You would never run your plant equipment like you run your ERP…
Far too many of us have made a significant investment in an enterprise resource planning (ERP) system, but then failed to fully utilize all its capabilities. To truly get the most out of our existing ERP, we need to change our mindset and start thinking about it as an asset instead of as a tool.
Martin Rowan is the managing partner with Reveal, which helps companies leverage their current technology investment to optimize their integrated, extended supply chains.
If you purchased a new manufacturing equipment asset costing millions of dollars and then let it run at only 15 to 25% capacity utilization, you’d run the risk of getting fired. Yet many organizations do not hold their enterprise resource planning (ERP) system to the same utilization standard, even though it is often one of their most expensive assets. An ERP system is meant to be the central nervous system of your business, driving all your supply chain, operations, and finance activities. But in a recent study by Reveal, 94% of companies said they were not effectively utilizing their existing SAP ERP technology to meet their business goals. (See Figure 1.) Now, you may think you’re off the hook because you don’t run SAP, but you can extrapolate that to almost every ERP, regardless of size. Based on our experience over the last 17 years with more than 200 clients, most companies are only leveraging a quarter or less of their ERP system’s capabilities, no matter what type of business they are in or what type of ERP they are using.
Why is this the case? One of the biggest reasons is because organizations don’t view their ERP as an asset. They see it instead as merely a tool. What’s the difference? An asset is something you invest money, time, and resources into that will ensure an economic return. A tool, on the other hand, is no different than a hammer; it is something you spend money on to “just get the job done.” When organizations don’t see their ERP as an asset, they end up making poor decisions about how to use it, enable bad habits to form, and ultimately allow the system to be significantly underutilized.
Think ROA, not ROI
One of the major reasons companies don’t view their ERP system as an asset is because of what we refer to as the “implementation trap.” When ERP systems are implemented (and this is true for legacy ERPs, modern ERPs, cloud-based ERPs, or composable ERPs), many companies focus primarily on getting the system transactions to work. For example, can we use the system to create a purchase order? If yes, then the implementation has been a success. That means we concentrate on IT success factors: whether the system is live and working, whether the data has been transferred error free, whether testing is complete, whether the implementation was on time and in budget, and so forth. The success of the project is a pure return on investment (ROI) play. The “benefit” is most likely calculated as an IT savings, such as from having a single unified platform rather than multiple platforms or the reduced cost required for supporting various skills, among other factors.
To ensure that you are getting the most out of your ERP system, however, you need to start thinking in terms of return on asset (ROA). ROA is an indicator of how profitable a company is relative to its total assets and how efficiently management is using its assets to generate earnings. High ROA is achieved with high asset utilization, operational excellence, efficient capital expenditure, and technical integrity. In other words, you will want to know to what degree your equipment, manufacturing plant asset, or other technology is being utilized to produce a profitable income. The income generated is return on asset. In simple terms:
Return on Asset = Net Income/Total Asset.
The ROA metric has been used in the investment community for many years. When considering acquiring an asset, the ROA measures to what extent you can generate more efficiencies to produce a return. ROA, in essence, indicates asset efficiency, or in layman’s terms, “squeezing the most out of limited resources.”
Thinking about turning our ERP into an asset, though, is only partially about value-based financial formulas. Mostly, it is a mindset that helps organizations maximize the use of their ERP to increase profitable income and business performance.
Typically, after a new ERP system has been implemented, IT gives the system over to the business and leaves it up to them “to figure it out.” That rarely works out well. Limited training, limited change management, no best practices, limited business ownership, no active business rule management, and more prevent the new system from actually being helpful. Over time, the ERP system reverts back to being just a tool, along with spreadsheets and other decision-making tools used to run specific tasks. That is where it all gets lost. Rather than seeing it as an asset to be understood, refined, nurtured, and maximized to get real business outcomes (such as improved inventory turns, increase service levels, increase throughput to enable revenue, and increased profitability), the business defines ERP as merely another tool. Essentially, it’s like purchasing a high-performing car that’s stuck in first gear.
What is your ERP asset utilization?
