FOR RELEASE: January 4, 2018
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
September-December 2017 Logistics Manager’s Index Report®
LMI® at 66.18%
Rate of Growth for Inventory Levels, Inventory Costs, Warehousing Utilization, Warehousing Prices, Transportation Prices and Transportation Utilization is INCREASING. Rate of growth for Warehousing Capacity is DECREASING, Transportation Capacity is DECREASING.
LMI® at 66.18%
Rate of Growth for Inventory Levels, Inventory Costs, Warehousing Utilization, Warehousing Prices, Transportation Prices and Transportation Utilization is INCREASING. Rate of growth for Warehousing Capacity is DECREASING, Transportation Capacity is DECREASING.
(Tempe, Arizona) — According to a sample of North American logistics executives, economic activity across the logistics sector expanded, primarily driven by increases in price and utilization from September to December.
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 September-December LMI® registered 66.2 percent, an increase of 3.4 percentage points from the July/August reading of 62.8. This is the first overall increase since January/February 2017, breaking a streak of 3 consecutive decreasing readings. This is also the highest-ever reading of the LMI®. This increase is largely driven by increased rates of growth in both utilization and price. Utilization of both Transportation and Warehousing, along with overall inventory levels, are up at an increased rate of growth. Similarly, Inventory Costs, Warehousing Prices and Transportation Prices also display increasing rates of growth. This period’s Transportation Price reading is particularly notable, the score of 86.03 being far and away the highest reading of any metric in the history of the LMI. Correspondingly, the rates of Warehousing Capacity and Transportation Capacity show decreasing rates of growth, with Transportation Capacity contracting (at a lowest-ever index rate of 30.71). It is somewhat telling that as Transportation Capacity reaches it’s lowest-ever reading, Transportation Prices are growing at their highest-ever rate. This is indicative of the inverse relationship between available capacity and price – suggesting that an increase in demand has yielded a decrease in supply.
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 71.21 percent, an increase of 3.8 percentage points from the July/August reading of 67.46 percent. The Inventory Cost Index registered 70.8 percent, up 0.6 percentage points from the July/August reading of 70.16 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 in every period (although in some periods, such as this on, at a decreasing rate). It would seem to indicate that firms are operating with confidence during the fourth quarter of 2017 and are building inventory levels accordingly. The Warehousing Capacity Index registered 53.6 percent, a decrease of 0.3 percentage points from the July/August reading of 53.9 percent. The Warehousing Utilization Index registered 69.69 percent, a very significant increase of 11.3 percentage points from the July/August reading of 54.5 percent. The Warehousing Price Index registered 69.5 percent, an increase of 5.8 percentage points from the July/August reading of 63.7 percent. The Transportation Capacity Index registered 30.7 percent in September-December, a decrease of 11.95 percentage points from the July/August reading of 42.65 percent. The Transportation Utilization index registered 77.9 percent, an increase of 3.5 percentage points from the July/August reading of 69.85 percent.
Finally, the Transportation Prices Index registered 86.03 percent, an increase of 9.95 percentage points from the July/August reading of 76.12 percent. The overall picture painted by this period’s reading of the LMI is a logistics industry where demand has exceeded available capacity, driving up prices significantly. This seems indicate that high levels of anticipated consumer demand placed severe strain on distribution networks throughout North America in the fourth quarter of 2017.
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 September-December LMI® registered 66.2 percent, an increase of 3.4 percentage points from the July/August reading of 62.8. This is the first overall increase since January/February 2017, breaking a streak of 3 consecutive decreasing readings. This is also the highest-ever reading of the LMI®. This increase is largely driven by increased rates of growth in both utilization and price. Utilization of both Transportation and Warehousing, along with overall inventory levels, are up at an increased rate of growth. Similarly, Inventory Costs, Warehousing Prices and Transportation Prices also display increasing rates of growth. This period’s Transportation Price reading is particularly notable, the score of 86.03 being far and away the highest reading of any metric in the history of the LMI. Correspondingly, the rates of Warehousing Capacity and Transportation Capacity show decreasing rates of growth, with Transportation Capacity contracting (at a lowest-ever index rate of 30.71). It is somewhat telling that as Transportation Capacity reaches it’s lowest-ever reading, Transportation Prices are growing at their highest-ever rate. This is indicative of the inverse relationship between available capacity and price – suggesting that an increase in demand has yielded a decrease in supply.
