 6.5 541.7 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● Proprietary
32 Verst Logistics 23 6.5 282.6 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● McLeod
Proprietary--Event
Tracker= omnichannel
33 Port Logistics Group 16 6.3 393.8 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ●
Whiplash =
ecommerce
34 Crane Worldwide Logistics 56 6.0 107.1 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● Proprietary
34 Kane Is Able 25 6.0 240.0 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● Manhattan Associates
34 WOW Logistics 19 6.0 315.8 ● ● ● ● ● ● ● ● ● ● ● Manhattan--SCALE
Proprietary--
35 Nippon Express North America 54 5.1 94.4 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ●
REWARDS
36 United Facilities 9 5.0 555.6 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● Infor; SWIMS
36 REO Logistics 6 5.0 833.3 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● Cadence/Accuplus
37 Atlanta Bonded Warehouse 14 4.9 350.0 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● RedPrairie
HighJump, WDLS 2.0,
38 ODW Logistics 19 4.7 247.4 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ●
Zethcon--Synapse
39 The Shippers Group 11 4.5 409.1 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● Codeworks, LLC
40 Comprehensive Logistics 17 4.3 252.9 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● Proprietary--STREME
41 Xpedient Logistics 5 4.0 800.0 ● ● ● ● ● ● ● ● ● ● ● ● ● ● High Jump
Manhattan
41 LeSaint Logistics 14 4.0 285.7 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ●
Associates, WareTech
41 Acme Distribution Centers 5 4.0 800.0 ● ● ● ● ● ● ● ● ● ● ● ● ● ● Proprietary
41 Barrett Distribution 20 4.0 200.0 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● Zethcon--Synapse
WMS – SAP WM,
41 SCI Group 31 4.0 129.0 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● LogFire, Manhattan
SCALE
Proprietary--
42 Damco North America 18 3.9 216.7 ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● Damco.com,
Manhattan, JDA
©2021 Armstrong & Associates 5TOP WAREHOUSING 3PLs
The capabilities of our Top 50 VAWD 3PLs are summarized in the tables below. The Top 3 warehouse
capabilities offered are Facilities Management (94%), Temperature Controlled warehouses (80%) and
warehouses with Rail Siding (67%). For Value-Added Services, all of them provide Cross Docking, then
Pick/Pack (98%) and Inventory Control/Vendor Management and Specialty Packaging both came in
third (96%).
Table 3. Warehouse Capabilities Summary
Capability Percent Providing
Facilities Management 94%
Warehouse
Temperature Controlled 80%
Rail Siding 67%
Refrigerated 56%
Frozen 37%
Table 4. Value-Added Services Capabilities Summary
Capability Percent Providing
Cross Docking 100%
Pick/Pack 98%
Inventory Control/Vendor Management 96%
Specialty Packaging 96%
Labeling 94%
Facilities Management 94%
Kitting 91%
Reverse Logistics 91%
Customization 89%
Lot Control 87%
Sub Assembly 87%
Pool Distribution 85%
Manufacturing Support 83%
Store Support/Direct Store Delivery 83%
Temperature Controlled 80%
Merge-in-Transit 78%
Repair/Refurbish 76%
Returnable Container Management 72%
Rail Siding 67%
Sequencing/Metering 67%
KanBan 65%
Refrigerated 56%
Call Centers 46%
Frozen 37%
More detail on each 3PL is available at www.3plogisticsonline.com.
©2021 Armstrong & Associates 6TOP WAREHOUSING 3PLs Cold Chain Warehousing Cold chain warehousing is experiencing a period of unprecedented growth, especially with the rapid expansion of online grocery shopping caused by the pandemic. The Global Cold Chain Alliance (GCCA) estimates that U.S. temperature-controlled warehouses will grow at a CAGR of 4% from 2018 to 2022. Although temp-controlled warehouses make up a small portion of the overall U.S. industrial market, major drivers such as e-commerce, population growth, and evolving consumer behaviors especially during the pandemic, increased space demand from 3PLs serving the food industry. The COVID-19 vaccine has also put cold storage front and center. E-commerce’s one-day or even two-hour delivery windows have increased the addition of cold chain facilities near population centers. New or expanding cold chain operations are struggling to localize themselves closer to their customers. While we have some important refrigerated warehouse operators on our list, information on this specialized business segment from the International Association of Refrigerated Warehouses (IARW) is particularly useful. Its list of the top North American refrigerated warehouse operators based on their warehouse capacity is below. The Top 3 Refrigerated Warehousing operators are Lineage Logistics, Americold Logistics and United States Cold Storage, all of which have had substantial growth over the past few years. The capacity of Lineage Logistics grew 122% since 2017 contributed by its multiple acquisition deals in the last several years. In the meantime, 3PLs in the cold storage space are continually investing in technologies ranging from temperature tracking to warehouse management systems and maintain optimal visibility. ©2021 Armstrong & Associates 7
TOP WAREHOUSING 3PLs