Knowing what your ERP utilization really is starts with discovering what your current business maturity level is. The five-step Business Maturity Continuum1 (see Figure 2) is a benchmark developed by Reveal that measures your organization’s ability to meet and exceed business goals by leveraging your ERP investment. An organization with a lower business maturity rating is typically very dependent on spreadsheets and other tools to run its business, while a higher-rated organization has mastered the ability to use its ERP to drive specific optimization goals and continuously meet its business objectives. The steps are:
Stabilization: At this level, the company is beginning to use the ERP system to run transactions but is still also using spreadsheets and other tools. The company is focusing on getting the transactions to work as intended within the system.
Data integrity: At this level, the company is working on making data in the ERP system accurate and complete. It is also focusing on getting all core business processes into the system. The ERP is integrated with other systems and is being used as a single source of the truth.
Business rules: For this level, the company is using ERP for planning purposes and not just for running transactions. The business rules that determine the right process performance and outcomes are defined and maintained within the system. Exceptions are reduced and data is grouped properly for better decision making.
Optimization: At this level, the company is using analytics and metrics to improve decision making and optimize processes performance. The ERP system provides end-to-end visibility of products and processes. The company is monitoring and automating processes in the system and using it to enable advanced business processes and collaboration.
Business value: Here, the ERP is being fully used to create business value such as increased service levels, better customer retention, and reduced operating costs. It is providing real-time visibility of performance goals, aiding collaboration across departments, and reducing risk.
According to a recent poll conducted by Reveal, 88% of those surveyed viewed themselves at step one (ERP is doing what it’s supposed to do) to step three (we are planning within the system). None of the respondents—not a single person surveyed—believed their organization was at step five of meeting their objectives on a continuous basis. Based on our experience with clients, we believe that even at step three, organizations are utilizing only 45 to 55% of their ERP’s power, allowing the rest of it to sit idle.
To assess what level your company is at, review honestly the various bullets in the five-level maturity continuum in Figure 2, and ask yourself, “Where do we fit on this continuum?” Not as a department or a team, but rather as a whole organization (or at a minimum the supply chain and operations function collectively). If unsure, you can take the self-assessment survey on our website, and it will give you a clear measure.2
How to get a return on your ERP
If you are less than a level four on the Business Maturity Continuum, here are some suggested actions you can take to get a full return on you ERP asset.
Step 1: Utilize your ERP. If you are on levels one (stabilization) and two (data integrity) of the Business Maturity Continuum, then you need to ensure that users are actually working inside your ERP system. A common mistake that companies make is implementing an ERP system, but then allowing their teams to continue to use spreadsheets and other third-party tools. When you rely on other tools to make process decisions, you are not able to fully utilize the ERP’s integrated capabilities. At the end of the day, the ERP becomes nothing more than just another record-keeping tool, and you will never achieve the aspirational goal of utilizing it as an asset to generate business value.
To ensure that transactions and work can be done inside the ERP system, you need to establish the fundamentals:
1. Commit to getting your data in order. You must recognize that the ERP is only as good as the data is relevant. Quite simply, if the ERP is not working off real-time data, none of its features and priorities will work. At the core of utilizing the ERP is maintaining the cleanliness of your data and making sure the data remains timely and relevant.
2. Integrate the business and work together as a cross-functional team. The ERP is blind to individual departments and functions. It presents an integrated view of the roadblocks to supply chain agility and encourages you to think likewise. Through active use of the ERP, you can view recurring exception messages and react as an integrated organization to resolve these messages. But you cannot take full advantage of this integrated view if you are still operating as independent silos rather than as a cross-functional team.
Step 2: Optimize your ERP. Once you begin to properly utilize your ERP, your next step is to optimize it by using it to address the process, system, and organizational inefficiencies that too often torpedo the supply chain. These inefficiencies can come in many sizes and shapes: overstocking, stock-outs, low manufacturing schedule attainment, overbuying, consistently late shipments, weak supplier performance, and so on. If you are seeing 1,000 or 10,000 of these exceptions throughout your supply chain, you will become overwhelmed, and you will likely ignore the process problems. The natural inclination is to build high inventory levels to put a bandage on the problem instead of striving to achieve a predictable, stable, and optimal process.
