FOR RELEASE: September 11, 2017
Contact:
Dale Rogers, Ph.D.
Logistics Manager’s Index Analyst
Professor, Logistics & Supply Chain Management
Department of Supply Chain Management
Arizona State University
Tempe, Arizona
(480) 965-1456
E-mail: Dale.Rogers@asu.edu
http://www.logisticsindex.org
Twitter: @LogisticsIndex
Contact:
Dale Rogers, Ph.D.
Logistics Manager’s Index Analyst
Professor, Logistics & Supply Chain Management
Department of Supply Chain Management
Arizona State University
Tempe, Arizona
(480) 965-1456
E-mail: Dale.Rogers@asu.edu
http://www.logisticsindex.org
Twitter: @LogisticsIndex
July/August 2017 Logistics Manager’s Index Report®
LMI® at 62.8%
Rate of Growth for Inventory Levels, Warehousing Utilization, and Transportation Utilization is INCREASING. Rate of growth for Inventory Costs, Warehousing Capacity, Warehousing Prices, Transportation Capacity and Transportation Prices is DECREASING.
LMI® at 62.8%
Rate of Growth for Inventory Levels, Warehousing Utilization, and Transportation Utilization is INCREASING. Rate of growth for Inventory Costs, Warehousing Capacity, Warehousing Prices, Transportation Capacity and Transportation Prices is DECREASING.
(Tempe, Arizona) — According to a sample of North American logistics executives, economic activity across the logistics sector expanded, though at a noticeably decreased rate in July and August.
The report was issued today by researchers at Arizona State University, Colorado State University, Portland State University, Rutgers University, and the University of Nevada, Reno, and in conjunction with the Council of Supply Chain Management Professionals (CSCMP).
Results Overview
The July/August LMI® registered 62.8 percent, a decrease of 2.2 percentage points from the May/June reading of 65.0. This is the third consecutive reading of the LMI in which the rate of growth of the logistics industry has decreased from the previous survey. Readings of Inventory Levels and both Warehouse and Transportation Capacity are down – with Transportation Capacity actually contracting. Utilization of both Transportation and Warehousing are up at an increased rate – which we would expect to increase as capacity decreases. Interestingly, while Transportation Prices are consistent (down 0.1% from the last reading) Warehouse Prices are growing, but at significantly decreasing rates in this reading. The LMI score is a combination of all of the other components that make up the index including inventory levels and costs, warehousing capacity, utilization, and prices, and transportation capacity, utilization, and prices. The LMI is calculated using a diffusion index, in which any reading above 50 percent indicates that logistics is expanding; a reading below 50 percent is indicative of a shrinking logistics industry.
The Inventory Levels Index registered 67.46 percent, an increase of 2.2 percentage points from the May/June reading of 64.6 percent. The Inventory Cost Index registered 70.2 percent, down 5.4 percentage points from the May/June reading of 75.5 percent. On some levels this is unsurprising as we would expect inventory costs to increase along with inventory levels. However it should be noted that this is the highest level of growth in Inventory Levels ever captured in the LMI, while Inventory Costs has grown every month. It would seem to indicate that firms are operating with confidence going into the third quarter and are building inventory levels accordingly. The Warehousing Capacity Index registered 53.9 percent, a decrease of 5.5 percentage points from the May/June reading of 59.4 percent. The Warehousing Utilization Index registered 58.4 percent, an increase of 3.9 percentage points from the May/June reading of 54.5 percent. The Warehousing Price Index registered 63.7 percent, a decrease of 7.2 percentage points from the May/June reading of 70.9 percent. The decreasing rate of growth in Warehousing Capacity may be a direct reflection of the observed increase in Inventory Levels. The Transportation Capacity Index registered 42.65 percent in July/August, a decrease of 9.95 percentage points from the May/June reading of 52.6 percent. The Transportation Utilization index registered 69.85 percent, an increase of 3.5 percentage points from the May/June reading of 66.3 percent. Finally, the Transportation Prices Index registered 76.12 percent, a decrease of 0.1 percentage points from the May/June reading of 76.3 percent. The decrease in Transportation Capacity and continued growth of Transportation Prices suggesting a tightening in the Transportation sector as growth struggles to match demand.
