FOR RELEASE: Tuesday, November 3rd, 2020
Contact:
Zac Rogers, Ph.D.
Logistics Manager’s Index Analyst
Assistant Professor, Supply Chain Management
Department of Management
Colorado State University
Fort Collins, Colorado
(970) 491-0890
E-mail: Zac.Rogers@colostate.edu
http://www.logisticsindex.org
Twitter: @LogisticsIndex
Contact:
Zac Rogers, Ph.D.
Logistics Manager’s Index Analyst
Assistant Professor, Supply Chain Management
Department of Management
Colorado State University
Fort Collins, Colorado
(970) 491-0890
E-mail: Zac.Rogers@colostate.edu
http://www.logisticsindex.org
Twitter: @LogisticsIndex
October 2020 Logistics Manager’s Index Report®
LMI® at 71.6%
Growth is INCREASING AT AN INCREASING RATE for: Inventory Levels, Inventory Costs, Warehousing Utilization, and Warehousing Prices,
Growth is INCREASING AT A DECREASING RATE for: Transportation Utilization and Transportation Prices
Warehousing Capacity and Transportation Capacity are CONTRACTING AT AN DECREASING RATE.
LMI® at 71.6%
Growth is INCREASING AT AN INCREASING RATE for: Inventory Levels, Inventory Costs, Warehousing Utilization, and Warehousing Prices,
Growth is INCREASING AT A DECREASING RATE for: Transportation Utilization and Transportation Prices
Warehousing Capacity and Transportation Capacity are CONTRACTING AT AN DECREASING RATE.
(Fort Collins, Colorado) — The October 2020 reading of the LMI suggests that the logistics industry continues to grow at a rapid pace. The LMI is at 71.6, up over 20 points from six months ago when it reached an all-time low of 51.3 in April 2020. The score of 71.6 is the highest score the overall index has reached since June of 2018. October’s growth is being driven by logistics metrics across the board. Firms are reporting increasing levels of inventory, contracting capacity, and increasing levels of both utilization and price. Ecommerce is predicted to be up by 50% year-over-year in Q4, a sharp jump from the 13% increase that was predicted pre-pandemic[1]. Ecommerce tends to be more logistics-intensive, requiring firms to carry more inventory and utilize more trucks and warehouses. Because ecommerce is growing at quadruple the predicted rate, it has been difficult for firms to procure the infrastructure necessary to fulfill consumer demand. This reflected in the plummeting rates of available Warehousing Capacity, which this month read in at their lowest-ever level in the history of the LMI®. Transportation Capacity is dropping even more rapidly and this month we observe subsequent increases in the cost of each.
At this moment it appears that demand for logistics services will continue to grow, both retail and manufacturing are up as the economy continues to recover[2]. However, it will be important to monitor whether or not this rate of growth lasts. Several European countries have re-entered lockdown, and firms such as Boeing and Charles Schwab have begun to shed white-collar jobs (to go along with the many blue-collar jobs that were lost early in the pandemic)[3]. If quarantine policy and employment trend back towards the negative, the retail-driven demand for logistics services may begin to subside. Rather or not the economy slows back down remains to be seen. But at the moment, we cannot add logistics infrastructure quickly enough, to keep up with burgeoning demand.
Researchers at Arizona State University, Colorado State University, Rochester Institute of Technology, Rutgers University, and the University of Nevada, Reno, and in conjunction with the Council of Supply Chain Management Professionals (CSCMP) issued this report today.
Results Overview
The LMI score is a combination of eight unique components that make up the logistics industry, 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 latest results of the LMI summarize the responses of supply chain professionals collected in October 2020. As we have seen for most of the last six months, October’s LMI displays rapid growth in price and utilization metrics and a drop-off in available capacity. Due to these factors, the cost of holding inventory remains high.
Overall, the LMI is up slightly (+1.1) from August’s reading of 70.5. This is the highest overall reading recorded since June of 2018, and is the third-highest overall reading in the history of the index. The rate of growth we observe for logistics services is similar to what we might see with a booming economy. This is consistent with both the recovery of GDP back towards pre-pandemic levels observed in Q3 as well as the growth in logistics-intensive retail.