Table 5. 2020 IARW North American Top 25 List
2020 Provider Name Locations 3
Capacity (ft ) Capacity (m )
3
2017-2020 Growth 2017 Rank
1 Lineage Logistics United States 1,391,971,100 39,416,232 122% 2
2 Americold Logistics Canada, United States 1,032,116,990 29,226,298 15% 1
3 United States Cold Storage United States 373,987,950 10,590,159 44% 4
4 VersaCold Logistics Services Canada 123,008,891 3,483,223 -7% 5
5 AGRO Merchants Group United States 118,671,599 3,360,405 4% 6
6 Interstate Warehousing United States 115,735,371 3,277,260 15% 7
7 Frialsa Frigorificos Mexico 102,227,430 2,894,758
8 Burris Logistics United States 74,901,966 2,120,987 20% 9
9 Congebec Logistics, Inc. Canada 57,741,880 1,635,068 16% 11
10 Conestoga Cold Storage Canada 56,621,606 1,603,345 32% 13
11 NewCold Advanced Cold Logistics United States 47,972,150 1,358,420
12 Hanson Logistics United States 43,818,540 1,240,803 0% 12
13 Holt Logistics Corp. United States 35,000,000 991,090
14 Confederation Freezers Canada 34,580,000 979,197 16% 15
15 Trenton Cold Storage, Inc. Canada 34,277,373 970,627 21% 16
16 Qualianz Mexico 25,958,009 735,049
17 MTC Logistics United States 25,206,254 713,761 0% 17
18 Midwest Refrigerated Services Inc. United States 23,433,765 663,570 8% 20
19 WOW Logistics United States 23,406,700 662,804
20 Nor-Am
Nor-Am Cold
Cold Storage,
Storage, Inc.
Inc United States 22,221,792 629,251 -12% 18
21 Interstate Cold Storage, Inc. United States 21,403,000 606,065 0% 21
22 Hall's Warehouse Corp. United States 20,625,304 584,043 0% 22
23 SnoTemp Cold Storage United States 19,067,775 539,939 4% 24
Valley Cold Storage &
24 United States 18,002,030 509,760
Transportation
25 CWI Logistics United States 17,280,000 489,315
Source: https://www.gcca.org/about/resources/about-industry/technical-publications/surveys-market-research/iarw-north-american
©2021 Armstrong & Associates 8WAREHOUSING SURVEY 2019 A&A’s North American Warehousing Survey 2019 In the fourth quarter of 2019, A&A collected information from 23 3PLs for our detailed warehousing database. In addition to the General Survey form in Appendix A, we expanded and revised our individual warehouse location database, as well as warehousing fulfillment benchmark data. We received responses covering 668 contract warehouses and 190 3PL warehousing contracts in North America, mostly in the U.S. and Canada. We asked our survey participants, “How much did your business change from 2017 to 2018?” 83% had positive revenue growth in 2018 with average Year-Over-Year (YOY) growth of 13%. The average gross warehouse revenue for the 23 3PLs was $26,646,791 for 2017 and $28,022,814 for 2018. We asked, “What percent of your total warehousing revenue in 2018 was from e-commerce warehousing/fulfillment?” and requested the portions of Business-to-Consumer (B2C) and Business-to- Business (B2B) revenue. An average of 20% of total warehousing revenue in 2018 was from e-commerce warehousing/fulfillment. Of that, B2C averaged 60% and B2B averaged 40%. We also asked, “What percent of your net revenue (without purchased transportation) came from the following functions? Dedicated Contract Warehousing, Contract Packaging, Multi-Client Contract Warehousing or Multi-Client Public Warehousing?” For revenue the averages were: Dedicated Contract Warehousing 50.9%, Multi-Client Contract Warehousing 31.6%, Multi-Client Public Warehousing 15.4% and Contract Packaging 2.1%. By space the averages were: Dedicated Contract Warehousing 57.4%, Multi-Client Contract Warehousing 25%, Multi-Client Public Warehousing 17.1% and Contract Packaging 0.6%. ©2021 Armstrong & Associates 9
WAREHOUSING SURVEY 2019
Current Warehousing Trends
We asked the survey participants about the changes and trends they have seen in warehousing in the
last 2-3 years.
What important changes have you seen in the warehousing business in the last 2-3 years?
The three main changes are increasing labor challenges, regionalization and inventory shifts, and advanced
technology/automation. E-commerce, omnichannel fulfillment, increased customer expectations, such as
faster delivery and an increased volume of orders (many times with smaller number of packages) are
upending the industry and putting pressure on the operations, processes and systems in place.
3PLs continue to experience positive growth rates. In response to challenges such as labor recruitment and
retainment as well as IT capabilities, shippers are increasing their use of outsourced logistics services versus
insourcing, as well as consolidating the number of 3PLs they use. Customers are becoming more reliant on
3PLs to coach them.
Low unemployment rates are driving a shortage of available staff and workers for employment. This issue is
exacerbated during seasonal peaks and shopping rushes. Plus, a rising number of fulfillment center and
warehouse jobs increases the competition for available workers – often in the same regions.
Challenges include price changes in material, wages, ongoing labor shortages and fuel costs. 3PLs are
competitive in recruiting and retaining warehouse employees through various labor recruiting, development,
and retention initiatives.