The report was issued today by researchers at Arizona State University, Colorado State University, Portland State University, Rutgers University, and the University of Nevada, Reno, and in conjunction with the Council of Supply Chain Management Professionals (CSCMP).
Results Overview
The July/August LMI® registered 62.8 percent, a decrease of 2.2 percentage points from the May/June reading of 65.0. This is the third consecutive reading of the LMI in which the rate of growth of the logistics industry has decreased from the previous survey. Readings of Inventory Levels and both Warehouse and Transportation Capacity are down – with Transportation Capacity actually contracting. Utilization of both Transportation and Warehousing are up at an increased rate – which we would expect to increase as capacity decreases. Interestingly, while Transportation Prices are consistent (down 0.1% from the last reading) Warehouse Prices are growing, but at significantly decreasing rates in this reading. The LMI score is a combination of all of the other components that make up the index including inventory levels and costs, warehousing capacity, utilization, and prices, and transportation capacity, utilization, and prices. The LMI is calculated using a diffusion index, in which any reading above 50 percent indicates that logistics is expanding; a reading below 50 percent is indicative of a shrinking logistics industry.
The Inventory Levels Index registered 67.46 percent, an increase of 2.2 percentage points from the May/June reading of 64.6 percent. The Inventory Cost Index registered 70.2 percent, down 5.4 percentage points from the May/June reading of 75.5 percent. On some levels this is unsurprising as we would expect inventory costs to increase along with inventory levels. However it should be noted that this is the highest level of growth in Inventory Levels ever captured in the LMI, while Inventory Costs has grown every month. It would seem to indicate that firms are operating with confidence going into the third quarter and are building inventory levels accordingly. The Warehousing Capacity Index registered 53.9 percent, a decrease of 5.5 percentage points from the May/June reading of 59.4 percent. The Warehousing Utilization Index registered 58.4 percent, an increase of 3.9 percentage points from the May/June reading of 54.5 percent. The Warehousing Price Index registered 63.7 percent, a decrease of 7.2 percentage points from the May/June reading of 70.9 percent. The decreasing rate of growth in Warehousing Capacity may be a direct reflection of the observed increase in Inventory Levels. The Transportation Capacity Index registered 42.65 percent in July/August, a decrease of 9.95 percentage points from the May/June reading of 52.6 percent. The Transportation Utilization index registered 69.85 percent, an increase of 3.5 percentage points from the May/June reading of 66.3 percent. Finally, the Transportation Prices Index registered 76.12 percent, a decrease of 0.1 percentage points from the May/June reading of 76.3 percent. The decrease in Transportation Capacity and continued growth of Transportation Prices suggesting a tightening in the Transportation sector as growth struggles to match demand.
Transportation typically functions as a leading indicator of overall economic health. The dramatic contraction in Transportation Capacity, combined with the steep, continuing growth in Transportation Prices indicates that demand is high and the industry is healthy. This is seemingly corroborated by the increase in Inventory Levels and the drop in Warehousing Capacity – indicating that warehousing space may be tightening due to increasing inventory levels (which are being moved by truck – challenging excess transportation capacity and driving up prices). This may indicate that firms are confident in the economy moving forward and are preparing for strong demand in the fourth quarter. This is corroborated by recent consumer confidence indices®, which suggest that consumer confidence is relatively high and increased in both July and August[i]
LMI®
The LMI contracted slightly to 62.78 in the July/August reading. This is the third consecutive period in which the overall index is down from the previous period. Despite the decrease, our readings still indicate that the logistics industry is growing – and at a reasonably consistent rate. While 62.78 is the second lowest reading of the overall index, it is still well within a standard deviation of 63.0, the average rate of growth over the past year. While the overall industry growth has been consistent, the growth and contraction among the specific components tracked in this report have varied widely over the past four readings (covering eight months). As mentioned above, the LMI is calculated using a diffusion index, in which any reading above 50 percent indicates that logistics is expanding; a reading below 50 percent is indicative of a shrinking logistics industry.
The LMI contracted slightly to 62.78 in the July/August reading. This is the third consecutive period in which the overall index is down from the previous period. Despite the decrease, our readings still indicate that the logistics industry is growing – and at a reasonably consistent rate. While 62.78 is the second lowest reading of the overall index, it is still well within a standard deviation of 63.0, the average rate of growth over the past year. While the overall industry growth has been consistent, the growth and contraction among the specific components tracked in this report have varied widely over the past four readings (covering eight months). As mentioned above, the LMI is calculated using a diffusion index, in which any reading above 50 percent indicates that logistics is expanding; a reading below 50 percent is indicative of a shrinking logistics industry.
