Logistics index shows US supply chain tightens further in October

Logistics


Los Angeles, Nov 6 : The Logistics Managers' Index (LMI) for October stood at 72.6, showing transportation and warehouse capacity sank further while transportation utilization and pricing increased but at a slower rate. The monthly index, designed to measure activity throughout various points in the supply chain in the United States, was 40 basis points higher than that in September. The number had been standing above 70 for nine straight months, which was classified as "significant expansion" in a report released on Tuesday. The report, covering all three key components of supply chain management: transportation, warehousing and logistics, said the latest number was driven by many factors, including continual growth in cost metrics, and further contraction in available capacity. Transportation capacity fell further and faster in October. It had more impacts to the downstream companies than the upstream ones. The subindex fell 310 basis points to 34.1, the report said. "Our data indicates that the downward pressure on transportation capacity remains extremely strong for downstream firms in supply chain (downstream Transportation Capacity Index is down to only 27.3)." The warehouse and inventory subindexes reflected an environment where freight continued to flood domestic ports without the capacity required to move or store it. Warehouse capacity subindex was 47.6, dipping further in October, with warehouse prices (85.8) continuing to climb. As the availability of industrial space fell to historically low levels, the prices required to store freight remained stubbornly high, Xinhua news agency reported. "Not once in the past two years has this index entered a contraction space, thus the likelihood that prices make a significant drop is highly unlikely," the report added. "In addition, these pricing dynamics are also driven by overall demand in all parts of the global supply chain. Thus, unless and until aggregate demand for goods decreases, and monumental increases to capacity are seen, these prices are likely to continue their upward trajectory." Inventory level grew to 68.1, more so for upstream producers. "Inventory levels are growing 10.3 points faster for upstream respondents -- reflecting the difficulty retailers are having building up inventories to sufficiently meet consumer demand," the report said. The LMI, founded in 2016, is a collaboration among Arizona State University, Colorado State University, Rochester Institute of Technology, Rutgers University and University of Nevada, Reno, conducted in conjunction with the Council of Supply Chain Management Professionals. The index measures key supply chain data from 100 upper-level industry managers in the country to analyze month-to-month changes in warehousing, transportation and inventory. /IANS




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