A hallmark of ecommerce retail is the high inventory levels required to maintain high levels of consumer satisfaction through quick delivery and maintaining a wide selection of available products. This may at least partially explain the increase in inventory levels, which are up (+8.2) to a 69.6 – a level we have not observed since 30 months ago in April of 2018. Inventory costs are up (+7.7) sharply as well, hitting a 20-month high of 73.6. Recent reports of U.S. ports backing up with imports as firms scramble to get inventory in from international suppliers[4] seems to corroborate this observation. This rapid inventory growth is putting significant pressure on logistics capacity to keep pace. The figure below presents inventory growth rates over the last two years (the blue line) contrasted against movements in Warehouse Capacity (purple line) and Transportation Capacity (green line).
At this moment it appears that demand for logistics services will continue to grow, both retail and manufacturing are up as the economy continues to recover[2]. However, it will be important to monitor whether or not this rate of growth lasts. Several European countries have re-entered lockdown, and firms such as Boeing and Charles Schwab have begun to shed white-collar jobs (to go along with the many blue-collar jobs that were lost early in the pandemic)[3]. If quarantine policy and employment trend back towards the negative, the retail-driven demand for logistics services may begin to subside. Rather or not the economy slows back down remains to be seen. But at the moment, we cannot add logistics infrastructure quickly enough, to keep up with burgeoning demand.
Researchers at Arizona State University, Colorado State University, Rochester Institute of Technology, Rutgers University, and the University of Nevada, Reno, and in conjunction with the Council of Supply Chain Management Professionals (CSCMP) issued this report today.
Results Overview
The LMI score is a combination of eight unique components that make up the logistics industry, 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 latest results of the LMI summarize the responses of supply chain professionals collected in October 2020. As we have seen for most of the last six months, October’s LMI displays rapid growth in price and utilization metrics and a drop-off in available capacity. Due to these factors, the cost of holding inventory remains high.
Overall, the LMI is up slightly (+1.1) from August’s reading of 70.5. This is the highest overall reading recorded since June of 2018, and is the third-highest overall reading in the history of the index. The rate of growth we observe for logistics services is similar to what we might see with a booming economy. This is consistent with both the recovery of GDP back towards pre-pandemic levels observed in Q3 as well as the growth in logistics-intensive retail.
A hallmark of ecommerce retail is the high inventory levels required to maintain high levels of consumer satisfaction through quick delivery and maintaining a wide selection of available products. This may at least partially explain the increase in inventory levels, which are up (+8.2) to a 69.6 – a level we have not observed since 30 months ago in April of 2018. Inventory costs are up (+7.7) sharply as well, hitting a 20-month high of 73.6. Recent reports of U.S. ports backing up with imports as firms scramble to get inventory in from international suppliers[4] seems to corroborate this observation. This rapid inventory growth is putting significant pressure on logistics capacity to keep pace. The figure below presents inventory growth rates over the last two years (the blue line) contrasted against movements in Warehouse Capacity (purple line) and Transportation Capacity (green line).
Any data point beneath the dotted black breakeven line indicates contraction, anything above indicates growth. Clearly, inventory levels have been on the rise throughout much of 2020. Available Warehousing and Transportation Capacity have both been headed towards contraction. In the October reading, inventory growth rates were approximately 30 points higher than the capacity readings – the furthest these have ever been apart in the history of the LMI.
The high inventory levels have driven available warehouse capacity down (-3.0) to 40.2, its lowest level in the history of this index. This has led to a subsequent increase in both Warehousing Utilization (+0.8), and even more sharply in Warehousing Prices (+8.2). Firms are caught between two sets of pressures. There are not enough warehouses to meet demand, and the warehouse space that is most desired by customer-facing firms tends to be in more expensive urban areas. This lack of available warehouse space has led firms like Walmart[5] and Macy’s[6] to convert traditional brick-and-mortar stores into fulfillment centers. The crunch is especially pronounced for downstream, consumer-facing firms, who read in 11 points lower on Warehousing Capacity than their upstream counterparts while also being 14 points higher on Warehousing Costs.