Every reading since the beginning of this project in September of 2016 has indicated growth in the logistics industry. What has changed is the rate at which the logistics industry is growing. Although the rate of growth is down slightly from the previous period, this reading’s index of 62.78 still indicates strong growth throughout the industry. While we see growth across every metric, it is interesting to note that in this period growth is primarily driven by utilization rates as prices and capacity metrics have either contracted or are growing at decreased rate. This suggests that firms are currently holding onto more inventory, and therefore the transportation and warehousing industries are tightening. While the researchers feel strongly that warehousing, transportation, and inventory trends are key economic indicators, the exact relationship between the LMI and the overall economy as indicated by GDP has yet to be established empirically.
PREVIOUS READINGS
Inventory Levels
The LMI Inventory Levels Index came in at 67.46 in the July/August reading. This is an increase of 2.8 percent from the May/June reading, which was 64.6. This is the highest Inventory Levels index reading in the history of the LMI.
The three industries reporting increased rates of Inventory Level growth during the July/August reading are: Electronics, Food & Drug and Shipping Transportation. The Consumer Goods, Logistics, and Warehousing industries reported a decreasing rate of growth in Inventory levels.
The LMI Inventory Levels Index came in at 67.46 in the July/August reading. This is an increase of 2.8 percent from the May/June reading, which was 64.6. This is the highest Inventory Levels index reading in the history of the LMI.
The three industries reporting increased rates of Inventory Level growth during the July/August reading are: Electronics, Food & Drug and Shipping Transportation. The Consumer Goods, Logistics, and Warehousing industries reported a decreasing rate of growth in Inventory levels.
Inventory Costs
LMI’s Inventory Costs Index read in at 70.16 percent in July/August. This was a decrease of 5.5 percentage points from 75.5 percent in May/June, which was our highest recording of this metric over the course of the LMI. Although the rate has slowed, this still represents significant growth in the costs of inventory.
The only industry reporting increased rates of growth in Inventory Costs during the July/August reading is Shipping & Transportation. The Consumer Goods, Electronics, Food & Drug, Logistics, and Warehousing industries reported decreased rates of growth in Inventory Costs.
LMI’s Inventory Costs Index read in at 70.16 percent in July/August. This was a decrease of 5.5 percentage points from 75.5 percent in May/June, which was our highest recording of this metric over the course of the LMI. Although the rate has slowed, this still represents significant growth in the costs of inventory.
The only industry reporting increased rates of growth in Inventory Costs during the July/August reading is Shipping & Transportation. The Consumer Goods, Electronics, Food & Drug, Logistics, and Warehousing industries reported decreased rates of growth in Inventory Costs.
Warehousing Capacity
The Warehousing Capacity Index registered 53.91 percent in July/August. This is a decrease of 5.5 percentage points from the May/June reading of 59.4. While Warehouse Capacity is still growing – the rate of growth is fairly low and has slowed considerably, suggesting a tightening in the market.
The only sector reporting increased rates of growth in Inventory Costs during the July/August reading is the Food & Drug industry. The Consumer Goods, Electronics, Logistics, Shipping & Transportation, and Warehousing industries reported decreased rates of growth in Warehousing Capacity.
The Warehousing Capacity Index registered 53.91 percent in July/August. This is a decrease of 5.5 percentage points from the May/June reading of 59.4. While Warehouse Capacity is still growing – the rate of growth is fairly low and has slowed considerably, suggesting a tightening in the market.
The only sector reporting increased rates of growth in Inventory Costs during the July/August reading is the Food & Drug industry. The Consumer Goods, Electronics, Logistics, Shipping & Transportation, and Warehousing industries reported decreased rates of growth in Warehousing Capacity.
Warehousing Utilization
The Warehousing Capacity Utilization Index registered 58.4 percent in July/August. This is an increase of 3.9 percentage points down from the May/June reading of 54.5, though still significantly below the March/April highpoint of 70.5.