There has been a decrease in capacity and increase in warehouse demand, especially in the controlled
environment space (temperature, relative humidity, etc.).
The distribution component of the customer experience is critical, but brands/shippers struggle to find a
logistics partner which shares their sense of urgency.
Service/delivery is starting to become more important than cost as retailers start punishing shippers for “non-
compliance”.
Transparency will continue to be a talking point – Customers aren’t just looking for value. While brands are
being led to make shipping changes by demanding customers, they’re also increasingly worried about the
transparency of their supply chains.
More and more customers are looking for longer storage terms and customized packaging service.
A growing trend is for shippers to lease the distribution centers and contract with providers to manage the
operations. In the past, the 3PL usually leased a facility and charged it back as part of the operating
agreement.
Same-day and two-day delivery expectations are forcing many companies to set closer to urban areas in order
to reach consumers in and around major U.S. cities, creating record-low vacancy rates despite robust
construction activity.
Lead times are continuing to be reduced. Orders are becoming more frequent with more complexity.
©2021 Armstrong & Associates 10WAREHOUSING SURVEY 2019 Non-traditional competitors in LTL and freight brokerage are entering the third-party warehousing market. Geopolitical variables are also shaping the 3PL industry, with ever-evolving trade compliance and regulations, from new tariffs, shifting alliances, and renegotiated trade agreements. Ecommerce and omnichannel fulfillment methods are driving the movement of inventory in new ways. In order to reduce transit time and costs, inventory is being shifted to stores and regional fulfillment centers. A distributed inventory position puts new and different pressures on the technology and operations needed to help manage, route, and distribute the inventory. The shifting location of inventory drives the need for advanced technology to make the inventory visible across all systems. Technology, such as AI and utilization of robots, offers the ability to operate more efficiently by enhancing existing labor, improving operational performance, and better accommodating seasonal surges. The use of robotics is increasingly being discussed and implemented, particularly in high-wage areas as minimum wage increases are mandated. Industry challenges and constant technological advancements continue to disrupt operations and the way we do business. Competition to provide the best customer experience in an effective way are bringing the role of data analytics to the forefront. Automation and robotics in the warehouse are increasing to help address labor shortages and the need for increased speed in all facets of operations. The growth of e-commerce is changing the expectations on warehousing, demanding more real-time transaction data. This is driving the increased need for new/more technology as well as automation. There is continued migration towards automation and technology-driven solutions. Internet of Things (IoT) connected growth is a trend. Qualifying Services or Differentiators We asked survey respondents what their qualifying services or differentiators are compared to other 3PLs. What are your qualifying services or differentiators? Owned facilities, customer Service, experience, customized solutions and capabilities, technology, blended integrated services. We focus on public and dedicated warehousing, LTL/TL transportation, plant support, and co-packaging. We do not try to be all things to all people. We know what we do well and execute in order to be a high touch, low noise operation. With owners on site, we make operating and investment decisions quickly. Retail and customer focused, global reach with local attention, e-commerce set ups, multi channel set ups, real estate, robust IT infrastructure and support. End-to-end solutions via our large portfolio, with modular customization and integration options. ©2021 Armstrong & Associates 11
WAREHOUSING SURVEY 2019 We identify critical market trends at the macro level, and to understand the challenges faced by specific vertical industries. Additionally, we are differentiated in the market by our capability and speed to adapt to changes, and to quickly scale up or down with customer business. Our customers commend our willingness to try new things and keep the momentum going forward without too much bureaucracy stalling progress. Through this, our customer relationship management and strategic development are leading competencies for us. We are omnichannel distribution specialist that helps consumer brands quickly and easily adapt to growth-driven logistics requirements. Unlike large, global 3PLs, we combine exceptional logistics performance with highly personalized service aimed at creating the 3PL industry’s happiest, most satisfied customers. We deliver customized, end-to-end solutions that allow shippers to consolidate 3PL services. Our facilities are tailored to specific needs and inventory, including automated ecommerce fulfillment centers, cross-docks, transload facilities, multi-temperature distribution centers, and food-grade warehouses. Engineers consistently analyze and optimize operations to address challenges like seasonality and short order demand times and our labor management expertise lends to operational synergies and flexibility to accommodate surges. To increase operational efficiencies for customers, we have also partnered