Analyst Insight: The boundaries defining U.S. value-added warehousing (VAWD) get fuzzier. The major 3PLs in the contract warehousing market continue to expand their transportation functionality to better match broader customer needs.  As a result, all of the major players now have expanded transportation services, which add significantly to their value-added warehousing capability.

-Dick Armstrong, chairman of Armstrong & Associates

The largest North American value-added warehousing and distribution company, Exel, operates Oracle's transportation management system and others.  It also has a large freight brokerage, Exel Transportation, and a home delivery operator, Exel Direct.  Exel has more than 600 tractors in commingled dedicated contract carriage (DCC) in North America.  To round out its cross-selling capabilities, it is owned by the largest global freight forwarder, DHL.

Jacobson Companies, the third-largest contract warehousing company, has over 350 tractors with 260 in DCC.  In addition, Jacobson has expanded to China and initiated international freight forwarding.  Jacobson plans on opening nine offices in China.  Major multifunction, value-added customers are Dow, ITS and Ralston.

OHL, the fourth-largest, has extensive overseas forwarding operations (Barthco) in 60 locations and over 120 tractors supporting operations.  In addition, OHL does extensive transportation management using the Oracle TMS.

UTi Contract Logistics, CEVA, Kuehne + Nagel and DB Schenker are other companies with large value-added warehousing, global freight forwarding operations plus extensive transportation management activity.  These companies are all technologically sophisticated with TMS, WMS and other supply chain management capabilities.

All of the VAWD 3PLs with freight forwarding and TMS capabilities offer one-stop shopping global supply chain management.  They have scale and scope particularly with regard to combined transportation functions that put them in a different category from smaller competitors.

There are other transportation marketing approaches, which have worked well for large North America-only companies.  GENCO has a large TMS operation that specializes in small package contracting and auditing.  GENCO is the second-largest VAWD with a heavy emphasis on return logistics and fulfillment.  Kenco, NFI, Saddle Creek and Kane Is Able use dedicated contract carriage to augment their distribution operations.  DSC uses extensive i2-based transportation management.

Menlo Worldwide uses extensive non-asset TM and freight brokerage (Con-way Multimodal) to complement its primarily multi-client VAWD operations.  Menlo has expanded its network to include Europe, Asia and Australia.

The transportation functionality expansions of North American-based VAWD 3PLs increasingly makes them look more like European contract logistics operations.  European contract logistics is about 40 to 45 percent warehousing, 20 to 25 percent value-added services and 30 to 40 percent truck distribution.  For 29 European countries combined, the total contract logistics market was $114bn in 2009.  Germany, the largest individual market, was $24bn.  For North America, the comparable numbers for commercial warehousing and DCC was $64bn.

Commercial warehousing is estimated at $50bn for the United States in 2010 with $30bn being VAWD and $20bn in public warehousing.  DCC in 2010 is estimated at $9.8bn.  The 2010 estimate for U.S. contract logistics is $60bn.  Of this total, $20bn is DCC and other truck distribution, $24bn is net VAWD and $16bn is net public warehousing.

The Outlook

The public warehousing segment is expected to grow slowly or shrink over the next five years while VAWD grows at 7 percent or more per year.