Freight Alley a key component to the American Heartland

(Photo: Shutterstock)

(Photo: Shutterstock)

Freight Alley is an area that roughly defines freight traffic moving throughout the southeastern U.S., particularly in Tennessee, South Carolina, North Carolina, Georgia, and Alabama. For years, the region has been a manufacturing powerhouse and in no-small coincidence a major distribution and logistics region. We have named this region Freight Alley because of the importance logistics and transportation plays in the region and how important the region is to the North American logistics map.

This past month another initiative with a goal toward defining an important and often overlooked (if not also misunderstood) area of the U.S. is what is being defined as the Heartland. The Walton Foundation recently hosted the Heartland Summit, the point of which was to showcase the exciting innovation happening between the coasts, and also “to spark frank conversations about the challenges the region is facing, and build networks to sustain economic growth and power problem solving across the country.”

The 19 states identified as the Heartland do not include any of the 13 colonies. You can’t be coastal and be in the Heartland according to the geographic boundaries of the study. The researchers acknowledge that there are many ways to define the American Heartland. To Ross DeVol, a research fellow, the American Heartland includes the Midwest (defined by Census Bureau Regions of the East North Central and West North Central) and the East South Central (Kentucky, Tennessee, Alabama, and Mississippi). “Additionally, I would include Arkansas, Oklahoma, and Louisiana in the West South Central.” While the study doesn’t include Texas officially, DeVol suggests that he would include it. The study doesn’t include Texas data into its 19 state study.

The 19 state region identified as the Heartland in the Walton Foundation study.  (Photo: Walton Foundation)

The 19 state region identified as the Heartland in the Walton Foundation study. (Photo: Walton Foundation)

The point of the Heartland discussion is that it symbolizes many of America’s biggest challenges. Yet the Heartland is also a storehouse of tremendous American potential. The aim is to bring the conversation “back home,” with an aim toward maximizing its potential.

While job growth has been steady for the region, it lags behind the rest of the country. From 2001-2017 the Heartland added fewer than 1.3 million jobs, for an annual growth rate of 0.2%. That is compared to the rest of the country, which added 11 million jobs at a 0.8% annual growth rate. 

Among the Heartland standouts, Tennessee has posted especially strong job growth since 2010. The state has increased 2 percent in job growth, trailing only North Dakota in terms of percentage, but is also far more densely populated (at 6,716,000) than ND (at 755,000). Cost of living, and a centrally-located position are two net positives for Tennessee. Young firms especially in manufacturing, logistics, and above all, technology, have accelerated growth in the region. 

Wrap up the week with JP and Chad.  Click here to listen on demand .

Wrap up the week with JP and Chad. Click here to listen on demand.

Chattanooga, at the heart of Freight Alley, is one such city that faces the talent challenge, familiar to those mid-size cities in the Heartland that are highly innovative. If you are setting up a highly-innovative market data business based on freight, knowledge and real-time market insights are critical to scale. In many cases, the talent is there, it’s just a matter of finding it.

"Chattanooga and the broader region is incredibly seeded with talent that understands the logistics industry with many leading firms having a significant presence here. Our freight market data business is able to take advantage of these connections to the freight market to expand our tribal knowledge, expand our data sources, and design products that will be needed and demanded by the market. Real-time information is critical to an industry seeing rapid digitization and innovation. No city in the U.S. is better positioned to understand the direction and economics of freight than Chattanooga,” says FreightWaves’ CEO Craig Fuller.

Another such mid-size city in what constitutes as both Freight Alley and the Heartland, is Birmingham. “Flatbed became popular in Birmingham during the steel boom [because] iron ore is rich in Birmingham,” Mauricio Paredes, director of information technology at P&S, tells FreightWaves. He adds that Birmingham steel did not play a major role in automakers’ just-in-time delivery processes and that allowed the city’s steelworkers to avoid the most damaging effects of the automotive industry collapse. Birmingham offers diverse choices in steel which also helped it weather the crisis. P&S is one of the largest flatbed operators with over 2,000 trucks. 

The broader Heartland shows that export-oriented industries undergird regional competitiveness. “The region excels especially in high-tech advanced manufacturing, and several eastern Heartland states, including Indiana, Michigan, Kentucky, and Alabama,” according to the report. These states are national leaders on both advanced manufacturing output and employment.

Moving west, the region becomes more the nation’s bread basket and an important source of its energy. In fact, according to the report, the Heartland produces over half of the country’s agricultural output, with anchors of production in Iowa, Nebraska, and Minnesota. “Some of this output is used to produce biofuels, which has helped turn Iowa into a major source of energy production. Other Heartland states, such as Oklahoma and Kansas, are pioneering U.S. wind and energy, while North Dakota and Oklahoma are major players in the fracking revolution.” 

All but two Heartland states exceeded the non-Heartland average for exports as a share of state gross domestic product in 2017.

 In terms of Venture Capital funding, the Heartland has work to do. The 19 state area brought in only $3.8 billion in VC funding out of a total national market of $74.1 billion in 2017. This is noted as a serious problem for firms, states, and local economies in the Heartland.

The area’s share of national venture capital funding has shrunk since 1995 from 11% to a mere 5.2%. The Heartland has been left out of the coastal concentration over the past 25 years.

Overall, the region is doing better than is often portrayed, and the general area is also more diverse than meets the eye, according to the report. Shortcomings in the region’s human capital and innovation capacity remain challenges that keep the region from realizing its full potential. Its toward that end, that FreightWaves—centralized in the heart of Freight Alley—shines a spotlight on the study, and seeks to keep the conversation alive.

For more extensive information on the Heartland Summit this past October, including links to their research, click here.