Similar to the trends we observe in with warehousing, Transportation Capacity continues to contract. While the rate of contraction is up considerably (+14.2) from September, it’s rate of 38.0 is still the lowest of any metric in this month’s reading. Once again, capacity is tighter for downstream firms than upstream firms, in this case by 9 points. Transportation Utilization and Prices also continue to grow quickly, at rates of 71.6 and 85.5 respectively. While both these scores are both down 2.4 points from September, these scores both indicate significant rates of growth. The demand for shipping is up to the point that 70% of UPS and FedEx shipments are now more expensive at-home deliveries, leading them both to increase prices[7]. As discussed last month, it is interesting that logistics capacity is already this pressed in October. We often see demand increase in November and early December. Whether or not the available warehousing and transportation capacity will be sufficient to meet customer demand over the next two months will be fascinating to observe.
The index scores for each of the eight components of the Logistics Managers’ Index, as well as the overall index score, are presented in the table below. Six of the eight metrics show signs of growth, with both capacity metrics actively contracting. The overall LMI® index score is at its highest level in 23 months.
The high inventory levels have driven available warehouse capacity down (-3.0) to 40.2, its lowest level in the history of this index. This has led to a subsequent increase in both Warehousing Utilization (+0.8), and even more sharply in Warehousing Prices (+8.2). Firms are caught between two sets of pressures. There are not enough warehouses to meet demand, and the warehouse space that is most desired by customer-facing firms tends to be in more expensive urban areas. This lack of available warehouse space has led firms like Walmart[5] and Macy’s[6] to convert traditional brick-and-mortar stores into fulfillment centers. The crunch is especially pronounced for downstream, consumer-facing firms, who read in 11 points lower on Warehousing Capacity than their upstream counterparts while also being 14 points higher on Warehousing Costs.
Similar to the trends we observe in with warehousing, Transportation Capacity continues to contract. While the rate of contraction is up considerably (+14.2) from September, it’s rate of 38.0 is still the lowest of any metric in this month’s reading. Once again, capacity is tighter for downstream firms than upstream firms, in this case by 9 points. Transportation Utilization and Prices also continue to grow quickly, at rates of 71.6 and 85.5 respectively. While both these scores are both down 2.4 points from September, these scores both indicate significant rates of growth. The demand for shipping is up to the point that 70% of UPS and FedEx shipments are now more expensive at-home deliveries, leading them both to increase prices[7]. As discussed last month, it is interesting that logistics capacity is already this pressed in October. We often see demand increase in November and early December. Whether or not the available warehousing and transportation capacity will be sufficient to meet customer demand over the next two months will be fascinating to observe.
The index scores for each of the eight components of the Logistics Managers’ Index, as well as the overall index score, are presented in the table below. Six of the eight metrics show signs of growth, with both capacity metrics actively contracting. The overall LMI® index score is at its highest level in 23 months.
This month, downstream firms such as retailers (represented by the orange bars) reported significantly tighter Transportation Capacity and Warehousing Capacity. Downstream respondents also report significantly higher Warehousing Prices. This is consistent with reports that the retail market continues to heat up, causing consumer-facing firms to struggle to find adequate logistics infrastructure.
This month, downstream firms such as retailers (represented by the orange bars) reported significantly tighter Transportation Capacity and Warehousing Capacity. Downstream respondents also report significantly higher Warehousing Prices. This is consistent with reports that the retail market continues to heat up, causing consumer-facing firms to struggle to find adequate logistics infrastructure.
As mentioned above, T-tests determined statistically significant differences existed between the two for Transportation and Warehousing Capacity, as well as Warehousing Prices:
Respondents were asked to predict movement in the overall LMI and individual metrics 12 months from now. Their predictions for future ratings are presented below. Respondents predict that prices will continue to grow, but at decreased rates from what we presently observe. This is likely a function of their belief that capacity will grow over the next year, a shift from their September predictions. Overall, LMI respondents anticipate robust levels of growth throughout the logistics industry over the next 12 months.