One way that an ERP can be used to help optimize a process is by first grouping and prioritizing the materials used and then creating business rules that dictate how the material should perform in the supply chain. In other words, having “a plan for every part” identified by the system. As an analogy, let’s consider how we purchase regular household items. We consume milk a lot, and we buy it every time we go to the supermarket, which is similar to a “make to stock” environment. Although eggs are high on our list, we tend to only buy those when we are down to the last two eggs—that is our “reorder point.” We purchase chilled white wine on special occasions and on demand and that would be considered a “make to order.” Finally, refrigerator lightbulbs typically last a long time, so we only buy them when the light bulb goes out. That would be an “unplanned purchase.”
These strategies—not limited to the ones listed above in the analogy—can be managed effectively by the ERP system if it knows what you want (the rules to live by) and then effectively groups the materials and adjusts coverages. When that occurs, the ERP system ensures you only hold enough of the material you need at any given time. If demand changes for the end product, the consumption patterns will immediately recognize the problem and notify you to increase or decrease inventory. That gives you agility.
Keep in mind, as you move from utilizing your ERP to optimizing it, education is key—and goes beyond individual, fast-paced training. Education should be team-driven, business-specific, ongoing, and steeped in the philosophy of “learn by doing.” Only by making education an organizational priority does true transformation and optimization take place.
Step 3: Maximize your ERP. After utilizing and optimizing your ERP asset, you arrive at a crucial part of your journey—maximizing the ERP system to really make the supply chain more agile. Increasingly, organizations are expecting to be able to quickly change their business models to respond to disruptions. As new business models take shape to support much-needed growth, supply chain leaders must be willing to revisit and align the supply chain with the new business models. These changes may require implementing more digital processes, shifting to a “product as a service” strategy, and/or enabling end-to-end supply chain resilience.
Fortunately, ERP companies have anticipated and identified this need for agility long before it surfaced in the minds of most CEOs. The advanced planning and execution capabilities provided by many ERP systems allow organizations to respond faster to changing market conditions and capitalize on new opportunities. However, these features and functions will mean very little if you are still stuck in levels 1 to 3 of the Business Maturity Continuum. The potential for organizations to capitalize on these new technology enhancements is immense—but there lurks a big “if.” You will benefit if you understand you need to do things differently and ensure step 1 and step 2 are completed. And that means dedicating yourself to a higher level of business maturity.
Make the most of what you have
There is so much hype over the latest technologies, advanced plannings solutions, artificial intelligence, and machine learning that it’s easy to lose sight of the capabilities already existing within your ERP system. These capabilities have the potential to make a real difference in your business, but many companies are not making smart use of their already existing technology.
Changing how you think about, use, and approach your ERP system will lead you to the creation of an agile supply chain. But to get there, you must take three important steps:
1. Understand and remediate the breakdowns that prevent you from utilizing the ERP as an asset.
2. Begin to optimize the asset and invest in the people that run the supply chain to ensure that a high level of knowledge and discipline is in place.
3. Allow the organization to expand capabilities to help maximize the asset.
Only then can you handle any supply chain challenge that comes our way, with confidence and agility.
Notes:
1. Business Maturity Continuum is a registered trademark of Reveal. You can find out more about the model at www.revealvalue.com/approach/business-maturity.
2. The survey can be found at www.revealvalue.com/self-assessment.
Documented processes and procedures are an important aspect of any successful distribution operation. Without process documentation, product gets shipped and not billed, customer orders and items get lost, and employees get upset. Distribution outfits need some form of step-by-step manuals, workflow diagrams, or digital instructions to ensure that operations run smoothly, consistently, and efficiently. However, creating and updating these documents has, historically, been time-consuming and resource-intensive.
Generative artificial intelligence (Gen AI)—a subset of AI that can create content, such as text, images, videos, and other media—can help. This cutting-edge technology has the potential to streamline the process of creating documented processes and procedures. As a result, it can become a cornerstone for companies looking to optimize their distribution operations, streamline training processes, and provide a superior customer experience. What once seemed like a distant futuristic possibility is now a crucial tool for the modern distribution industry.