with innovative technology leaders in pioneer automation, robotics, and business intelligence to enhance the employee experience. Our in-house real estate solutions create differentiation in service levels and enable distribution solutions spanning leasing, rental, and construction of custom build-to-suit facilities. Our growing investment in real estate allows it to procure spec buildings and sell into it. It is possible to provide our various forwarding services by one window. We are always able to provide optimal services not only international, also domestic for truck, ocean and air transport Accuracy, inventory, 99%+ compliance, strong management team, central location, on time shipments. Flexibility - Utilization of existing, customer or build to suit property, customer systems or internal system, multi- client and dedicated space; People and Process – Recruiting premised on "best athlete,", well-trained, and supported through quality systems and career development; Engineering and IT Technology – Offering considerable resources utilizing proprietary and enterprise licensed tools to support development; Partnership – Transparency and diligence to build a relationship that has staying power beyond a contract term. We offer high value through our in-house, custom engineered solutions for e-commerce fulfillment, distribution, warehousing, and transportation services. For most clients, we can be up and running in 10 to 16 weeks, including IT integration. For larger customers we can source dedicated facilities and fleets with turn-key operations. Customer vertical knowledge (knowledge of our customers' customers and their requirements); knowledge of the import supply chain; outsourced logistics management (one stop shop). We deliver high-speed, low-cost fulfillment with high-touch customized services. We are the only vendor that offers a fully integrated, end-to-end back-end ecommerce suite including order management, store fulfillment, payments and fraud management, Drop-ship management and fulfillment, supply chain, and customer care services. We provide purpose-built, multi-category B2C fulfillment, as well as B2B capabilities to enable a consolidated view of inventory and gives retailers fixed-cost leverage, even during peak levels. Our distributed order management system delivers comprehensive reporting and analytics that provide our clients with insights to respond to orders based on transportation cost, transit time, inventory and other parameters. Our parent company provides ample access to capital to expand with a focus on delivering long-term value. Our sister company provides experience in regulatory duty and tariff knowledge that is becoming increasingly important and applicable in meeting the needs of our retail partners international customers, and in supporting specific programs that may provide strategic value. ©2021 Armstrong & Associates 12
WAREHOUSING SURVEY 2019
Integrated Supply Chain Solutions; combine the flexibility of our non-asset and asset-based capabilities with
optimal technology and superior service focused on continuous improvement, cost savings, and supply chain
efficiency; innovative warehouse solutions - our Value-Added Warehousing services offer scalable and agile
warehouse space tailored to our partners’ requirements; integrated transportation management system (TMS)
and warehouse management system (WMS) platform; Our in-house customization and integration team uses
platform optimization feedback so lessons learned can be employed with future planning; productivity
enhancements; cost Reductions; assign dedicated resources to support each client. We work to understand
client's current state and requirements through validated, quality data to ensure our solution provides the optimal
supply chain design to produce improvements, efficiencies, and potential savings. Our standardized process for
managing new business start-ups employs the methodology established by the Project Management Institute
(PMI). We are a flat organization and senior management guarantees visibility and accountability to the
partnership.
Operational Excellence and Lean Operating System; integrated Solutions to lower total landed cost (e.g.
packaging, returns, configuration, transportation management); engineering Expertise – lower total landed cost &
improved service (e.g. optimal network & facility design, max productivity, reduced inventory carrying costs &
buffer stock, improved order cycle time) ; modular IT Portfolio, actionable BI & Near Real Time Visibility –
required functionality without excess costs coupled with business intelligence and visibility to support real-time
decision making; proprietary retail compliance technology – avoid retailer penalties & secure preferred shelf
placement.
Our quality of service including inventory accuracy, customer service, and on time delivery. Our flexibility to
customize our operations to meet the customers needs.
Our biggest differentiator is our geographic footprint and scale.
Our sweet spot is dedicated distribution center operations. We meet customer expectations while remaining
nimble to scale. We operate at competitive margins and deliver customer value. Our client base offers us with
more distribution center opportunities.
Five Critical Areas of VAWD
We also asked participants to rank the level of their organizations’ maturity in five critical areas of
VAWD (A. Safety, B. People, Talent Management, C. Technology, D. Continuous Improvement, E. Quality
Program) with 1 being the lowest and 5 being highest level of maturity. Figure 2 provides a summary of
the responses received from the 23 3PLs.