The two industries reporting growth in this sector were Food & Drug and Warehousing. The Consumer Goods, Electronics, Logistics, and Shipping & Transportation industries all reported a decreased rate of growth in Warehouse Utilization in this period.
The Warehousing Capacity Utilization Index registered 58.4 percent in July/August. This is an increase of 3.9 percentage points down from the May/June reading of 54.5, though still significantly below the March/April highpoint of 70.5.
The two industries reporting growth in this sector were Food & Drug and Warehousing. The Consumer Goods, Electronics, Logistics, and Shipping & Transportation industries all reported a decreased rate of growth in Warehouse Utilization in this period.
Warehousing Prices
The Warehousing Prices Index registered 63.71 percent in July/August. This is a decrease of 7.2 percentage points down from the May/June reading of 70.9. While the rate of growth in Warehouse Prices are down, they are still growing at a faster rate than either Warehouse Capacity or Utilization. The increase in Prices corresponds with our readings on the growth in inventory and Warehouse Utilization.
All industries reporting in this reading registered decreased rates of growth in Warehouse Prices. Although the Warehousing Prices sector is growing overall, the rate at which it is doing so is down considerably.
The Warehousing Prices Index registered 63.71 percent in July/August. This is a decrease of 7.2 percentage points down from the May/June reading of 70.9. While the rate of growth in Warehouse Prices are down, they are still growing at a faster rate than either Warehouse Capacity or Utilization. The increase in Prices corresponds with our readings on the growth in inventory and Warehouse Utilization.
All industries reporting in this reading registered decreased rates of growth in Warehouse Prices. Although the Warehousing Prices sector is growing overall, the rate at which it is doing so is down considerably.
Transportation Capacity
Transportation Capacity is the only metric which reads as contracting in this period. The Transportation Capacity Index registered 42.65 percent in July/August. This is a decrease of 9.5 percentage points down from the May/June reading 52.6 and nearly 20.0 points down from the March/April high of 62.0. This is one of the lowest readings ever recorded in the LMI® and the largest two-period drop we have yet recorded. It would appear that transportation industry may be struggling to keep up with demand and excess capacity is beginning to disappear.
The three industries reporting increased Transportation Capacity during the July/August reading are: Electronics, Logistics, and Warehousing. The industries reporting a decreased rate of growth in Transportation Capacity are the Consumer Goods, Food & Drug, and Shipping & Transportation industries.
Transportation Capacity is the only metric which reads as contracting in this period. The Transportation Capacity Index registered 42.65 percent in July/August. This is a decrease of 9.5 percentage points down from the May/June reading 52.6 and nearly 20.0 points down from the March/April high of 62.0. This is one of the lowest readings ever recorded in the LMI® and the largest two-period drop we have yet recorded. It would appear that transportation industry may be struggling to keep up with demand and excess capacity is beginning to disappear.
The three industries reporting increased Transportation Capacity during the July/August reading are: Electronics, Logistics, and Warehousing. The industries reporting a decreased rate of growth in Transportation Capacity are the Consumer Goods, Food & Drug, and Shipping & Transportation industries.
Transportation Utilization
The Transportation Utilization Index registered 69.85 percent in July/August. This is an increase of 3.5 percentage points from the May/June reading of 66.3 and the highest rate of growth recorded for this metric in the LMI.
Reflecting this high rate of growth, all reporting industries read in an increased rate of Transportation Utilization growth during the July/August period.
The Transportation Utilization Index registered 69.85 percent in July/August. This is an increase of 3.5 percentage points from the May/June reading of 66.3 and the highest rate of growth recorded for this metric in the LMI.
Reflecting this high rate of growth, all reporting industries read in an increased rate of Transportation Utilization growth during the July/August period.
Transportation Prices
The Transportation Prices Index registered 76.12 percent in July/August. This is a slight decrease of 0.18 percentage points from the May/June reading of 76.3. Even with the decrease, this still represents a significant rate of growth in the Transportation Prices and is consistent with all of the readings we have tracked in 2017 (all readings above 70.0).
The four industries reporting an increased rate of Transportation Prices during the July/August reading are the Consumer Goods, Food & Drug, Logistics, and Shipping & Transportation. The industries reporting a decreasing rate of growth in Transportation Prices are the Electronics and Warehousing industries.
Growth in transportation prices continues to outpace all other sectors measured by the LMI® for the third consecutive period.
