January/February Report

logo 3-27-17

 

FOR RELEASE: March 3, 2017

Contact: Dale Rogers, Ph.D.
Logistics Manager’s Index Analyst
Professor, Logistics & Supply Chain ManagementDepartment of Supply Chain Management
Arizona State University

Tempe, Arizona
(480) 965-1456
E-mail: Dale.Rogers@asu.edu

http://www.logisticsindex.org

Twitter: @LogisticsIndex

 

January/February 2017 Logistics Manager’s Index Report®

 

LMI® at 66.0%
Inventory Levels, Costs, Warehousing Capacity, Utilization and Prices increasing. Transportation Utilization and Prices Increasing, Transportation Capacity Decreasing.

 

(Tempe, Arizona) — According to a sample of North American logistics executives, economic activity across the logistics sector expanded in November and December.

The report was issued today by researchers at Arizona State University, Rutgers University, Portland State University, University of Nevada, Reno, and Colorado State University in conjunction with the Council of Supply Chain Management Professionals (CSCMP).


 

Results Overview

The January/February LMI® registered 66.0 percent, an increase of 8 percentage points from the November/December reading of 62.9 percent. 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 56.2 percent, a decrease of 2.4 percentage points from the November/December reading of 58.6 percent. The Inventory Cost Index registered 65.4 percent, down 0.1 percentage points from the November/December reading of 65.5 percent. The Warehousing Capacity Index registered 55.2 percent, a decrease of 4.3 percentage points from the November/December reading of 59.5 percent. The Warehousing Utilization Index registered 76.3 percent, an increase of 9.3 percentage points from the November/December reading of 67 percent. This component has grown the most since the end of 2016. The Transportation Capacity Index registered 57.8 percent in January/February, an increase of 8.7 percentage points from the November/December reading of 49.1 percent. The Transportation Utilization index registered 67.9 percent, a decrease of 0.6 percentage points from the November/December reading of 68.5 percent. Finally, the Transportation Prices Index registered at 75.3 percent, an increase of 8.1 percentage points from the November/December reading of 67.2 percent. The Transportation Utilization and Transportation Prices Indices registered new highs for the LMI Index.

 

 

LOGISTICS AT A GLANCE

Index Jan/Feb Index Nov/Dec Index MoM Change Projected Direction Rate of Change
LMI® 66.0 62.9 +3.1% Growing Increasing
Inventory Levels 56.2 58.6 -2.4% Growing Slowing
Inventory Costs 65.4 65.5 -0.1% Growing Slowing
Warehousing Capacity 59.5 55.2 +4.3% Growing Increasing
Warehousing Utilization 76.3 67.0 +9.3% Growing Increasing
Warehousing Prices 69.7 71.8 -2.1% Growing Slowing
Transportation Capacity 57.8 49.1 +8.7% Growing Increasing
Transportation Utilization 67.9 68.5 -0.6% Growing Slowing
Transportation prices 75.3 67.2 +8.1% Growing Increasing

 

As might be expected, warehousing capacity has increased as firms begin to take down their inventories following the fourth quarter holiday season. Inventories are still rising but at a decreasing rate. Conversely, transportation prices have seen the most growth of any Logistics Managers Index components.
The LMI expanded to 66.0 in the January/February reading. This is up from November/December 2016 results, when the overall LMI was 62.9. This is the highest overall LMI diffusion index score up to this point in the project. 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.LMI®

Every reading since the beginning of this project in September has indicated growth in the logistics industry. What has changed is the rate at which the logistics industry is growing. This reading’s index of 66.0 indicates the fastest rate of growth that has been recorded by the LMI. 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.

 

THE LAST 3 READINGS

Month LMI Average for 3 readings – 61.9

High – 66.0

Low – 54.9

Jan/Feb 66.0
Nov/Dec 2016 62.9
Oct 2016 54.9
Sep 2016 63.9

 

 

Inventory Levels

The LMI Inventory Levels Index came in at 56.2 in the January/February reading. This is a decrease of 2.4 percent from the November/December reading, which was 58.6. This drop likely reflects a paring down of inventory on-hand from the fourth quarter and holiday season.

The four industries reporting Inventory growth during the January/February reading are: Automotive, Electronics, Food & Drug, and Warehousing. The three industries reporting a decrease in Inventory Levels during January/February are: Apparel, Consumer Goods, and Shipping & Transportation. Logistics was the only industry reported little-to-no change in Inventory Levels in January/February.

