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Home/News/Insights/Chart of the Week/Supply chain diversification apparent in
freight market
Chart of the WeekNewsTop Stories


SUPPLY CHAIN DIVERSIFICATION APPARENT IN FREIGHT MARKET


FREIGHT ORIGINS MOVE EAST

Zach Strickland, FW Market Expert & Market Analyst
· Saturday, June 10, 2023
Photo: Jim Allen - FreightWaves
Listen to this article
5 min




Chart of the Week: Outbound Tender Volume – by region SONAR: OTVI.URWT,
OTVI.URSW, OTVI.URNE, OTVI.URSE, OTVI.URNW, OTVI.URMP, OTVI.URNW

Compared to June 2019, regional outbound freight demand has shifted noticeably
to the Eastern half of the U.S. based on shipper requests for capacity (OTVI).
The Southwest region, which includes Texas, has captured most of the growth
while the freight-starved Northwest has deteriorated the most in terms of
percentage change. 

Some of this movement could be attributed to the post-pandemic economic fallout
as supply chains become unkinked and consumption patterns stabilize. But there
is definitely a sustainable shift in how freight is distributed domestically. 

First off, we have to acknowledge that we tend to talk about 2019 like it was
last year due to the fact that it was what many consider the last “normal” year
before COVID-19 took us on a wild economic roller coaster ride. It was in fact
four years ago, meaning that even during stable periods, patterns change over
such a length of time — although the pandemic has definitely accelerated this
recent shift.

The heat map above shows each region color-coded from darkest blue (highest
outbound demand) to white (lowest outbound demand). The Midwest originates the
most freight, with the Northwest and Mountain Prairie regions having the least. 

The Southwest region averaged about 11% less demand in 2019 than the West Coast.
That has flipped in the first half of 2023.









INVENTORY OFFLOADING

Inventory correction probably accounts for a certain portion of the shift as
many companies have slowed their ordering now that they can receive goods on a
more predictable cadence and consumption has slowed.

This activity would naturally reduce the amount of freight coming out of the
West since that is the nation’s largest entry point for goods from overseas.
While there are still many companies with inventory to shed, the nation’s
largest retailers are reportedly close to being where they want to be.

The latest Logistics Managers’ Index inventory level component shows a slight
contraction with a value of 49.5 — values below 50 show contraction, those above
50 show expansion. That’s a stark contrast to a year ago when they were
expanding rapidly with values over 70.

Now that inventories are more in line with demand, some of the ordering patterns
have remained relatively sticky. Looking at customs data that measures container
volumes entering the ports, Port Houston inbound container volumes (CSTEU.USHOU)
have doubled versus June 2019. The Southern California ports of Long Beach
(CSTEU.USLGB) and Los Angeles (CSTEU.USLAX) have contracted when added together.


DIVERSIFICATION REDISTRIBUTES FREIGHT

There is a push for supply chain diversification in the post-pandemic world.
Procurement teams are being pushed to find multiple sources to hedge their
exposure to risk of supply chain disruptions. One of the byproducts of this is
freight patterns shifting away from what has been the predominant path for the
flow of goods in the U.S.

There is certainly more nuance to this outside of the West Coast demand erosion.
Within the region itself, patterns are also changing. 



Phoenix, once a market where carriers could not buy freight to carry, is an
up-and-coming outbound market, though inbound volumes still outweigh the
outbound. Outbound tender volumes for Phoenix are up 66% versus June 2019, while
the distribution-centric Ontario, California, market has eroded 14%. If this
trend continues, the once easy-to-manage market may be more exposed to service
risks. 

The bottom line is even in an extremely loose trucking market, underlying
changes are occurring. Once capacity falls into closer alignment with demand,
transportation providers may have some new puzzles to solve in network
management. Transportation managers will want to monitor these pattern changes
to be ahead of their service and cost risks.


ABOUT THE CHART OF THE WEEK

The FreightWaves Chart of the Week is a chart selection from SONAR that provides
an interesting data point to describe the state of the freight markets. A chart
is chosen from thousands of potential charts on SONAR to help participants
visualize the freight market in real time. Each week a Market Expert will post a
chart, along with commentary, live on the front page. After that, the Chart of
the Week will be archived on FreightWaves.com for future reference.

SONAR aggregates data from hundreds of sources, presenting the data in charts
and maps and providing commentary on what freight market experts want to know
about the industry in real time.

The FreightWaves data science and product teams are releasing new datasets each
week and enhancing the client experience.

To request a SONAR demo, click here.


OTVISONARtrucking demand


3 COMMENTS

 1. CARLOS USA🇺🇸
    
    Monday, June 12, 2023 at 12:23 pm
    
    No… This is called business MOVING AWAY from hostile leftist states and
    their communist tactics

    

 2. CARLOS USA🇺🇸
    
    Monday, June 12, 2023 at 12:22 pm
    
    ⚠️West Coast LEFTISTS driving away the business like a TOXIC Cesspool
    👏👏👏👏👏👍🏻🤡👍🏻

    

 3. TOM
    
    Monday, June 12, 2023 at 8:56 am
    
    It’s going to get worse. Student loan payments will resume in September.
    That’s $4b per month the economy won’t see anymore.

    

Comments are closed.


ZACH STRICKLAND, FW MARKET EXPERT & MARKET ANALYST

Zach Strickland, the “Sultan of SONAR,” curates the weekly market update. Zach
is also one of FreightWaves’ Market Experts. With a degree in Finance,
Strickland spent the early part of his career in banking before transitioning to
transportation in various roles and segments, such as truckload and LTL. He has
over 13 years of transportation experience, specializing in data, pricing, and
analytics.
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