Brian Gibson is the Wilson Family professor at Auburn University’s Raymond J. Harbert College of Business. He is also executive director of the Center for Supply Chain Innovation.
The past four months have been unprecedented in the supply chain world—an understatement you might say! It’s not just that the ongoing global pandemic has laid bare the complexities and vulnerabilities of modern supply chains. There has also been unprecedented media attention paid to supply chain management. For better or worse, now the whole world knows about supply chains. In particular, warehousing and distribution have been brought out of the shadows and into the bright media lights for the critical role they play.
The upcoming edition of the “Logistics 2030” (L-2030) report, sponsored by JLL and CenterPoint, will focus on the growing importance of warehousing and distribution and the strategic direction they will take over the next decade. The annual study is conducted by the Center for Supply Chain Innovation at Auburn University in partnership with the Council of Supply Chain Management Professionals (CSCMP), the National Shippers Strategic Transportation Council (NASSTRAC), and AGiLE Business Media (publisher of DC Velocity and CSCMP’s Supply Chain Quarterly). This year’s report is based on multiple in-depth focus group discussions with leading supply chain executives and survey responses from a wide range of supply chain professionals. The release of the Logistics 2030 warehousing report and a related panel discussion are scheduled for August 20 at the fourth annual Fusion 20/20 Supply Chain Symposium (www.auburnscm.org/events).
The focus group meetings and survey results highlighted a key point: Even before the onset of COVID-19, the role of warehousing and distribution had been in transition from supporting downstream supply chain functions to operating as a frontline service provider to end customers.
This is quite a turn of events. Historically, warehousing and distribution were considered a cost center by business executives—a function that needed to be economized. But this view is now changing. A large majority (80%) of survey respondents in our L-2030 study point to a shift in the way top management in their firms think about warehousing and distribution. They are now recognizing the business value warehousing and distribution can provide. We notice a near consensus among survey respondents (88% agree) that warehousing and distribution will be an organizational priority by 2030. (See Figure 1.)
[Figure1] A changing perspective of warehousing and distribution Enlarge this image
The shift is on
A key trend underlying the new value proposition for warehousing is the ongoing shift in the supply chain structure. Supply chain executives in our focus groups point to the decentralization of supply chains arising from the need to push inventory closer to the customers. As one respondent said, “We’re going to be relocating facilities closer to customers in response to the need for faster deliveries. We’re going to put facilities in multiple places as opposed to just being at the most geographically central place.” Survey results indicate that firms’ push for forward inventory placement will continue into the next decade. The use of retail stores to fulfill e-commerce orders is expected to double. Additionally, 68% of respondents expect to see an increase in the use of local fulfillment centers and a 51% increase in regional distribution facilities by 2030.
Developing a decentralized warehousing and distribution structure requires major investments in infrastructure and technology. A big part of these future investments will be targeted towards expanding firms’ distribution networks. Eight-five percent of survey respondents expects a significant increase in corporate funding to improve warehouse and distribution. These investments will go towards developing key capabilities deemed essential in the coming decade: expanding distribution networks (71% of survey respondents agree), incorporating flexibility in capacity and warehousing operations (68%), leveraging automation for speed (62%), and cutting distribution costs (61%).
Our discussions with focus group executives highlighted a key capability deemed critical in the coming decade – flexibility in adjusting warehousing and distribution capacity. The importance of this capability is rooted in the need to respond to the ever-shifting whims of customers, now and in the future. Firms are investigating ways to be nimble by adjusting their supply chain capacity to match the continually changing demand patterns. “We’re looking at logistics facilities that are flexible in size, construction, and attributes geared towards a cross-dock-like capacity,” explained one respondent Thereby, a necessary capability in warehousing and distribution would be the agility to expand (and shrink) capacity quickly.
Embrace the tech
We asked focus group executives and survey participants how they planned to implement their decentralized distribution strategy. A clear consensus (supported by 93% of survey respondents) is that firms are looking to leverage technology as a catalyst to upgrade their warehousing and distribution processes.
In our study, we noticed a clear change in the conversation around technology that went beyond the typical issues of acquisition costs and implementation pains. We found supply chain executives to be focused more on a broader return on investment (ROI) perspective. One executive highlighted this point as follows: “We know that warehouse labor isn’t going to get any easier to recruit or retain. So as soon as we can justify ROI to replace labor with technology, we’re ready ‘to swing the bat’.”
Another element of this new conversation is the need for execution speed. One executive articulated this point as follows: “So in our [distribution centers] (DCs) we’re investing in ways to unload faster [and] load faster to make fulfillment of things faster so that we can do more with less people.” The cost-benefit analysis for technology solutions is starting to tilt towards a favorable business case for early adoption. “The economics of technology and what you consider in terms of labor availability and how far you’re willing to think about cost escalation or things like healthcare and fringe benefits. I think it’s changed the game in terms of the business ROI,” said one executive.
Our survey results indicate a high use of order management system by 2030 (71% of respondents agree). This software would align inventory and customer orders for fulfillment and shipping across multiple channels. Another big increase is expected in the use of warehouse execution systems (from 16% currently to 61% in 2030) that can provide a real-time coordination of labor and equipment for automated picking, packing, and shipping. Based on the survey results, we project that more firms will start using traditional warehouse management systems (an increase of 67%) by 2030.
