Logistics industry expansion continues in February

Economic activity in the logistics industry continued to expand in February, driven by tight capacity and high prices across the market, according to the latest Logistics Manager’s Index (LMI) report, released today.

Inventory costs, warehousing prices, and transportation prices all reached their highest levels in more than two years last month, as demand for logistics services continues to outstrip supply. LMI researchers added that congestion at U.S. ports is slowing down supply chains at home and abroad—a situation likely to be exacerbated in the months ahead by strong consumer and industrial growth, driven by government stimulus spending.

The LMI registered 71.4 in February, up more than 4 points from January and up nearly 19 points compared to year-ago levels. An LMI above 50 indicates growth in the industry, and an LMI below 50 indicates contraction.

“Basically, the supply chain’s gotten very expensive,” said LMI researcher Zac Rogers, assistant professor of supply chain management at Colorado State University, pointing to months-long declines in both transportation and warehousing capacity.

The LMI’s transportation capacity index has been declining since May and the warehousing capacity index has been declining since August. Alongside those metrics, transportation prices increased for the ninth straight month in February and warehousing prices have continued to grow throughout the pandemic and through peak holiday shipping season. Inventory costs have also continued to grow; the inventory costs index reached 76.8 in February—15 points above last year’s reading and the index’s highest level in more than two years.

And the outlook calls for more of the same over the next 12 months. 

“[Survey respondents] predict that prices will continue to grow at high levels across the board. While respondents believe warehousing and transportation will be coming online at a moderate clip … it is likely that will not be sufficient to establish an equilibrium between supply and demand over the next 12 months,” the researchers wrote. “Demand for logistics services jumped forward by 2-3 years in 2020; it may take more than a year of building up additional capacity to catch up.”

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.