Rapid recovery continues in logistics

The logistics industry continues to grow at a rapid pace, driven by accelerating e-commerce activity and rising inventory levels this fall, according to data from the October Logistics Manager’s Index (LMI) report, released today.

The LMI reached 71.6 in October, its highest reading in more than two years and an increase of 20 points over its all-time low of 51.3 in April. The LMI measures business activity in logistics, warehousing, and transportation; a reading above 50 indicates expansion, and a reading below 50 indicates contraction.

“The market is really, really hot right now,” said LMI researcher Zac Rogers, assistant professor of supply chain management at Colorado State University. 

He emphasized the rapidly rising inventory levels across the channel as well as tightening warehouse capacity during the month. Inventory levels rose more than eight points over September, to a reading of 69.6, and warehouse capacity continued to contract, falling three  points from September to hit an all-time low of 40.2.

“We’ve never seen [warehousing capacity] contract this quickly,”  Rogers added. “It’s a direct reflection of the growth in inventory.”

Retailers’ efforts to restock dwindling inventory levels and prepare for holiday peak-season shipping is driving much of the trend. Rogers pointed to retail efforts to spread out holiday peak season activity, including Amazon’s mid-October Prime Day and similar sales and promotions designed to get consumers shopping early. Companies’ rush to position inventory closer to customers is also a factor, contributing to a crunch for warehousing space. Transportation capacity contracted during the month, although at a slower rate compared to September; transportation utilization and pricing continued to grow, although at slower rates compared to last month as well.

“Since [the Covid-19 pandemic hit] we’ve seen crazy spikes in inventory and a dip in warehousing. This is the furthest apart [those two measures have] ever been,” Rogers added. “That, to me, is the big story.”

Historically, inventory levels continue to rise in November, indicating that the crunch for space is likely to continue.

The LMI tracks logistics industry growth overall and across eight areas: inventory levels and costs; warehousing capacity, utilization, and prices; and transportation capacity, utilization, and prices. The report is released monthly by researchers from Arizona State University, Colorado State University, Rochester Institute of Technology, Rutgers University, and the University of Nevada, Reno, in conjunction with the Council of Supply Chain Management Professionals (CSCMP).

Visit the LMI website to participate in the monthly survey.