Historic Logistics Managers’ Index Scores
This period’s along with prior readings from the last two years of the LMI are presented table below. The values have been updated to reflect the method for calculating the overall LMI:
This period’s along with prior readings from the last two years of the LMI are presented table below. The values have been updated to reflect the method for calculating the overall LMI:
LMI®
The overall LMI index is up (+1.1) to 71.6 from September’s reading of 70.5. This marks six consecutive months of increasing readings following April’s all-time low of 51.3. This is highest reading for the overall index since June of 2018. The long-term U-shape of this metric demonstrates how, after an extended period of slow expansion, growth rates roared back in through the Summer and Fall of 2020. As noted above, this growth seems to be primarily driven by increasing inventory levels which have resulted in limited capacity and high prices for both warehousing and transportation. The logistics industry is continuing to grow quickly, a trend that is likely to increase through the end of the year as holiday shopping continues to pick up.
Respondents predict that over the next year, the LMI will be at 71.5, up (+5.1) from August’s future prediction of 66.0. This suggests that respondents are anticipating increasing rates of growth in the logistics industry over the next 12 months.
The overall LMI index is up (+1.1) to 71.6 from September’s reading of 70.5. This marks six consecutive months of increasing readings following April’s all-time low of 51.3. This is highest reading for the overall index since June of 2018. The long-term U-shape of this metric demonstrates how, after an extended period of slow expansion, growth rates roared back in through the Summer and Fall of 2020. As noted above, this growth seems to be primarily driven by increasing inventory levels which have resulted in limited capacity and high prices for both warehousing and transportation. The logistics industry is continuing to grow quickly, a trend that is likely to increase through the end of the year as holiday shopping continues to pick up.
Respondents predict that over the next year, the LMI will be at 71.5, up (+5.1) from August’s future prediction of 66.0. This suggests that respondents are anticipating increasing rates of growth in the logistics industry over the next 12 months.
Inventory Levels
The Inventory Level value is 69.6 which is up significantly (+8.2) from last month’s value of 61.4.This is also considerably higher (14.5 points) than the same time last year, and 7.5 points higher than two years ago, suggesting that firms are building up their inventories at a faster rate than they traditionally do in October. Upstream respondents returned a value of 75.0, compared to 67.2 for downstream respondents suggesting that more inventory is being stored upstream than down.
When asked to predict what conditions will be like 12 months from now, the average value is 78.3 up (+6.5) from September’s future prediction of 71.8. Thus, the projected increase is greater than last month’s, and indicates that respondents expect inventory values to continue increase significantly over the next year.
The Inventory Level value is 69.6 which is up significantly (+8.2) from last month’s value of 61.4.This is also considerably higher (14.5 points) than the same time last year, and 7.5 points higher than two years ago, suggesting that firms are building up their inventories at a faster rate than they traditionally do in October. Upstream respondents returned a value of 75.0, compared to 67.2 for downstream respondents suggesting that more inventory is being stored upstream than down.
When asked to predict what conditions will be like 12 months from now, the average value is 78.3 up (+6.5) from September’s future prediction of 71.8. Thus, the projected increase is greater than last month’s, and indicates that respondents expect inventory values to continue increase significantly over the next year.
Inventory Costs
Given the continued increases in inventory levels, it is not surprising that inventory costs have continued to increase. The current value is 73.6, up (+7.7) from September’s reading of 65.8. Consistent with the faster growth in levels, October 2020’s rate of Inventory Cost growth is 6.9 points higher than October 2019’s reading of 66.7, suggesting that cost growth has increased relative to last year at this time. Taking this graph and the previous graph together, inventory levels and costs are growing at higher rates. This continued growth in costs could be related to the fact that warehousing prices and utilization are still increasing. Given the significant increase in inventory levels seen above, and consistent increases in warehousing costs, it seems quite likely that inventory costs will continue to rise.
Responses from participants seem consistent with this hypothesis. When asked about what they expect inventory costs to be like 12 months from now, the index value is 78.8, up (+2.1) from September’s future prediction of 76.7. Respondents clearly expect inventory costs to continue to be high for the next 12 months.
