Benjamin Gordon, managing director for BG Strategic Advisors, told warehousemen gathered at the International Warehouse Logistics Association meeting in Las Vegas that share appreciation of 29% for asset-laden rail companies outpaced asset-light freight forwarders for the first time in three years. That was just one example of the importance of assets in the logistics market today, according to Gordon. He offered a list of the usual suspects – drivers, steamship capacity etc. Then he pointed to the Dakota Minnesota and Eastern Railroad’s application for $2.5 billion in federal funding to create the first new Class 1 railroad in over 100 years.
Concern over congestion at ports in Southern California led Wal-Mart to a decision to build Houston into a port that is competitive with Los Angeles and Long Beach, Gordon says. That decision centers on a 4 million square foot distribution facility. The Wal-Mart move is just one of the indicators of a logistics world Gordon says is turned upside down. Wal-Mart’s investment at the port speaks to a larger infrastructure problem Gordon highlights. While the U.S. six-year plan to spend $286 billion on transportation infrastructure is positive, it represents an investment of only 5% of the $1 trillion U.S. companies spend for logistics spend each year. India, with a logistics market of only $15 billion, is spending $17 billion over the next five years on infrastructure development. That’s a pace of 23% per year.
The top 50 logistics companies in the U.S. are still dominated by non-asset companies. Their combined revenues of $48.9 billion are split into $18.9 billion for non-asset-based surface transportation, $12.7 billion for value-added warehousing, $9.4 billion for air and ocean freight forwarding and $7.9 billion for asset-based transportation.