ITS Logistics Distribution + Fulfillment Q4 Index: Tariff-Driven Cost Pressure Reshapes Inventory Ownership, Tightening Truck Capacity

— Lean inventory strategies accelerate freight flows as middle-mile networks expand without return to COVID-era extremes, and push distribution closer to end markets —

(RENO, NEV.: January 22, 2026) – ITS Logistics today released the Q4 ITS Logistics US Distribution and Fulfillment Index, Powered by Cresa. This quarter, the index reveals the US logistics sector closed Q4 2025 in a disciplined position defined by inventory depletion, released utilization, and capital efficiency rather than demand deterioration. In addition, the Logistics Managers’ Index (LMI) fell to 54.2 in December, its slowest rate of expansion since April 2024, as inventory levels contracted sharply to 35.1. This is a 17.4-point month-over-month decline that materially exceeded typical seasonal drawdowns. As inventories exited upstream nodes faster than they were replenished, warehousing capacity expanded to 61.2 while utilization dropped to 42.9, the second-lowest utilization reading on record.

“This release of warehouse capacity was driven primarily by inventory behavior, not new supply, creating short-term rate options for shippers and margin pressure for operators,” said Ryan Martin, President of Distribution and Fulfillment for ITS Logistics. “The inventory status can also be tied to the current US tariffs, existing inventory carrying costs, and retailers who are deliberately and strategically keeping inventory lean, while wholesalers and other intermediaries are bearing a larger share of the overall experienced burden.”

This month, DAT reported that despite the weaker warehousing utilization, transportation markets remained broadly stable. Spot truckload rates rose in December on seasonal and weather effects, but against a backdrop of still-loose capacity and modest shipment volumes. This decoupling indicates that Q4’s adjustment was inventory-driven rather than freight-driven.

In December, Trucking Info reported 2025 as being a “lackluster” year for freight rates. Dry van rates ran stronger for several weeks in late November and into December, compared with recordings from over a year ago. This indicated an additional 2025 trend on the capacity side of the supply chain, as trucking capacity continued to decrease to meet low demand. While ACT Research confirmed that weather did play a role in the rate increase, with three fairly significant storms since Thanksgiving 2025 that caused delays in supply chains, the overall strength in spot rates is also due to the realization that the supply-demand balance is tightening.

Martin continued, “The freight market is tightening, driven by inventory momentum, but not a return to COVID-era conditions. This industry’s freight cycle is being driven by inventory leaving warehouses and moving through additional readily available networks. This is occurring as capacity is tightening and prices are also increasing.”

Overall, Q4 demand conditions showed selective strength in US consumption, with essentials and e-commerce channels performing solidly, while discretionary categories–particularly big-ticket durables–remained uneven. Combined with the cooling of inflation compared to earlier in the cycle, along with elevated capital, insurance, and labor costs, these factors reinforced leaner inventory positions and shorter replenishment cycles.

This month, Retail Dive reported that, for the 2025 holiday season, shoppers who were already pushed close to their breaking point by months of inflation and tariff anxiety entered the season feeling cautious and price sensitive. Despite the sentiment, they still spent heavily on buy now, pay later financing structures, with ecommerce remaining popular due to AI-driven shopping experiences. Retailers continued to be plagued with job cuts as they attempted to abruptly adjust to a tariff-altered buying environment. In all, economic uncertainty intensified this season, resulting in a decline in consumer sentiment to its lowest level in three years in November.

While the industry continues to progress into the new year, distribution network reconfiguration, diversified gateways, and the rise of intermediate middle-mile warehousing nodes have proven to take precedence within the supply chain for 2026. The diversification of ports of entry can be linked to improved industry efficiency, as freight flows across US regions have become more balanced.

“If you look at the supply chain pre-COVID, 65% of everything came in through Southern California,” explained Zac Rodgers, lead author of the Logistics Managers’ Index, in an interview with ITS Logistics. “Now, it’s like, 40%. We’re more balanced, which allows us to distribute our fleets and networks better. If you’re balanced, you’re just going to be more efficient.”

Warehouse networks have also shifted away from what is being referred to as a small set of legacy mega-hubs towards more intermediate nodes between gateways and end markets. Indianapolis is a current example of one of the extreme standout markets.

“Headline vacancy in key distribution metros continued to normalize rather than loosen in Q4,” continued Martin. “Dallas vacancy declined from 9.1% to 8.9%, and Chicago saw similar stabilization, while selected inland nodes such as Indianapolis tightened more sharply. The cycle that emerged in Q4 was not a storage cycle but a velocity cycle: firms reduced total stock while maintaining or repositioning space to support more frequent replenishment and downstream service.”

Vacancy normalized in headline terms, but functional space remained selective and sticky. Operators and shippers did not abandon nodes; instead, they reconfigured them for downstream service and replenishment throughput. This explains why warehousing utilization declined in the LMI while Dallas and Chicago vacancy tightened: utilization measured inventory accumulation, while vacancy tracked occupancy and operational relevance.

ITS Logistics offers a full suite of network transportation solutions across North America and omnichannel distribution and fulfillment services to 95% of the US population within two days. These services include drayage and intermodal in 22 coastal ports and 30 rail ramps, a full suite of asset and asset-lite transportation solutions, omnichannel distribution and fulfillment, and outbound small parcel.

The ITS Logistics US Distribution and Fulfillment Index tracks the Producer Price Index (PPI) for Warehousing and Storage and offers a regional markets overview to optimize warehousing and delivery costs. All major markets in the US are highlighted each quarter via the Index. Visit here for a full, comprehensive copy of the index with expected forecasts for the US distribution and fulfillment sector of the supply chain industry.

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ITS Logistics is one of North America's fastest-growing, asset-based modern 3PLs, providing solutions for the industry’s most complicated supply chain challenges. With a people-first culture committed to excellence, the company relentlessly strives to deliver unmatched value through best-in-class service, expertise, and innovation. The ITS Logistics portfolio features North America's #18 asset-lite freight brokerage, a top drayage and intermodal solution, an asset-based dedicated fleet, an innovative cloud-based technology ecosystem, and a nationwide distribution and fulfillment network.