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Home » LMI: Tight capacity, high prices drive expansion

LMI: Tight capacity, high prices drive expansion

Logistics Managers’ Index dips in August, but remains in growth territory as the logistics industry continues its unprecedented growth stretch.

august-21-lmi.png
September 7, 2021
Victoria Kickham
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Business activity across the logistics industry continued its unprecedented growth stretch in August, marked by tight capacity and high costs as companies worked to meet historic levels of demand, according to the monthly Logistics Managers’ Index (LMI) report, released today. The LMI registered 73.8 during the month, down slightly from July’s reading, but still the fifth highest reading in the report’s five-year history, according to LMI researchers.

“By any measure, this summer has seen unparalleled rates of expansion in the logistics industry—largely driven by rapid price growth and significant tightening of capacity,” according to the report. “… It seems likely that the tightness and high costs we have observed through the summer will continue into the fall.”

The LMI gauges business activity across the warehousing and transportation industry. An LMI above 50 indicates growth; an LMI below 50 indicates contraction.

LMI researcher Zac Rogers, of Colorado State University, said the slight dip in August reflects declining inventory levels due to supply chain backups and product shortages across many industries. He added that there’s no immediate sign of relief from those backups, noting that the LMI transportation capacity index continued to contract in August, registering 40.5, its 15th straight month of decline. Transportation prices remained high as well, with the LMI’s transportation prices metric rising nearly 3 percentage points to a reading of 93.7—the fifth time in six months the metric has registered in the 90s.

The situation was similar in warehousing, where the capacity index registered 39.1, the first time it has dipped back into the 30s since November 2020. Warehousing capacity has now contracted every month for a full year, according to the report. The warehousing prices index remained at its all-time high reading of 88 for the second straight month.

Looking ahead, Rogers said the LMI’s future conditions index—which asks respondents to gauge conditions over the next 12 months—signals more of the same heading into peak holiday shipping season.

“Similar to what we have seen [recently], everyone is predicting high costs,” Rogers said, adding that there is some optimism that transportation capacity will come online over the next year, which may provide some relief. “It will be interesting to see what happens in [the fourth quarter]. We’re seeing a trend of less spikey levels of demand toward a higher plateau. It will be interesting to see what happens.”

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.

Logistics Strategy
KEYWORDS LMI - Logistics Managers' Index
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Victoria Kickham, an editor at large for Supply Chain Quarterly, started her career as a newspaper reporter in the Boston area before moving into B2B journalism. She has covered manufacturing, distribution and supply chain issues for a variety of publications in the industrial and electronics sectors, and now writes about everything from forklift batteries to omnichannel business trends for Supply Chain Quarterly's sister publication, DC Velocity.

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