 

inventory levels

 


Inventory Costs

LMI’s Inventory Costs Index read in at 65.4 percent in January/February. This was a decrease of 0.1 percentage points from 65.5 percent in November/December.

The six industries reporting growth in production during the January/February reading are: the Automotive, Consumer Goods, Electronics, Logistics, Shipping & Transportation and Warehousing industries. The two industries reporting a decrease in Inventory Cost during January/February are the Apparel and Food & Drug industries.

 

Inventory Costs


Warehousing Capacity

The Warehousing Capacity Index registered 59.5 percent in January/February.  This is an increase of 4.3 percentage points over the November/December reading of 55.2.

The six industries reporting higher Warehouse Capacity in January/February are: the Apparel, Automotive, Consumer Goods, Logistics, Shipping & Transportation, Food & Drug industries. The two industries reporting lower inventories in the January/February reading are: Electronics, Logistics, and Warehousing industries. Food & Drug and Shipping & Transportation.

 

Warehouse Capacity

 

 

Warehousing Utilization

The Warehousing Capacity Utilization Index registered 76.3 percent in January/February.  This is an increase of 9.3 percentage points over the November/December reading of 67.

The four industries reporting increased Warehouse Capacity Utilization during the January/February reading are: the Apparel, Automotive, Consumer Goods, Electronics, Food & Drug, Logistics, Shipping & Transportation, and Warehousing. In this reading, none of the industries in our survey reported a decreasing level of warehousing utilization – potentially suggesting that all participants in this reading have focused on optimizing available space rather than expanding into new warehouse space.

 

Warehousing Utilization

 

Warehousing Prices

The Warehousing Prices Index registered 69.7 percent in January/February.  This is an increase of 2.9 percentage points over the November/December reading of 68.9.

The five industries reporting increased Warehouse Prices during the January/February reading are: the Automotive, Consumer Goods, Electronics, Food & Drug, Logistics, Shipping & Transportation, and Warehousing industries.  In this reading, none of the industries in our survey reported decreasing Warehousing Prices. The Apparel industry reported little-to-no change over this period.  This may be related to the increase in overall Warehousing capacity observed above.

Over the course of the last few months warehousing prices have dropped the most of the Logistics Managers Index components.  This decrease may be due to greater utilization of warehouse capacity, an increase in capacity, and drop in demand following the 2016 holiday season.

 

WH Prices

 

Transportation Capacity

The Transportation Capacity Index registered 57.8 percent in January/February.  This is an increase of 8.7 percentage points over the November/December reading of 49.1. In the previous reading, Transportation Capacity was the only metric which was reported as decreasing. As Transportation Capacity is increasing in the current reading, all metrics in the LMI are now reporting growth. .

The four industries reporting increased Transportation Capacity during the January/February reading are: Consumer Goods, Food & Drug, Logistics, and Warehousing industries. The two industries reporting decreased Transportation Capacity during January/February are the Electronics and Automotive industries.  The Apparel and Shipping & Transportation industries reported little-to-no change over this period.

 

Trans Cap

 

Transportation Utilization

The Transportation Utilization Index registered 67.9 percent in January/February.  This is a decrease of 0.6 percentage points from the November/December reading of 68.5.  This is the first reading of the LMI in which Transportation Utilization was not reported as having an increasing rate of growth (it is still growing, just at a decreased rate).

The seven industries reporting increased Transportation Utilization during the January/February reading are: Automotive, Consumer Goods, Electronics, Food & Drug, Logistics, Shipping & Transportation, and Warehousing. In this reading, none of the industries in our survey reported decreasing Transportation Utilization. The Apparel industry reported little-to-no change over this period.

 

Trans Utilizatoin

 

Transportation Prices

The Transportation Prices Index registered 75.3 percent in January/February.  This is an increase of 8.1 percentage points from the November/December reading of 67.2.  This is the highest rate of growth in Transportation Price that has been recorded in the LMI readings.

The eight industries reporting increased Transportation Prices during the January/February reading are: Apparel, Automotive, Consumer Goods, Electronics, Food & Drug, Logistics, Shipping & Transportation, and Warehousing. In this reading, none of the industries in our survey reported decreasing Transportation Prices.

Trans prices

 

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. For the first time, this period’s reading includes 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.