Figure 2. Level of Maturity in Five Critical Areas of VAWD
Safety 4.32
Quality Program 4.26
Continuous Improvement 3.79
Technology 3.74
People, Talent Management 3.74
3.40 3.60 3.80 4.00 4.20 4.40
©2021 Armstrong & Associates 13WAREHOUSING SURVEY 2019 It was important that we qualify each critical area of success as the VAWD respondents rank their level of maturity. Clearly Safety is the foundation of warehousing. Most surprising is that people or talent management is ranked low. Now is the time to set a strategy for talent management and employee development. Safety: Safety expectations are communicated throughout the entire organization. Safety standards are set and measured. There is a safety committee and regular training for all associates. Housekeeping, cleanliness and 5S are all part of the safety program. Equipment is checked before usage and lock out tag out processes are set in place. There are safety audits and random safety sweeps. Accidents and near misses are discussed and a root cause analysis is conducted to prevent future near misses or accidents. Good behavior is rewarded. Continuous Improvement: The company vision, mission and values are clearly communicated to all associates. The associates understand the vision, mission, and values and how they can contribute to the purpose. There is a formal Lean/Six Sigma program where there are green belt, black belt and master black belt associates available to all facilities. The visual management is standardized with active metrics used to management the day-to-day business. Lean/Six Sigma tools are easily available to all associates. There is a process in place to manage defects, corrective and preventative action reports. All employees understand how to perform root cause analysis such as fish bone diagrams, SIPOC (Suppliers, Inputs, Process, Outputs, and Customers), 5-why's, DMAIC (Define, Measure, Analyze, Improve and Control), and A4s. Key Performance Indicator (KPI) management is standardized. The business scorecard is aligned with the business vision and mission. All associates understand the metrics that drive success in their department. The employee suggestion program is formalized. The standard work sheets are posted at work-stations to include Leadership Standard Work. The leaders are trained on Lean/Six Sigma to include certification. Quality: There is a formal Quality Program with centralized access to the program. The sites are audited on compliance and there are Quality Sweeps on the effectiveness of the program. Standard Operating Procedures (SOPs) are audited and up to date. There are SOPs for all processes. Common features of a quality management system are: 1. Document Control (SOPs, job descriptions, standard work, RACI matrix, training matrix...) 2. Change Control 3. Corrective Action and Preventative Action (CAPA) 4. Audit Management 5. Compliance Management 6. Risk Management 7. Statistical Process Control 8. Supplier Quality Management 9. Employee Training and Management People, Talent Management: Job descriptions are formalized and all associates know what is expected of them. The employees have the tools they need to effectively do their job. Performance reviews are conducted for all associates. There is a formal mentorship program in place and the associates actively participate in the program. There is an employee development program where they can grow and learn skills beyond the day-to-day work. Roles and responsibilities are somewhat personalized to meet the strengths of the associates. ©2021 Armstrong & Associates 14
CONTRACT WAREHOUSE PRICING
Technology: The Business Intelligence (BI) system is easy to use. The BI tool is used for data analytics,
information, reporting, data and process mining, benchmarking, predictive and prescriptive analytics,
and strategic decision making. All sites use a Tier-1 WMS. The Learning Management System (LMS)
is integrated with the WMS. The Customer Relationship Management (CRM) starts with sales and is
maintained throughout the tenure of the customer relationship. Customers have access to the data
through an online portal that includes real-time inquiries and reporting. The portal is a self-serve tool to
view and manage the account. Automation of processes are appropriately used (examples are carousels,
conveyors, automatic stacker cranes, robots, pick-to-light, pick-to-voice and automated storage and
retrieval systems). There is a digital strategy that includes digital optimization and digital monetization.
Contract Warehouse Pricing Guidelines
There are many factors that can play a part in the pricing for contract warehousing services. The pricing
is mostly tailored by location. The storage fee is usually higher for areas with higher real estate costs.
Besides location, costs can vary depending on if the warehouse is owned or leased by the 3PL. The
process is driven by customer demands and unique circumstances. Refrigerated or special storage
conditions and specialized equipment can increase storage fees. Pricing schemes have become
more varied over time, but according to our 2019 warehousing survey results, the handling charges,
accessorial fees and racked/bulk rate benchmarks below are reasonable for basic warehousing and
value-added services.
Table 6. Handling Charges
Handling Unit-Load Average Rate Range
Pallet in $4.94 $3.3 – $7.5
Pallet out $4.62 $3.5 – $7.5
Pallet in/out $9.31 $5.98 – $15
Slip sheet in $7.02 $4 – $7.5
Slip sheet out $6.66 $4 – $7.5
Slip sheet in/out $13.68 $8 – $15
Box car pallet in $5.85 $3.5 – $12
Box car pallet out $5.72 $3.5 – $12
Box car pallet in/out $9.79 $7 – $15
Clamp in $4.87 $3 – $7.38
Clamp out $4.40 $3 – $5.53
Clamp in/out $9.35 $6 – $11.6
Small case pick $0.43 $0.15 – $1.2
Medium case pick $0.61 $0.35 – $1.75
Large case pick $1.13 $0.45 – $3.25
Piece pick $0.42 $0.14 – $0.75
©2021 Armstrong & Associates 15CONTRACT WAREHOUSE PRICING
Table 7. Accessorial Fees
M
Accessorial Fees Per Average Rate Min Rate a Range
x
Monthly minimum Month $2,774.29 $420.00 $420 – $5,000
Bill of lading fee, domestic Each $6.33 $3.50 $3.5 – $9.25
Bill of lading fee, international Each $9.19 $6.75 $6.75 – $15
Parcel order fee Each $3.58 $2.00 $2 – $8
Shrink wrap fee Each $4.19 $1.50 $1.5 – $9
Labeling fee, pallet Each $0.78 $0.25 $0.25 – $2
Labeling fee, case Each $0.38 $0.10 $0.1 – $0.75
Forklift labor Hour $43.33 $30.00 $30 – $75
Forklift labor, overtime Hour $54.98 $39.22 $39.22 – $75
Special projects labor Hour $38.90 $20.00 $20 – $75
Special projects labor, overtime Hour $49.33 $27.50 $27.5 – $75
Clerical labor Hour $35.90 $14.50 $14.5 – $55
Clerical labor, overtime Hour $46.06 $21.75 $21.75 – $55.77
I.T. labor rate Hour $94.69 $30.00 $30 – $175
I.T. labor rate, overtime Hour $94.88 $30.00 $30 – $175
EDI fee, per transaction Each $1,150.67 $0.00 $0 – $1,350
Table 8. Racked/Bulk Rate
Racked/Bulk Rate Average Rate Min Rate Max Rate Range
RACKED: Fully burdened rate per square foot, include margin $0.75 $0.35 $1.35 $0.35 – $1.35
BULK: Fully burdened rate per square foot, include operating margin $0.67 $0.35 $1.35 $0.35 – $1.35
Calculating Market Storage Rates per Pallets
The tables below contain average square footage and average monthly fee benchmarks for a standard
48’ x 40’ pallet of goods stored in different configurations using a 25% common-area allowance and
average 85% warehouse utilization.