Given the continued increases in inventory levels, it is not surprising that inventory costs have continued to increase. The current value is 73.6, up (+7.7) from September’s reading of 65.8. Consistent with the faster growth in levels, October 2020’s rate of Inventory Cost growth is 6.9 points higher than October 2019’s reading of 66.7, suggesting that cost growth has increased relative to last year at this time. Taking this graph and the previous graph together, inventory levels and costs are growing at higher rates. This continued growth in costs could be related to the fact that warehousing prices and utilization are still increasing. Given the significant increase in inventory levels seen above, and consistent increases in warehousing costs, it seems quite likely that inventory costs will continue to rise.
Responses from participants seem consistent with this hypothesis. When asked about what they expect inventory costs to be like 12 months from now, the index value is 78.8, up (+2.1) from September’s future prediction of 76.7. Respondents clearly expect inventory costs to continue to be high for the next 12 months.
Warehousing Capacity
The Warehousing Capacity Index registered 40.19 percent in October 2020, which is the lowest reading that has been recorded for this metric in the history of the LMI®. This is the second consecutive month in which Warehouse Capacity has decreased. This reading is down from last month by nearly 3 percentage points. In addition, this reading is down nearly 17 percentage points from the reading one year ago (October 2019 registered in at 57.7). The forthcoming holiday season is likely due to, as we have previously suggested, to increases in safety stock across the consumer package goods supply chains to prepare for the dual challenge of increase utilization of e-commerce as a result of COVID-19’s shock on the supply chain, as well as the [likely] historic holiday season of 2020.
Looking forward at the next 12 months, the predicted Warehousing Capacity index is 54.3, up (+4.8) from September’s future prediction of 49.5, down slightly. While respondents are certainly no bullish this metric over the next 12 months, they no longer predict that it will continue contracting – indicating that some levels of (modest) relief may be on the horizon.
The Warehousing Capacity Index registered 40.19 percent in October 2020, which is the lowest reading that has been recorded for this metric in the history of the LMI®. This is the second consecutive month in which Warehouse Capacity has decreased. This reading is down from last month by nearly 3 percentage points. In addition, this reading is down nearly 17 percentage points from the reading one year ago (October 2019 registered in at 57.7). The forthcoming holiday season is likely due to, as we have previously suggested, to increases in safety stock across the consumer package goods supply chains to prepare for the dual challenge of increase utilization of e-commerce as a result of COVID-19’s shock on the supply chain, as well as the [likely] historic holiday season of 2020.
Looking forward at the next 12 months, the predicted Warehousing Capacity index is 54.3, up (+4.8) from September’s future prediction of 49.5, down slightly. While respondents are certainly no bullish this metric over the next 12 months, they no longer predict that it will continue contracting – indicating that some levels of (modest) relief may be on the horizon.
Warehousing Utilization
The Warehousing Utilization Index registered 71.91 percent in October 2020. This represents a minor .9 percentage point increase from last month, and is up by just over 3 percentage points from the October 2019 reading of 67.3. This is also the 4th straight month of increases to the rate of warehousing utilization. This continued increase in the rate at which utilization is increasing is congruent with the decrease in capacity noted previously. Previously in this report, the team noted that the reasoning for the growth in utilization was being driven by COVID-19 challenges, safety stock, and the holiday season preparations. The data indicate that this prediction is concurrent. In addition, we expect that these data will continue to demonstrate an increase in the months to come.
Looking forward at the next 12 months, the predicted Warehousing Utilization index is 77.4, very similar (+0.2) for September’s future prediction of 77.2. This seems to support the notion that respondents do not expect significant amounts of warehousing to come online in the next year, and therefore anticipate the need to utilize more of the currently available space.
The Warehousing Utilization Index registered 71.91 percent in October 2020. This represents a minor .9 percentage point increase from last month, and is up by just over 3 percentage points from the October 2019 reading of 67.3. This is also the 4th straight month of increases to the rate of warehousing utilization. This continued increase in the rate at which utilization is increasing is congruent with the decrease in capacity noted previously. Previously in this report, the team noted that the reasoning for the growth in utilization was being driven by COVID-19 challenges, safety stock, and the holiday season preparations. The data indicate that this prediction is concurrent. In addition, we expect that these data will continue to demonstrate an increase in the months to come.