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 71.21 percent, an increase of 3.8 percentage points from the July/August reading of 67.46 percent. The Inventory Cost Index registered 70.8 percent, up 0.6 percentage points from the July/August reading of 70.16 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 in every period (although in some periods, such as this on, at a decreasing rate). It would seem to indicate that firms are operating with confidence during the fourth quarter of 2017 and are building inventory levels accordingly. The Warehousing Capacity Index registered 53.6 percent, a decrease of 0.3 percentage points from the July/August reading of 53.9 percent. The Warehousing Utilization Index registered 69.69 percent, a very significant increase of 11.3 percentage points from the July/August reading of 54.5 percent. The Warehousing Price Index registered 69.5 percent, an increase of 5.8 percentage points from the July/August reading of 63.7 percent. The Transportation Capacity Index registered 30.7 percent in September-December, a decrease of 11.95 percentage points from the July/August reading of 42.65 percent. The Transportation Utilization index registered 77.9 percent, an increase of 3.5 percentage points from the July/August reading of 69.85 percent.
Finally, the Transportation Prices Index registered 86.03 percent, an increase of 9.95 percentage points from the July/August reading of 76.12 percent. The overall picture painted by this period’s reading of the LMI is a logistics industry where demand has exceeded available capacity, driving up prices significantly. This seems indicate that high levels of anticipated consumer demand placed severe strain on distribution networks throughout North America in the fourth quarter of 2017.
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 the fourth quarter of 2017[i]
LMI®
The LMI increased to 62.78 in the September-December reading. This breaks a streak of three consecutive periods of a decreasing overall index score. As mentioned above, this increase is primarily driven by significant rates of growth in utilization and price – particularly Transportation Prices. 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 increased to 62.78 in the September-December reading. This breaks a streak of three consecutive periods of a decreasing overall index score. As mentioned above, this increase is primarily driven by significant rates of growth in utilization and price – particularly Transportation Prices. 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. However the September-December 2017 reading came in as the highest overall index score in the history of the Logistics Manager’s Index. As mentioned above, the overall index growth in this period primarily driven by utilization rates and price as 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
PREVIOUS READINGS
Inventory Levels
The LMI Inventory Levels Index came in at 71.21 in the September-December reading. This is an increase of 3.4 percent from the July/August reading, which was 67.46. For the second consecutive period, we read the highest Inventory Levels index reading in the history of the LMI.
Inventory Costs
LMI’s Inventory Costs Index read in at 70.8 percent in September-December. This was an increase of 0.6 percentage points from 70.16 percent in July/August. This represents a continuation of the growth we have tracked in every period of the LMI.
Warehousing Capacity
The Warehousing Capacity Index registered 53.62 percent in September-December. This is a slight decrease of 0.3 percentage points from the July/August reading of 53.9. While Warehouse Capacity is still growing – the rate of growth is fairly low and has slowed considerably, suggesting a tightening in the market.
Warehousing Utilization
The Warehousing Capacity Utilization Index registered 69.69 percent in September-December. This is a considerable increase of 11.3 percentage points up from the July/August reading of 58.4, continuing a two period rate-of-growth streak (although it has this metric has registered as “growing” in every period.
Warehousing Prices
The Warehousing Prices Index registered 69.53 percent in September-December. This is an increase of 5.8 percentage points up from the July/August reading of 63.7. The increase in Prices corresponds with our readings on the growth in both Inventory and Warehouse Utilization.
Transportation Capacity
Transportation Capacity is the only metric which reads as contracting in this period. The Transportation Capacity Index registered 30.7 percent in September-December. This is a decrease of 11.9 percentage points down from the July/August reading 42.65 and nearly 32 points down from the March/April high of 62.0. This is the lowest reading ever recorded in the LMI® and the largest three-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.
Transportation Utilization
The Transportation Utilization Index registered 77.9 percent in September-December. This is an increase of 8.0 percentage points from the July/August reading of 69.85 and by far the highest rate of growth recorded for this metric in the LMI.
Transportation Prices
Finally, the Transportation Prices Index registered 86.03 percent in September-December. This is a significant increase of 9.9 percentage points from the July/August reading of 76.12. Growth in transportation prices continues to outpace all other sectors measured by the LMI® for the fourth consecutive period.
Finally, the Transportation Prices Index registered 86.03 percent in September-December. This is a significant increase of 9.9 percentage points from the July/August reading of 76.12. Growth in transportation prices continues to outpace all other sectors measured by the LMI® for the fourth 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, 2017.
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