The cornerstone of consistency
Documented procedures standardize operations across all levels of the distribution chain, from warehouse workers to managers. When employees follow clearly defined steps, consistency in task execution becomes a given. This is especially important in large distribution centers where employees might work on similar tasks but in different shifts. Standardization helps maintain a consistent level of quality, regardless of who is performing the job. This not only enhances operational efficiency but also minimizes errors.
In addition to providing consistency, documented processes and procedures have several other benefits such as streamlining training and onboarding, enhancing knowledge retention, improving performance evaluation, aiding in continuous improvement efforts, and ensuring compliance with industry regulations.
Training and onboarding:Training new employees is a critical phase in any organization, but even more so in the distribution sector, where complex logistics and time-sensitive processes are involved. Clear, documented procedures make it easier to onboard new staff, reducing the learning curve and ensuring they can contribute effectively in a shorter amount of time. These materials are a reliable resource for employees, allowing them to refer back whenever they are uncertain about the correct procedure for a task.
In the past, training often depended on experienced employees showing new hires the ropes, which can be time-consuming and inconsistent. Well-documented processes eliminate this dependency and ensure that training is uniform across the board, leading to faster, more efficient onboarding.
Knowledge retention: One of the biggest challenges many organizations face is the loss of knowledge when experienced employees leave. A robust system of documented procedures acts as an institutional memory, preserving critical knowledge and ensuring that valuable insights and practices are not lost when staff turnover occurs. This continuity is essential for maintaining long-term operational efficiency.
Performance evaluation and continuous improvement: Standardized, documented procedures allow for more objective performance evaluations. Managers can measure employee performance against clearly defined expectations, identifying areas of strength and opportunities for improvement. In addition, these documents serve as a foundation for continuous improvement efforts. By periodically reviewing and refining procedures, businesses can adapt to changing market conditions, adopt new technologies, and optimize workflows to stay competitive.
Compliance and auditing: In today’s regulatory environment, compliance is non-negotiable. Documented procedures are vital in ensuring that a company complies with industry regulations. When processes are clearly outlined and followed, it is easier to demonstrate adherence to safety standards, labor laws, and environmental regulations. This helps avoid costly fines and simplifies the auditing process, reducing the time and resources required for internal and external audits.
The perils of unclear instructions
When warehouses operate without clear, well-documented processes, they expose themselves to risks and inefficiencies. Unclear expectations create uncertainty, which can ripple across the entire operation. Here are some common examples:
Inconsistent performance and increased error rates: Employees may interpret tasks differently without standardized guidelines, leading to inconsistent performance. Variations in completing tasks can result in some excellent but many suboptimal outcomes. For instance, one employee may prioritize speed, while another focuses on accuracy. This inconsistency affects productivity and can lead to a higher error rate in order fulfillment, inventory management, or customer service.
Even small errors can have big consequences in a fast-paced warehouse environment. Incorrectly filled orders, damaged goods, or delayed shipments can damage customer relationships and result in financial losses.
Higher training costs and reduced productivity: When processes are not clearly defined, training new employees becomes more resource-intensive. Without a formalized training program supported by documented procedures, trainers often have to spend more time demonstrating tasks and correcting mistakes. This increases the cost of training and diverts experienced staff away from their regular duties, thus lowering overall productivity.
Customer dissatisfaction: Customer experience is a key differentiator in today’s competitive marketplace. Consistency in processes directly impacts how customers perceive a brand. A positive, uniform experience across multiple interactions strengthens brand identity and fosters loyalty. Customers are more likely to become repeat buyers when they know they can rely on the distributor to deliver on its promises, whether that’s order accuracy, speed of delivery, or responsiveness to inquiries.
Inconsistent service inevitably leads to customer dissatisfaction. Customers expect a reliable and uniform experience, especially regarding delivery times, product availability, and order accuracy. A lack of clear, repeatable processes can make it more likely for a company to fail to meet customer expectations, leading to complaints, returns, and, ultimately, loss of business.