©2021 Armstrong & Associates 16CONTRACT WAREHOUSE PRICING
Table 9. Square Feet per Pallet
A&A Matrix Pallets High
Square Feet per Pallet 1 High 2 High 3 High 4 High 5 High 6 High 7 High 8 High
Turret, Swing 6' Aisle 1 43.60 21.80 14.53 10.90 8.72 7.27 6.23 5.45
Reach Lift 1 52.94 26.47 17.65 13.23 10.59 8.82 7.56 6.62
Deep Reach Lift 2 40.27 20.14 13.42 10.07 8.05 6.71 5.75 5.03
Rack
3 36.05 18.02 12.02 9.01 7.21 6.01 5.15 4.51
9.5' Aisle 4 33.94 16.97 11.31 8.48 6.79 5.66 4.85 4.24
5 32.67 16.34 10.89 8.17 6.53 5.45 4.67 4.08
Counterbalance 1 67.88 33.94 22.63 16.97 13.58 11.32 9.70 8.49
13' Aisle 2 47.66 23.83 15.89 11.92 9.54 7.95 6.81 5.96
Pallets Deep
3 40.92 20.46 13.64 10.24 8.19 6.83 5.85 5.12
4 37.55 18.78 12.52 9.39 7.52 6.26 5.37 4.70
5 35.53 17.77 11.85 8.89 7.11 5.93 5.08 4.45
6 34.18 17.09 11.40 8.55 6.84 5.70 4.89 4.28
Bulk
7 33.22 16.61 11.08 8.31 6.65 5.54 4.75 4.16
8 32.50 16.25 10.84 8.13 6.51 5.42 4.65 4.07
9 31.93 15.97 10.65 7.99 6.40 5.33 4.57 4.00
10 31.48 15.75 10.50 7.88 6.31 5.26 4.51 3.95
11 31.12 15.56 10.38 7.79 6.23 5.20 4.46 3.90
12 30.81 15.41 10.28 7.71 6.17 5.15 4.41 3.86
©2021 Armstrong & Associates 17CONTRACT WAREHOUSE PRICING
Table 10. Rate per Pallet
A&A Matrix Pallets High
Rate per Pallet 1 High 2 High 3 High 4 High 5 High 6 High 7 High 8 High
Turret, Swing 6' Aisle 1 $ 32.70 $ 16.35 $ 10.90 $ 8.18 $ 6.54 $ 5.45 $ 4.67 $ 4.09
Reach Lift 1 $ 39.70 $ 19.85 $ 13.23 $ 9.93 $ 7.94 $ 6.62 $ 5.67 $ 4.96
Deep Reach Lift 2 $ 30.20 $ 15.10 $ 10.07 $ 7.55 $ 6.04 $ 5.03 $ 4.31 $ 3.78
Rack
3 $ 27.04 $ 13.52 $ 9.01 $ 6.76 $ 5.41 $ 4.51 $ 3.86 $ 3.38
9.5' Aisle 4 $ 25.45 $ 12.73 $ 8.48 $ 6.36 $ 5.09 $ 4.24 $ 3.64 $ 3.18
5 $ 24.50 $ 12.25 $ 8.17 $ 6.13 $ 4.90 $ 4.08 $ 3.50 $ 3.06
Counterbalance 1 $ 45.48 $ 22.74 $ 15.16 $ 11.37 $ 9.10 $ 7.58 $ 6.50 $ 5.69
13' Aisle 2 $ 31.93 $ 15.97 $ 10.65 $ 7.99 $ 6.39 $ 5.33 $ 4.57 $ 4.00
Pallets Deep
3 $ 27.42 $ 13.71 $ 9.14 $ 6.86 $ 5.49 $ 4.57 $ 3.92 $ 3.43
4 $ 25.16 $ 12.58 $ 8.39 $ 6.29 $ 5.04 $ 4.20 $ 3.60 $ 3.15
5 $ 23.80 $ 11.90 $ 7.94 $ 5.95 $ 4.77 $ 3.97 $ 3.41 $ 2.98
6 $ 22.90 $ 11.45 $ 7.64 $ 5.73 $ 4.58 $ 3.82 $ 3.28 $ 2.87
Bulk
7 $ 22.26 $ 11.13 $ 7.42 $ 5.57 $ 4.46 $ 3.71 $ 3.18 $ 2.79
8 $ 21.77 $ 10.89 $ 7.26 $ 5.45 $ 4.36 $ 3.63 $ 3.12 $ 2.73
9 $ 21.40 $ 10.70 $ 7.14 $ 5.35 $ 4.28 $ 3.57 $ 3.06 $ 2.68
10 $ 21.09 $ 10.55 $ 7.04 $ 5.28 $ 4.22 $ 3.52 $ 3.02 $ 2.64
11 $ 20.85 $ 10.43 $ 6.95 $ 5.22 $ 4.18 $ 3.48 $ 2.98 $ 2.61
12 $ 20.64 $ 10.33 $ 6.89 $ 5.17 $ 4.14 $ 3.45 $ 2.96 $ 2.59
Fulfillment Fees
E-commerce is changing the landscape of 3PL warehousing. Nearly every major trend in warehousing—
a tight labor market, adoption of new technologies, increased rents, low vacancy rates, and increasing
capacity, equally affect private and outsourced e-commerce warehousing. 3PLs are adapting to this
changing landscape by being agile, flexible, innovative and resilient. In the tables below, we calculated
fulfillment fees for broken case picking with different order ranges, insert fee, as well as other fulfillment
fees.
