The freight market in the United States has witnessed noticeable changes in regional outbound demand, indicating a shift in supply chain dynamics. A comparison with June 2019 reveals a significant redistribution of freight towards the Eastern half of the country, based on shippers’ requests for capacity (OTVI). Notably, the Southwest region, including Texas, has experienced the most growth, while the Northwest, suffering from a shortage of freight, has deteriorated the most in terms of percentage change.
While some of these shifts can be attributed to the post-pandemic economic fallout and the stabilization of consumption patterns as supply chains recover, there is also a sustainable transformation in how freight is distributed domestically.
It is important to acknowledge that 2019, often referred to as the last “normal” year before the COVID-19 pandemic, was four years ago. Even during stable periods, patterns naturally evolve over such a significant timeframe, although the pandemic has certainly accelerated the recent shift.
The Midwest remains the primary origin of freight, while the Northwest and Mountain Prairie regions exhibit the least activity.
One factor contributing to the shift is inventory correction. As many companies have adjusted their ordering practices to align with more predictable supply cadences and slower consumption rates, there has been a reduction in freight volumes from the West. This decrease is expected since the West serves as the primary entry point for goods from overseas. Although some companies still have inventory to offload, major retailers are reportedly nearing their desired inventory levels.
The latest Logistics Managers’ Index indicates a slight contraction in inventory levels, with a value of 49.5. Values below 50 represent contraction, while those above 50 indicate expansion. This is a notable contrast to the previous year when inventory levels were rapidly expanding, with values exceeding 70.
With inventories aligning with demand, certain ordering patterns have remained relatively consistent. Customs data tracking container volumes entering ports reveals that inbound container volumes at Port Houston (CSTEU.USHOU) have doubled compared to June 2019. However, the combined volumes at the Southern California ports of Long Beach (CSTEU.USLGB) and Los Angeles (CSTEU.USLAX) have contracted.
The post-pandemic world has seen a push for supply chain diversification, driven by the need to mitigate risks of disruptions. Procurement teams are actively seeking multiple sources to hedge their exposure. Consequently, freight patterns are shifting away from the traditional flow of goods in the U.S.
The changes extend beyond the erosion of demand on the West Coast. Even within the region, freight patterns are undergoing transformation. Phoenix, once a market where carriers struggled to find freight, is now emerging as a significant outbound market, although inbound volumes still exceed outbound volumes. Outbound tender volumes for Phoenix have increased by 66% compared to June 2019, while the distribution-centric market of Ontario, California, has experienced a decline of 14%. If this trend continues, the once easily manageable market in Ontario may face increased service risks.
In summary, the evolving freight market reflects underlying changes occurring even in a loose trucking market. As capacity aligns more closely with demand, transportation providers may face new challenges in network management. Transportation managers should closely monitor these pattern changes to proactively address potential service and cost risks.