Difficulty scaling operations: Scaling operations becomes increasingly difficult when there is no standardized playbook to follow. As distribution centers grow or a company expands to new locations, replicating success becomes challenging if processes are unclear.
Scalable, consistent processes also allow companies to grow their operations while maintaining the same level of service quality. This scalability becomes a significant competitive advantage in a sector where margins are thin and efficiency is paramount. By ensuring that processes are repeatable and effective, companies can focus on expanding their reach and entering new markets without sacrificing quality.
The potential role of Gen AI
Gen AI is a game changer for distribution operations that are looking to create, update, or optimize their process documentation. Gen AI can drastically reduce the time and effort required to develop comprehensive procedural guidelines by automating and enhancing the content creation process. (Figure 1 above lists the main benefits of using Gen AI to create process documentation and procedures.)
One of the most significant advantages of Gen AI is its ability to generate content quickly. Whether creating initial drafts of process documents or updating existing procedures, AI can handle these tasks in a fraction of the time it would take a human team. AI can also customize the content for specific roles, locations, or scenarios, ensuring the documentation is relevant and applicable to various operational segments.
Gen AI can create documentation in multiple formats, including text-based manuals, visual flowcharts, and instructional videos. This flexibility allows companies to create a variety of training materials that cater to different learning styles and ensures that employees can access information in the format that works best for them. Furthermore, as procedures evolve over time, AI can easily update these documents, keeping them current and aligned with the latest operational requirements.
Best practices and considerations
While the potential benefits of Gen AI are clear, successful implementation requires careful planning and strategic execution. The following are some key considerations that companies must keep in mind as they use Gen AI tools in real-world situations:
Human oversight: AI-generated content should not replace human expertise but rather complement it. Subject matter experts must review AI-generated documents to ensure their accuracy and relevance.
Data quality: AI systems need access to high-quality data to be effective, so ensuring that your organization’s operational data is up-to-date is critical.
Ethical considerations: As with any AI system, ethical considerations must be taken into account, particularly regarding potential biases in the content.
Employee training: Companies must also invest in training their employees to use AI tools effectively, ensuring that they can access and apply the information generated by AI systems.
Security and privacy: As AI systems rely on sensitive operational data, robust security measures are necessary to protect this information.
Change management: Introducing AI significantly changes how employees access and use procedural documentation. Clear communication and training are essential to ensure smooth adoption and to help employees see AI as a tool that enhances their work rather than a threat to their jobs.
Embracing the future of distribution
The distribution sector is on the brink of a significant transformation in today's fast-paced, ever-evolving business landscape. The driving force behind this change is the rise of artificial intelligence and, more specifically, generative AI.
It’s important to realize that Gen AI is not just a tool for the future—it is a tool that can already be used today to improve distribution processes. Companies can create more consistent, efficient, and scalable operations by embracing this technology. AI is poised to revolutionize how companies document and update their distribution processes, which in turn can streamline training and onboarding and improve customer satisfaction and operational efficiency.
As the industry moves forward, those who integrate Gen AI into their operations will be better positioned to meet the demands of a dynamic marketplace. The future of distribution lies in the partnership between human expertise and AI, creating a synergy that drives innovation and sets a new standard for excellence in the field.
About the author: Steve Levy is the vice president of Enterprise Architecture for the distribution industry at Infor. Before joining Infor, he honed his skills and expertise working in the distribution industry and was the executive vice president at a wholesale paper distributor.
As the Trump Administration threatens new steps in a growing trade war, U.S. manufacturers and retailers are calling for a ceasefire, saying the crossfire caused by the new tax hikes on American businesses will raise prices for consumers and possibly trigger rising inflation.
Tariffs are taxes charged by a country on its own businesses that import goods from other nations. Until they can invest in long-term alternatives like building new factories or finding new trading partners, companies must either take those additional tax duties out of their profit margins or pass them on to consumers as higher prices.
