Economic pursuit in the logistics industry continued to heighten in January, driven by increasing inventory levels all through the supply chain and tight capacity across warehousing and transportation markers, according to the most up to date Logistics Manager’s Index (LMI) report, released February 2nd, 2021.
The LMI, which gauges industry growth monthly, registered 67.2 in January, up somewhat compared to December but well above the 54.1 reading from a year ago, LMI researchers said. The numbers show a continuation of the strong increase the industry has seen since rebounding last summer from lows brought on by the pandemic.
An LMI above 50 suggests growth in the industry; an LMI below 50 indicates contraction.
Much of the increase in this month’s LMI (is) driven by increases in the rate of growth for the inventory metrics,” LMI researchers wrote. “Due to constricted capacity and high inventory levels, it would appear that as firms increase the amount of inventory they’re holding, the cost of doing so is increasing at an increasing rate of growth detected in this month’s LMI.
Inventory levels rose nearly six points compared to December and were up eight points compared to a year ago, all while warehousing capacity continued to contract. The warehousing capacity index remained below 50 for the fifth straight month in January, falling 1.3 points compared to December and highlighting an ongoing shortage of warehouse space. Inventory costs rose more than three points during the month and warehousing prices continued to climb as well, rising slightly compared to December but up eight points compared to a year ago.
With such limited capacity, it’s difficult to find a place to put things,” LMI researcher Zac Rogers, assistant professor of supply chain management at Colorado State University, said, adding that inventory costs are the highest they’ve been in two years “It really demonstrates the tightness people are dealing with.
Transportation capacity increased in January but remained below the 50-point mark at a reading of 46.3, indicating continued contraction in the segment. Transportation capacity has remained below 50 since June.
Looking ahead, the LMI’s future predictions index indicates that prices will continue to grow at high levels across the board. Rogers said respondents are optimistic that a considerable amount of transportation capacity will come online, but are less bullish about movements in new warehousing capacity.