In response to our survey question about technologies that have the most potential to disrupt warehousing and distribution, supply chain professionals identified the following: predictive and prescriptive analytics, automated guided vehicles, automated storage and retrieval systems, and automated conveyor systems. It is interesting to note how these technology choices align with automation, capacity expansion, and speed of distribution; all of which support operationalizing the emerging decentralized supply chain structure mentioned above.
In conclusion, warehousing and distribution are marching forward towards fulfilling their new role of a frontline function that drives business growth for firms. As the pendulum swings back to a decentralized supply chain structure, we expect companies to increasingly implement technology in warehousing and distribution in the coming years. To develop the necessary capabilities of speed and flexibility, supply chain executives are strategizing to make the requisite investments in distribution networks, incorporate technology, and engage capable third-party logistics partners to harness the opportunities that lie ahead.
[Authors’ Note: The Auburn University Fusion 20/20 Supply Chain Symposium will be held on August 20th. Register at www.auburnscm.org/events]
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.”
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.
As U.S. businesses count down the days until the expiration of the Trump Administration’s monthlong pause of tariffs on Canada and Mexico, a report from Uber Freight says the tariffs will likely be avoided through an extended agreement, since the potential for damaging consequences would be so severe for all parties.
If the tariffs occurred, they could push U.S. inflation higher, adding $1,000 to $1,200 to the average person's cost of living. And relief from interest rates would likely not come to the rescue, since inflation is already above the Fed's target, delaying further rate cuts.
A potential impact of the tariffs in the long run might be to boost domestic freight by giving local manufacturers an edge. However, the magnitude and sudden implementation of these tariffs means we likely won't see such benefits for a while, and the immediate damage will be more significant in the meantime, Uber Freight said in its “2025 Q1 Market update & outlook.”
That market volatility comes even as tough times continue in the freight market. In the U.S. full truckload sector, the cost per loaded mile currently exceeds spot rates significantly, which will likely push rate increases.
However, in the first quarter of 2025, spot rates are now falling, as they usually do in February following the winter peak. According to Uber Freight, this situation arose after truck operating costs rose 2 cents/mile in 2023 despite a 9-cent diesel price decline, thanks to increases in insurance (+13%), truck and trailer costs (+9%), and driver wages (+8%). Costs then fell 2 cents/mile in 2024, resulting in stable costs over the past two years.
Fortunately, Uber Freight predicts that the freight cycle could soon begin to turn, as signs of a recovery are emerging despite weak current demand. A measure of manufacturing growth called the ISM PMI edged up to 50.9 in December, surpassing the expansion threshold for the first time in 26 months.
Accordingly, new orders and production increased while employment stabilized. That means the U.S. manufacturing economy appears to be expanding after a prolonged period of contraction, signaling a positive outlook for freight demand, Uber Freight said.
The surge comes as the U.S. imposed a new 10% tariff on Chinese goods as of February 4, while pausing a more aggressive 25% tariffs on imports from Mexico and Canada until March, Descartes said in its “February Global Shipping Report.”
So far, ports are handling the surge well, with overall port transit time delays not significantly lengthening at the top 10 U.S. ports, despite elevated volumes for a seventh consecutive month. But the future may look more cloudy; businesses with global supply chains are coping with heightened uncertainty as they eye the new U.S. tariffs on China, continuing trade policy tensions, and ongoing geopolitical instability in the Middle East, Descartes said.
“The impact of new and potential tariffs, coupled with a late Chinese Lunar New Year (January 29 – February 12), may have contributed to higher U.S. container imports in January,” Jackson Wood, Director, Industry Strategy at Descartes, said in a release. “These trade policy developments add significant uncertainty to global supply chains, increasing concerns about rising import costs and supply chain disruptions. As trade tensions escalate, businesses and consumers alike may face the risk of higher prices and prolonged market volatility.”
New York-based Cofactr will now integrate Factor.io’s capabilities into its unified platform, a supply chain and logistics management tool that streamlines production, processes, and policies for critical hardware manufacturers. The combined platform will give users complete visibility into the status of every part in their Bill of Materials (BOM), across the end-to-end direct material management process, the firm said.
Those capabilities are particularly crucial for Cofactr’s core customer base, which include manufacturers in high-compliance, highly regulated sectors such as defense, aerospace, robotics, and medtech.
“Whether an organization is supplying U.S. government agencies with critical hardware or working to meet ambitious product goals in an emerging space, they’re all looking for new ways to optimize old processes that stand between them and their need to iterate at breakneck speeds,” Matthew Haber, CEO and Co-founder of Cofactr, said in a release. “Through this acquisition, we’re giving them another way to do that with acute visibility into their full bill of materials across the many suppliers they work with, directly through our platform.”
“Poor data quality in the supply chain has always been a root cause of delays that create unnecessary costs and interfere with an organization’s speed to market. For manufacturers, especially those in regulated industries, manually cross-checking hundreds of supplier communications against ERP information while navigating other complex processes and policies is a recipe for disaster,” Shultz said. “With Cofactr, we’re now working with the best in the industry to scale our ability to eliminate time-consuming tasks and increase process efficiencies so manufacturers can instead focus on building their products.”