The Trump Administration on Thursday announced it may impose “reciprocal tariffs” on any country that currently holds tariffs on the import of U.S. goods. That step followed earlier threats to apply tariffs on the import of steel and aluminum beginning March 12, another plan to charge tariffs on the import of materials from Canada and Mexico—now postponed until early March—and new round of tariffs on imports from China including a 10% blanket increase and the elimination of the “de minimis” exception for individual items under a value of $800 each.
Various industry groups say that while the Administration may have legitimate goals in ramping up a trade war—such as lowering foreign tariff and non-tariff trade barriers—applying a strategy of hiking tariffs on imports coming into America would inflict economic harm on U.S. businesses and consumers.
“This tariff-heavy approach continues to gamble with our economic prosperity and is based on incomplete thinking about the vital role ethical and fairly traded imports play in the prosperity,” Steve Lamar, president and CEO of The American Apparel & Footwear Association (AAFA) said in a release. “Putting America first means ensuring predictability for American businesses that create U.S. jobs; affordable options for American consumers who power our economy; opportunities for farmers who feed our families; and support for tens of millions of U.S. workers whose trade dependent jobs make our factories, our stores, our warehouses, and our offices function. Sweeping new tariffs — a possible outcome of this exercise — instead puts America last, raising costs for American manufacturers for critical inputs and materials, closing key markets for American farmers, and raising prices for hardworking American families.”
A similar message came from the National Retail Federation (NRF), whose executive vice president of government relations, David French, said: “While we support the president’s efforts to reduce trade barriers and imbalances, this scale of undertaking is massive and will be extremely disruptive to our supply chains. It will likely result in higher prices for hardworking American families and will erode household spending power. We encourage the president to seek coordination and collaboration with our trading partners and bring stability to our supply chains and family budgets.”
The logistics tech firm Körber Supply Chain Software has a common position. "The imposition of new tariffs, or the suspension of tariffs, introduces substantial challenges for businesses dependent on international supply chains. Industries such as automotive and electronics, which rely heavily on cross-border trade with Mexico and Canada, are particularly vulnerable,” Steve Blough, Chief Strategist at Körber Supply Chain Software, said in an emailed statement. “Supply chains that are doing low-value ecommerce deliveries will have their business model thrown into complete disarray. The increased costs due to tariffs, or the increased costs in processing time due to suspensions, may lead to higher consumer prices and processing times.”
And further opposition to the strategy came from the California-based IT consulting firm Bristlecone. “Tariffs or the potential for tariffs increase uncertainty throughout the supply chain, potentially stalling deals, impacting the sourcing of raw materials, and prompting higher prices for consumers,” Jen Chew, Bristlecone’s VP of Solutions & Consulting, said in a statement. “Tariffs and other protectionist economic policies reflect an overarching trend away from global sourcing and toward local sourcing and production. However, despite the perceived benefits of local operations, some resources and capabilities may simply not be available locally, prompting manufacturers to continue operations overseas, even if it means paying steep tariffs.”
New Jersey is home to the most congested freight bottleneck in the country for the seventh straight year, according to research from the American Transportation Research Institute (ATRI), released today.
ATRI’s annual list of the Top 100 Truck Bottlenecks aims to highlight the nation’s most congested highways and help local, state, and federal governments target funding to areas most in need of relief. The data show ways to reduce chokepoints, lower emissions, and drive economic growth, according to the researchers.
The 2025 Top Truck Bottleneck List measures the level of truck-involved congestion at more than 325 locations on the national highway system. The analysis is based on an extensive database of freight truck GPS data and uses several customized software applications and analysis methods, along with terabytes of data from trucking operations, to produce a congestion impact ranking for each location. The bottleneck locations detailed in the latest ATRI list represent the top 100 congested locations, although ATRI continuously monitors more than 325 freight-critical locations, the group said.
For the seventh straight year, the intersection of I-95 and State Route 4 near the George Washington Bridge in Fort Lee, New Jersey, is the top freight bottleneck in the country. The remaining top 10 bottlenecks include: Chicago, I-294 at I-290/I-88; Houston, I-45 at I-69/US 59; Atlanta, I-285 at I-85 (North); Nashville: I-24/I-40 at I-440 (East); Atlanta: I-75 at I-285 (North); Los Angeles, SR 60 at SR 57; Cincinnati, I-71 at I-75; Houston, I-10 at I-45; and Atlanta, I-20 at I-285 (West).