©2021 Armstrong & Associates 18CONTRACT WAREHOUSE PRICING
Table 11. Broken Case Picking, Fulfillment Fees
Orders Item Fee
0-1,000 1,001-2,500 2,501-5,000 5,001+ 0-1,000 1,001-2,500 2,501-5,000 5,001+
Average $2.33 $2.20 $2.08 $2.07 $0.44 $0.42 $0.40 $0.39
Min $1.00 $1.00 $0.85 $0.85 $0.25 $0.25 $0.20 $0.20
Max $3.50 $3.50 $3.50 $3.50 $0.80 $0.75 $0.75 $0.75
Table 12. Insert Fee per Page
Insert Fee per Page
Average $0.16
Range $0.05 - $0.25
Table 13. Other Fulfillment Fees
Special Projects Average Rate
Initial set-up fee $1,450.00
Labor hourly rate $30.94
Touch hourly fee $27.67
Contract Warehousing
In our sample of contract warehouses, the average annual revenue per warehouse is $7.4 million and
revenues range from $45,000 to $116.9 million. Our analysis shows the fourth quarter has the highest
average revenue of the year accounting for 29.2%, while the first quarter has the lowest average revenue
at 22.5%. Of the 668 warehouses, temperature-controlled warehouses account for 14% of the total.
Each contract warehouse has an average of five customers with one warehouse having as many as 80
customers. In this section, we have an in-depth analysis of our 2019 warehousing survey results and
provide some comparisons to our 2017 warehousing survey results.
Contract Lengths, Warehouse Sizes and Operating Margins
Figure 3 covers contract lengths. One-year contracts grew 7% over our 2017 survey. Three-year
contracts are 46% of the total. Two-year and three-year contracts decreased by 5% compared to 2017.
Short-term contracts of 1-3 years now represent 77% of the total. Contracts with longer terms of four
years or more, account for 23% of the total.
©2021 Armstrong & Associates 19CONTRACT LENGTHS
Figure 3. Contract Lengths
50% 46%
45%
40%
Percent of Contracts
35%
30%
25%
20%
20% 17%
15% 11%
10%
2% 4%
5%
0%
1 2 3 4 5 >5
Years
The warehousing industry is continuously impacted by the rise of e-commerce. E-commerce is
becoming an increasingly larger sales channel especially in B2C as B2B business has waned. Contract
lengths could shorten as the e-commerce market matures. Two-day delivery necessitates proximity
to customers, which means more distribution centers and fulfillment centers. To accomplish two-day
delivery, retailers that previously could have relied on one or two distribution centers now must have
five to provide reliable two- to three-day delivery. The increasing frequency of next-day and same-day
delivery requires an even more dramatic increase in locations. Next-day delivery works best with 40-50
locations, and same-day requires 80-100 locations. A retailer with two distribution centers may have
locations on the East and West Coasts, for example. Two-day delivery, however, means retailers and
3PLs have snapped up space on the periphery of major metro markets and near parcel hubs. Now,
warehousing demand is heating up in secondary and tertiary markets, too.
Another trend in new contract warehouses is for them to be larger in size. Our 2019 warehousing survey
result shows that 52% of all warehouses are smaller than 200,000 square feet. This is down 7% from our
2017 survey. In addition, the average warehouse size is 328,643 sq. ft. - 30% higher than two years ago.
“Big boxes” warehouses of 600,000 square feet or greater account for 16% of total sample, compared to
11% in 2017. The largest 3PL warehouse is 3,959,827 sq. ft. compared to 1,500,000 sq. ft. in 2017 survey.
The average warehouse size in the one million sq. ft. or greater group is 1,584,395 sq. ft. which is 6%
more than 2017 survey. Of the 668 warehouses analyzed, average warehouse ceiling height is 29.4 feet
and average common area is 14%.
