A growing number of mid-market firms are shifting distribution strategy away from primary ports such as Los Angeles, Rotterdam and Shanghai toward secondary cities and second-tier ports. The motivation is twofold: chronic congestion at major gateways and the rising cost and unpredictability of tariffs. This article examines the structural drivers, the operational implications for mid-market firms, and the risks that accompany this strategic pivot.
The Congestion and Tariff Double Bind
Primary ports have become bottlenecks. At the Port of Los Angeles, container dwell times averaged over six days in early 2025, according to the Pacific Maritime Association. Similar congestion affects Rotterdam and Shanghai, where berth availability is frequently constrained. For mid-market firms, delays at these ports cascade through inventory cycles, increasing working capital requirements and eroding customer service levels.
Simultaneously, tariff uncertainty has made long-term routing decisions more complex. The US-China trade war, now in its second phase, has led to punitive duties on a widening range of goods. The EU has introduced carbon border adjustment mechanisms that add cost to certain imports. Mid-market firms, which lack the legal and financial resources of multinationals to hedge or litigate, are disproportionately exposed.
The Secondary City Strategy
In response, a cohort of mid-market firms is establishing regional distribution hubs in second-tier ports. Examples include Charleston and Savannah in the US, Felixstowe and Liverpool in the UK, and Ningbo and Qingdao in China. These ports offer lower congestion, shorter dwell times, and often lower handling fees. They also provide access to regional consumer markets without the need to transit through overburdened inland logistics networks.
A mid-market electronics distributor, for instance, might route Asian imports through Savannah rather than Los Angeles, then distribute to customers in the US Southeast and Midwest via a regional hub in Atlanta or Charlotte. The strategy reduces transit time from port to end customer by several days and lowers the risk of tariff-related delays at primary ports.
Operational Implications
Building a regional distribution hub requires upfront investment in warehousing, transportation contracts, and customs brokerage. Mid-market firms typically lease rather than own warehouse space, but even leasing in secondary cities has become more expensive as demand rises. Industrial vacancy rates in Savannah and Charleston have fallen below 4 per cent, according to CBRE data, pushing up rents.
Labour availability is another consideration. Secondary cities often have smaller labour pools for logistics roles. Firms may need to invest in training or offer higher wages to attract workers. Automation, such as autonomous mobile robots or automated sorting systems, can mitigate labour constraints but adds capital expenditure.
Technology integration is also critical. Firms must connect their enterprise resource planning (ERP) systems with port community systems and customs platforms in multiple jurisdictions. This is feasible for most mid-market firms using cloud-based logistics software, but it requires dedicated IT resources.
Commercial Impact
The commercial logic is clear. By bypassing primary ports, firms can reduce inventory carrying costs, improve order fulfilment speed, and mitigate tariff exposure. A regional hub in a secondary port city can serve a radius of 300-500 miles, covering multiple states or provinces. This allows firms to offer faster delivery without building a national network.
For investors, the trend signals opportunity in industrial real estate in secondary port cities, as well as in logistics technology providers that serve mid-market firms. Private equity interest in mid-market logistics has increased, with deal volume in the sector rising 18 per cent year-on-year in 2024, according to PitchBook data.
Risks and Unknowns
The strategy is not without risk. Secondary ports can become congested themselves as more firms adopt the approach. Savannah, for example, has seen container volumes rise sharply, and infrastructure investment is lagging. If secondary ports become as congested as primary ones, the advantage erodes.
Tariff policy is also unpredictable. A change in trade agreements or the imposition of new duties could alter the cost calculus. Firms that have invested in a regional hub may find themselves locked into a suboptimal location if trade flows shift.
Labour shortages in secondary cities could worsen as demand for logistics workers increases. Wage inflation in these markets may erode the cost savings from lower port fees.
Why It Matters
For mid-market firms, supply chain strategy is no longer a back-office function. It is a competitive differentiator. The shift to secondary city distribution hubs represents a structural change in how goods move from producer to consumer. Firms that adapt early may gain a cost and service advantage. Those that do not may face longer lead times, higher costs, and greater tariff exposure.
FY Outlook
Over the next 12-18 months, we expect more mid-market firms to evaluate secondary port strategies. The trend will accelerate if primary port congestion persists or if tariff uncertainty increases. Industrial real estate in secondary port cities will become more expensive, and logistics technology providers will see increased demand. Firms that combine regional hubs with data-driven inventory management will be best positioned.
Conclusion
The secondary city supply chain is not a temporary workaround. It is a strategic response to structural congestion and tariff volatility. Mid-market firms that invest in regional distribution hubs in second-tier ports can reduce risk, improve service, and lower costs. The window for early-mover advantage is open but narrowing as more firms adopt the approach.
