Six times per year, professors from Arizona State University, Colorado State University, Rochester Institute of Technology, Rutgers University, and the University of Nevada, Reno collaborate with the Council of Supply Chain Management Professionals (CSCMP) to collate data from professionals in the logistics industry, “identifying trends and developments in the logistics industry over time,” according to the Logistics Manager’s Index (LMI).
100-200 respondents participate in each survey, and “almost all of our respondents are directors and above...we want to talk to people who have a good understanding of the whole picture,” as explained by Zac Rogers, assistant professor of supply chain management at Colorado State University. The March-April 2018 survey results were published in May, and FreightWaves breaks down this edition of the LMI data below.
In providing an overview of the results of the survey, the LMI is broken down into eight categories, which come together to form the LMI score: inventory price, inventory levels, warehousing price, warehousing utilization, warehouse capacity, transportation price, transportation utilization, and transportation capacity.
Despite the multitude of factors that come together to make up the LMI score, transportation typically serves as the “leading indicator of overall economic health.” With this in mind, the LMI thoroughly covers transportation variables as they interact with inventory and warehouse data. According to Rogers, “index scores range from 0 to 100, with a score of 50 indicating no change, scores under 50 indicating contraction, and any score over 50 indicating growth.”
The March-April 2018 LMI reports that inventory rates are at a record high, hitting 72.64 this spring. This is “the highest value in the history of the index,” and represents a 12.3 percent increase when compared to January-February 2018. Due to the increase in inventory rates, inventory costs are spiking to “their all-time highest values.” Panelists consulted projected that both inventory rates and inventory costs will continue to increase in the next year.
With inventory on the rise, warehouses are in high demand. Warehouse capacity in March and April was 50.34 percent, and is projected to rise to 59.9, which “indicates that firms are optimistic that more warehouse space will become available over the next year, potentially easing the current mismatch between the supply and demand of affordable.”
Warehouse utilization is sitting at 83.11 percent, and paired with higher capacity, it is likely that—although warehouse space is in high demand—”it is being consumed at a quicker pace than it can be produced.” It is predicted that “firms anticipate utilizing more of the existing warehouse.” Warehouse prices have slightly increased to 77.82 percent, perhaps “due to a limited supply of warehousing, or distribution moving ever-closer to consumers, and therefore into more expensive areas.”
According to the March-April 2018 LMI, transportation capacity has seen a slight decrease, with the trend predicted to continue in the next 12 months. At 30.1 percent, this data point is the “lowest level registered so far in the LMI.” It would appear that transportation industry is still struggling to keep up with demand and excess capacity is still historically low.” Transportation utilization is at 75.5 percent, which is “the second highest rating ever recorded” in the LMI. The transportation prices index, which is currently at 95.8 percent, “constitutes a very strong upward trend in transportation prices.”
As for what this says about the industry? “The dramatic contraction in transportation capacity, combined with the steep, continuing growth in transportation prices indicates that demand is high and the industry is healthy. The increase in inventory levels and warehousing price are further evidence that the demand for available logistics capacity remains high, while available supply seemingly struggles.”
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