©2021 Armstrong & Associates 20CONTRACT WAREHOUSES by SIZE
Figure 4. Contract Warehouses by Size
250
218
200
Number of Warehouses
150
126
100
76
66
50 51
50 39 42
0
00
00
9
9
9
9
9
9
99
9
99
99
99
9
,0
,0
,9
,9
00
9,
9,
9,
9,
00
9
9
29
39
49
59
99
19CONTRACT WAREHOUSES by SIZE Sortation is handled at sortation centers and parcel hubs, and cross-docking is a key activity. Some fulfillment may occur from a sortation center location, and therefore storage can include high-velocity SKUs. Sortation centers average between 100,000–500,000 square feet with average clear heights of 24–36 feet. Again, sortation centers are located on relatively low-cost real estate. Placement within a regional/hub-and-spoke distribution network factors into location selection. Parcel fulfillment centers handle sortation for last-mile delivery, with cross-docking for delivery vans. Parcel fulfillment centers are smaller, usually 100,000 square feet or less, with low clear heights and many cross-docking doors. Parcel fulfillment centers are located within or on the periphery of metro areas. E-commerce facilities are getting larger and taller due to the variety of SKUs sold by e-commerce retailers and labor-intensive pick-and-pack work E-commerce is driving a shift in the footprint of warehouses. Warehouses built in the last five years average nearly 185,000 square feet—143% larger than those built in the pre-recession years of 2002–2007. The shift is vertical, as well: during the same time period, clear height increased about 8%, to 32.3 feet. While the average warehouse size is getting bigger due to the complication of e-commerce fulfillment, there’s also been emergence of some hyperlocal/micro fulfillment in the past couple years which uses relatively small fulfillment centers, often automated, delivering in a tight radius, on a very constrained schedule. It relies on small, numerous fulfillment centers, located in urban areas, to stock and ship out goods for e-commerce orders and is used as the remedy to the challenges that are making order fulfillment increasingly difficult. Warehouses with different expected and actual operating margins are shown in Figure 5. Actual operating margins in 2017 versus 2019 are shown in Figure 6. We asked participants to provide both priced and budgeted expected margins for the first time in this survey. The group with operating margins of 10-14.9% contains the largest sample of warehouses. 5.4% of total warehouses averaged negative actual margins compared to 1.3% in our 2017 survey. In contrast, 9% warehouses achieved average operating margins of 30% or greater compared to 1.9% in 2017. Figure 5. Contract Warehouses by Expected and Actual Operating Margins – 2019 ©2021 Armstrong & Associates 22
CONTRACT WAREHOUSE MARGINS
Figure 5. Contract Warehouses by Expected and Actual Operating Margins – 2019
45% 42.6%
40%
35% 33.6%
20.7%
30%
27.0% 27.1%
25.1%
25%
Percent of Cases
20% 17.9%
15.2%
15% 13.2% 12.9%
5.7% 6.4% 9.0%
10% 7.9% 7.6%
6.9%
5.4% 5.9%
3.4% 2.2%
5% 1.4%
1.8% 1.1%
1.0%
0%CONTRACT WAREHOUSE MARGINS
Table 15 provides the range, mean and median values of expected priced, expected budged, and actual
operating margins. The median priced and budgeted expected operating margins are 10% and 9.85%,
respectively. The achieved, median actual operating margin is 9.11% - lower than both the expected
priced and budgeted margins. There are 11 cases out of 668 (2%) samples where 3PLs lost money on
warehouse operations. The mean actual margin is 11.57% - higher than the expected priced margin, and
lower than the expected budgeted margin.
The actual margin range is also much wider than in our 2017 survey on both the low and high ends
showing the variety of the warehousing market. The lowest actual margin was -29.4% and the highest
reached 108.3%. The mean and median values of the actual operating margins have slipped by 0.9% and
2.4%, respectively, since 2017.
Table 15. Contract Warehouses by Expected and Actual Operating Margins – 2019
Range Mean Median
Expected margin, priced -9.00% – 30.00% 10.27% 10.00%
Expected margin, budgeted -10.00% – 56.12% 12.16% 9.85%
Actual margin, P&L -29.40% – 108.30% 11.57% 9.11%
We used margin groups 5-9.9% and 10-14.9% to study margin changes over the years since they have
the greatest number of contract warehouses. We put together the expected and actual margins from
our 2015, 2017 and 2019 surveys in Table 16. The absolute variance for expected and actual operating
margins between 5% and 14.9% goes from 50% (24%+26%) in 2015 to 39% (18%+21%) in 2017 and 25%
(7%+18%) in 2019. The steadily decreasing variance of expected and actual margins show 3PLs are
getting better at managing the actual operating margin to expected operating margin. Figure 7 below
shows the decrease of variance for both margins over the years.
Table 16. Expected and Actual Operating Margins Comparison, Percent of Contract Warehouses
Expected, priced
Margin Range Expected 2015 Actual 2015 Variance 2015 Expected 2017 Actual 2017 Variance 2017 Actual 2019 Variance 2019
2019
5.0 – 9.9% 37% 60% 24% 38% 56% 18% 27% 34% 7%
10.0 – 14.9% 55% 29% -26% 50% 29% -21% 43% 25% -18%
©2021 Armstrong & Associates 24You can also read