Looking forward at the next 12 months, the predicted Warehousing Utilization index is 77.4, very similar (+0.2) for September’s future prediction of 77.2. This seems to support the notion that respondents do not expect significant amounts of warehousing to come online in the next year, and therefore anticipate the need to utilize more of the currently available space.
Warehousing Prices
Warehousing Prices Index registered 78.71 percent in October 2020. This reading represents a rather sizable increase of over 8 percentage points from last month, which continues the trend of the seventh straight month of an increased growth rate in warehousing prices amid the COVID-19 disruption(s), and holiday season preparations. This reading is also dramatically up by over 13 percentage points from the reading one year ago. This rapid climb in the rate at which prices are increasing is likely directly proportional to the tightening in warehousing capacity and utilization, creating a heightened demand and an increasingly difficult pricing structure for those seeking warehouse space. Previously we suggested that the “rate of increase reflected in pricing this month could be a harbinger of increases in pricing to come in the following months.” Clearly, the data are indicating that pricing will not relent anytime soon, unless a rapid shift in the market occurs.
Future predictions suggest that respondents are expecting prices to continue to grow at a rate of 82.5, up slightly (+1.3) from September’s future prediction of 81.2. Clearly respondents are anticipating a significant increase in costs (and a continuation of current trends) over the next 12 months.
Warehousing Prices Index registered 78.71 percent in October 2020. This reading represents a rather sizable increase of over 8 percentage points from last month, which continues the trend of the seventh straight month of an increased growth rate in warehousing prices amid the COVID-19 disruption(s), and holiday season preparations. This reading is also dramatically up by over 13 percentage points from the reading one year ago. This rapid climb in the rate at which prices are increasing is likely directly proportional to the tightening in warehousing capacity and utilization, creating a heightened demand and an increasingly difficult pricing structure for those seeking warehouse space. Previously we suggested that the “rate of increase reflected in pricing this month could be a harbinger of increases in pricing to come in the following months.” Clearly, the data are indicating that pricing will not relent anytime soon, unless a rapid shift in the market occurs.
Future predictions suggest that respondents are expecting prices to continue to grow at a rate of 82.5, up slightly (+1.3) from September’s future prediction of 81.2. Clearly respondents are anticipating a significant increase in costs (and a continuation of current trends) over the next 12 months.
Transportation Capacity
The Transportation Capacity Index registered 38.0 percent in October 2020. This constitutes a sharp increase of 14.2 percentage points from the September reading of 23.8. It should be noted that the jump from 23.8 to 38.0 does not indicate that there was any more transportation available in October than there was in September. Instead it suggests that available transportation did decrease, merely at reduced rate relative to last month. Finding sufficient transportation continues to be an issue for many firms (particularly customer-facing firms), the three lowest scores for the last two years in the Transportation Capacity index have come in the last three months. Downstream firms are likely to have an increased need for transportation, particularly around last-mile delivery in Q3 and Q4, it will be interesting to see whether or not the capacity that is currently available will be sufficient.
Future predictions suggest that respondents are expecting capacity to continue to contract at a rate of 59.5, up significantly (+11.4) from September’s future prediction of 48.1 (and even more so relative to August, with its anemic future prediction of 31.7), This suggests that respondents have become more bullish on Transportation Capacity, and expect more to come online over the next 12 months.
The Transportation Capacity Index registered 38.0 percent in October 2020. This constitutes a sharp increase of 14.2 percentage points from the September reading of 23.8. It should be noted that the jump from 23.8 to 38.0 does not indicate that there was any more transportation available in October than there was in September. Instead it suggests that available transportation did decrease, merely at reduced rate relative to last month. Finding sufficient transportation continues to be an issue for many firms (particularly customer-facing firms), the three lowest scores for the last two years in the Transportation Capacity index have come in the last three months. Downstream firms are likely to have an increased need for transportation, particularly around last-mile delivery in Q3 and Q4, it will be interesting to see whether or not the capacity that is currently available will be sufficient.
