Logistics industry growth continued in November

Economic activity in the logistics industry grew in November, reflecting strong demand for transportation and warehousing services as peak holiday shipping season got underway, according to monthly data from the Logistics Manager’s Index report (LMI), released Tuesday.

The LMI registered 73.4 in November, up slightly from October’s reading of 72.6, and up nearly three points compared to a year ago. The LMI has been above the 70-point mark for the past 10 months, indicating a strong run of growth across the industry, according to LMI researchers.

An LMI reading above 50 indicates industry expansion; a reading below 50 indicates contraction.

Tight capacity, higher prices, and faster movement of goods through the channel characterized the monthly growth, according to LMI researcher Zac Rogers, assistant professor of supply chain management at Colorado State University. He said large retailers spent heavily to move inventory from docks and wholesale warehouses to store shelves in November. Retail inventory levels were nearly 11 points higher than their upstream counterparts (wholesalers and distributors) during the month, a reverse from October when inventory levels at the upstream firms were 10.3 points higher than at retailers downstream.

“This suggests that the inventory glut that was being held upstream has now flowed down toward retailers,” Rogers said. “We find additional evidence for this in the 9.2-point faster rate of contraction in available warehousing space for downstream firms and the 14.7-point quicker rate of growth for upstream firms in transportation utilization. Essentially, upstream firms are utilizing every square inch of available transportation capacity to move inventory into the warehouses, fulfillment centers, and store shelves of downstream retailers.”

This was not the case for smaller retailers, who were still challenged to move goods through the channel and are dealing with inventory shortages as a result, Rogers said. Companies in the appliance and electronics industries were similarly affected, possibly reflecting the ongoing semiconductor shortage, according to the report.

Looking ahead, LMI respondents said they expect current conditions to continue. The 12-month Future Predictions Index registered 71.2, up slightly from October. Overall, respondents expect to see moderate growth in warehousing and transportation capacity and strong growth in cost metrics over the next year.

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.