The Transportation Prices Index registered 76.12 percent in July/August. This is a slight decrease of 0.18 percentage points from the May/June reading of 76.3. Even with the decrease, this still represents a significant rate of growth in the Transportation Prices and is consistent with all of the readings we have tracked in 2017 (all readings above 70.0).
The four industries reporting an increased rate of Transportation Prices during the July/August reading are the Consumer Goods, Food & Drug, Logistics, and Shipping & Transportation. The industries reporting a decreasing rate of growth in Transportation Prices are the Electronics and Warehousing industries.
Growth in transportation prices continues to outpace all other sectors measured by the LMI® for the third consecutive period.
About This Report
The data presented herein is obtained from a survey of logistics supply executives based on information they have collected within their respective organizations. LMI® makes no representation, other than that stated within this release, regarding the individual company data collection procedures. The data should be compared to all other economic data sources when used in decision-making.
Data and Method of Presentation
Data for the Logistics Manager’s Index is collected in a monthly survey of leading logistics professionals. The respondents are CSCMP members working at the director-level or above. Upper-level managers are preferable as they are more likely to have macro-level information on trends in Inventory, Warehousing and Transportation trends within their firm. Data is also collected from subscribers to both DC Velocity and Supply Chain Quarterly as well. Respondents hail from firms working on all six continents, with the majority of them working at firms with annual revenues over a billion dollars. The industries represented in this respondent pool include, but are not limited to: Apparel, Automotive, Consumer Goods, Electronics, Food & Drug, Home Furnishings, Logistics, Shipping & Transportation, and Warehousing.
Respondents are asked to identify the monthly change across each of the eight metrics collected in this survey (Inventory Levels, Inventory Costs, Warehousing Capacity, Warehousing Utilization, Warehousing Prices, Transportation Capacity, Transportation Utilization, and Transportation Prices). In addition, they also forecast future trends for each metric ranging over the next 12 months. The raw data is then analyzed using a diffusion index. Diffusion Indexes measure how widely something is diffused, or spread across a group. The Bureau of Labor Statistics has been using a diffusion index for the Current Employment Statics program since 1974, and the Institute for Supply Management (ISM) has been using a diffusion index to compute the Purchasing Managers Index since 1948. The ISM Index of New Orders is considered a Leading Economic Indicator.
We compute the Diffusion Index as follows:
PD = Percentage of respondents saying the category is Declining,
PU = Percentage of respondents saying the category is Unchanged,
PI = Percentage of respondents saying the category is Increasing,
Diffusion Index = 0.5 * PD + 0.5 * PU + 1.0 * PI
For example, if 25% say the category is declining, 38% say it is unchanged, and 37% say it is increasing, we would calculate an index value of 0*0.25 + 0.5*0.38 + 1.0*0.37 = 0 + 0.19 + 0.37 = 0.56, and the index is increasing overall. For an index value above 0.5 indicates the category is increasing, a value below 0.5 indicates it is decreasing, and a value of 0.5 means the category is unchanged. When a full year’s worth of data has been collected, adjustments will be made for seasonal factors as well.
Logistics Managers Index
Requests for permission to reproduce or distribute Logistics Managers Index Content can be made by contacting in writing at: Dale S. Rogers, WP Carey School of Business, Tempe, Arizona 85287, or by emailing dale.rogers@asu.edu Subject: Content Request.
The authors of the Logistics Managers Index shall not have any liability, duty, or obligation for or relating to the Logistics Managers Index Content or other information contained herein, any errors, inaccuracies, omissions or delays in providing any Logistics Managers Index Content, or for any actions taken in reliance thereon. In no event shall the authors of the Logistics Managers Index be liable for any special, incidental, or consequential damages, arising out of the use of the Logistics Managers Index. Logistics Managers Index, and LMI® are registered trademarks.
About The Logistics Manager’s Index®
The Logistics Manager’s Index (LMI) is a joint project between researchers from Arizona State University, Colorado State University, University of Nevada, Reno, Portland State University and Rutgers University, supported by CSCMP.
[i] Consumer Confidence Survey®, 2017. The Conference Board Consumer Confidence Index Increased in August. https://www.conference-board.org/data/consumerconfidence.cfm, accessed September 10, 2014.
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