Future predictions suggest that respondents are expecting capacity to continue to contract at a rate of 59.5, up significantly (+11.4) from September’s future prediction of 48.1 (and even more so relative to August, with its anemic future prediction of 31.7), This suggests that respondents have become more bullish on Transportation Capacity, and expect more to come online over the next 12 months.
Transportation Utilization
The Transportation Utilization Index registered 71.6 percent in October 2020. This number denotes a 2.5 points decrease from the September reading of 74.1. This denotes the first drop in Transportation Utilization Index since April 2020. Like Transportation Capacity however, it should be noted that this does not indicate a decrease in utilization, merely that the rate at which Transportation Utilization is growing is slightly down.
Future predictions suggest this trend will continue, with this month’s future reading coming in at 74.8, down (-2.3) from September’s future prediction of 77.1. This is consistent with the prediction that Transportation Utilization will continue to be strained over the next 12 months, and that as a result firms will have to utilize more of what is available.
The Transportation Utilization Index registered 71.6 percent in October 2020. This number denotes a 2.5 points decrease from the September reading of 74.1. This denotes the first drop in Transportation Utilization Index since April 2020. Like Transportation Capacity however, it should be noted that this does not indicate a decrease in utilization, merely that the rate at which Transportation Utilization is growing is slightly down.
Future predictions suggest this trend will continue, with this month’s future reading coming in at 74.8, down (-2.3) from September’s future prediction of 77.1. This is consistent with the prediction that Transportation Utilization will continue to be strained over the next 12 months, and that as a result firms will have to utilize more of what is available.
Transportation Prices
The Transportation Prices Index registered 85.5 percent in October 2020. This constitutes a decrease of 2.4 percent from the September transportation prices reading of 87.9. However, Transportation Prices are still growing at a significant rate and are likely to continue to do so as we near the Q4 retail season – particularly with ecommerce projected to increase by 50% year-over-year. This continues the approximately 50-point increase we’ve seen in Transportation Prices since reaching their nadir of 37.7 in April. Observing the last two years of Transportation Prices shows a “u-shaped” trend, with October’s rate of growth representing a return to the heady days of mid-to-late 2018.
Future predictions suggest that respondents expect more of the same, forecasting future Transportation Prices to grow at a rate of 81.4, down (-4.7) from September’s future prediction of 85.8. Respondents clearly expect the continued tightness in the freight market to result in increasing costs – with no relief in sight.
The Transportation Prices Index registered 85.5 percent in October 2020. This constitutes a decrease of 2.4 percent from the September transportation prices reading of 87.9. However, Transportation Prices are still growing at a significant rate and are likely to continue to do so as we near the Q4 retail season – particularly with ecommerce projected to increase by 50% year-over-year. This continues the approximately 50-point increase we’ve seen in Transportation Prices since reaching their nadir of 37.7 in April. Observing the last two years of Transportation Prices shows a “u-shaped” trend, with October’s rate of growth representing a return to the heady days of mid-to-late 2018.
Future predictions suggest that respondents expect more of the same, forecasting future Transportation Prices to grow at a rate of 81.4, down (-4.7) from September’s future prediction of 85.8. Respondents clearly expect the continued tightness in the freight market to result in increasing costs – with no relief in sight.
About This Report
The data presented herein are 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, Rochester Institute of Technology and Rutgers University, supported by CSCMP. It is authored by Zac Rogers Ph.D., Steven Carnovale Ph.D., Shen Yeniyurt Ph.D., Ron Lembke Ph.D., and Dale Rogers Ph.D.
The data presented herein are 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, Rochester Institute of Technology and Rutgers University, supported by CSCMP. It is authored by Zac Rogers Ph.D., Steven Carnovale Ph.D., Shen Yeniyurt Ph.D., Ron Lembke Ph.D., and Dale Rogers Ph.D.
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[7] Amling, A. (2020, October 28). Commentary: E-Commerce Surge Will Reshape Parcel Carriers’ Strategies. Wall Street Journal. https://www.wsj.com/articles/commentary-e-commerce-surge-will-reshape-parcel-carriers-strategies-11603879200