ATRI’s analysis, which utilized data from 2024, found that traffic conditions continue to deteriorate from recent years, partly due to work zones resulting from increased infrastructure investment. Average rush hour truck speeds were 34.2 miles per hour (MPH), down 3% from the previous year. Among the top 10 locations, average rush hour truck speeds were 29.7 MPH.
In addition to squandering time and money, these delays also waste fuel—with trucks burning an estimated 6.4 billion gallons of diesel fuel and producing more than 65 million metric tons of additional carbon emissions while stuck in traffic jams, according to ATRI.
On a positive note, ATRI said its analysis helps quantify the value of infrastructure investment, pointing to improvements at Chicago’s Jane Byrne Interchange as an example. Once the number one truck bottleneck in the country for three years in a row, the recently constructed interchange saw rush hour truck speeds improve by nearly 25% after construction was completed, according to the report.
“Delays inflicted on truckers by congestion are the equivalent of 436,000 drivers sitting idle for an entire year,” ATRI President and COO Rebecca Brewster said in a statement announcing the findings. “These metrics are getting worse, but the good news is that states do not need to accept the status quo. Illinois was once home to the top bottleneck in the country, but following a sustained effort to expand capacity, the Jane Byrne Interchange in Chicago no longer ranks in the top 10. This data gives policymakers a road map to reduce chokepoints, lower emissions, and drive economic growth.”
Know someone who is making a difference in the world of logistics? Then consider nominating that person as one of DC Velocity’s “Rainmakers”—professionals from all facets of the business whose achievements set them apart from the crowd. In the past, they have included practitioners, consultants, academics, vendors, and even military commanders.
To identify these achievers, DC Velocity’s editorial directors work with members of the magazine’s Editorial Advisory Board. The nomination process begins in January and concludes in April with a vote to determine which nominees will be invited to become Rainmakers.
It’s getting a little easier to find warehouse space in the U.S., as the frantic construction pace of recent years declined to pre-pandemic levels in the fourth quarter of 2024, in line with rising vacancies, according to a report from real estate firm Colliers.
Those trends played out as the gap between new building supply and tenants’ demand narrowed during 2024, the firm said in its “U.S. Industrial Market Outlook Report / Q4 2024.” By the numbers, developers delivered 400 million square feet for the year, 34% below the record 607 million square feet completed in 2023. And net absorption, a key measure of demand, declined by 27%, to 168 million square feet.
Consequently, the U.S. industrial vacancy rate rose by 126 basis points, to 6.8%, as construction activity normalized at year-end to pre-pandemic levels of below 300 million square feet. With supply and demand nearing equilibrium in 2025, the vacancy rate is expected to peak at around 7% before starting to fall again.
Thanks to those market conditions, renters of warehouse space should begin to see some relief from the steep rent hikes they’re seen in recent years. According to Colliers, rent growth decelerated in 2024 after nine consecutive quarters of year-over-year increases surpassing 10%. Average warehouse and distribution rents rose by 5% to $10.12/SF triple net, and rents in some markets actually declined following a period of unprecedented growth when increases often exceeded 25% year-over-year. As the market adjusts, rents are projected to stabilize in 2025, rising between 2% and 5%, in line with historical averages.
In 2024, there were 125 new occupancies of 500,000 square feet or more, led by third-party logistics (3PL) providers, followed by manufacturing companies. Demand peaked in the fourth quarter at 53 million square feet, while the first quarter had the lowest activity at 28 million square feet — the lowest quarterly tally since 2012.
In its economic outlook for the future, Colliers said the U.S. economy remains strong by most measures; with low unemployment, consumer spending surpassing expectations, positive GDP growth, and signs of improvement in manufacturing. However businesses still face challenges including persistent inflation, the lowest hiring rate since 2010, and uncertainties surrounding tariffs, migration, and policies introduced by the new Trump Administration.