March/April Report

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FOR RELEASE: May 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

March/April 2017 Logistics Manager’s Index Report®

LMI® at 65.5%
All metrics trending up – Rate of Growth of Inventory Levels, Costs, Transportation Capacity and Transportation Utilization Increasing. Rate of Growth for Warehousing Capacity, Utilization and Prices and Transportation Prices Decreasing.

(Tempe, Arizona) — According to a sample of North American logistics executives, economic activity across the logistics sector expanded, though at a slightly decreased rate in March and April.

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 March/April LMI® registered 65.5 percent, a decrease of 0.5 percentage points from the January/February reading of 66.0. This is the first reading of the LMI in which the rate of growth of the logistics industry has been down from the previous survey. 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 66.0 percent, an increase of 9.8 percentage points from the January/February reading of 56.2 percent. The Inventory Cost Index registered 68.9 percent, up 3.5 percentage points from the January/February reading of 65.5 percent. Whereas both inventory measures were down in the last period from the previous reading, in this period they are both up. The Warehousing Capacity Index registered 57.1 percent, a decrease of 2.4 percentage points from the January/February reading of 59.5 percent. The Warehousing Utilization Index registered 70.5 percent, a decrease of 5.8 percentage points from the January/February reading of 76.3 percent.

lmi mar april

This is the first reading in which all three measures of warehousing growth are down from the previous period. However, even though the rate of Warehouse Utilization growth is down, it is still growing at the fastest pace of any of the metrics analyzed in the LMI ®. The Transportation Capacity Index registered 57.8 percent in March/April, an increase of 8.7 percentage points from the January/February reading of 49.1 percent. The Transportation Utilization index registered 68.2 percent, an increase of 0.3 percentage points from the January/February reading of 67.9 percent. Finally, the Transportation Prices Index registered at 70.5 percent, a decrease of 4.8 percentage points from the January/February reading of 75.3 percent.

While the rate of growth for all of the Warehousing metrics is decreasing. Transportation metrics are a mixed bag, with rates of capacity and utilization on the rise as the growth of prices slows.

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LMI®
The LMI contracted slightly to 65.5 in the March/April reading. This down from January/February results, when the overall LMI was 66.0, which had been the highest overall LMI diffusion index score up to this point in the project (with this period being a close second). 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 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 65.5 still indicates strong growth throughout the industry. While we see growth across every metric, it is interesting to note that the rate of growth in our warehousing measures are trending down, while the rate of growth in transportation measures is trending upwards. 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.

at aglance table

 

last 3 readins
Inventory Levels
The LMI Inventory Levels Index came in at 66.0 in the March/April reading. This is an increase of 9.8 percent from the January/February reading, which was 56.2. Period to period, this is metric displays the most growth of any of our measures. This may reflect the firms rebuilding their inventories after the quiet period that generally follows the fourth quarter and holiday season.
The five industries reporting increased rates of Inventory Level growth during the March/April reading are: Apparel & Accessories, Consumer Goods, Logistics, Shipping & Transportation, and Warehousing. The Automotive, Electronics and Food & Drug industries reported a decreasing rate of growth in Inventory levels.

inventory levels
Inventory Costs
LMI’s Inventory Costs Index read in at 68.9 percent in March/April. This was an increase of 3.5 percentage points from 65.4 percent in January/February.
The four industries reporting increased rates of growth in Inventory Costs during the March/April reading are: the Apparel & Accessories, Food & Drug, Logistics, Shipping & Transportation and Warehousing industries. The Automotive, Consumer Goods, and Electronics industries reported decreased rates of growth in Inventory Costs.

inventory costs
Warehousing Capacity
The Warehousing Capacity Index registered 57.1 percent in March/April. This is a decrease of 2.4 percentage points from the January/February reading of 59.5.
The three industries reporting higher rate of growth in Warehouse Capacity in March/April are the Electronics, Logistics and Warehousing industries. The industries reporting lower Warehouse Capacity in the March/April reading are the Accessories & Apparel, Automotive, Consumer Goods and Food & Drug industries. The Shipping & Transportation industry reports little-to-no change in the rate of Warehouse Capacity growth.

It is interesting that the “sellers” of Warehousing Capacity (both the Warehousing and Logistics industries) report an increase in capacity, while the “buyers” observe a decrease in the March/April reading.

warehousing capacity
Warehousing Utilization
The Warehousing Capacity Utilization Index registered 70.5 percent in March/April. This is a decrease of 5.8 percentage points down from the January/February reading of 76.3.
Interestingly, all eight major industries tracked in this survey reported growth in overall Warehouse Utilization, however the rate at which capacity is growing has decreased slightly in this period. This was to be somewhat expected as the reading of 76.3 in the last period was the highest rate of growth of any metric we have tracked over the life of this index.

Apparel & Accessories, Electronics and Warehousing report and increased rate of growth in March/April. The Consumer Goods, Food & Drug, Logistics, and Shipping & Transportation industries all reported a decreased rate of growth in Warehouse Utilization in this period.

warehousing utilization

Warehousing Prices
The Warehousing Prices Index registered 61.0 percent in March/April. This is a decrease of 8.7 percentage points down from the January/February reading of 69.7.
While no industry reports a contraction in Warehousing Prices, only the Logistics industry reports an increasing rate of growth. The Apparel & Accessories and Automotive industries reported little-to-no change. The five industries reporting a decreased rate of growth in Warehousing prices are the Consumer Goods, Electronics, Food & Drug, Shipping & Transportation, and Warehousing industries.
Over the course of the LMI ®, the rate of growth in warehousing prices have dropped the most of the Logistics Managers Index components. However, it is important to point out that prices are still rising, simply at a continuously decreasing rate.

warehousing prices

Transportation Capacity
The Transportation Capacity Index registered 62.0 percent in March/April. This is an increase of 4.2 percentage points over the January/February reading of 57.8.
The four industries reporting increased Transportation Capacity during the March/April reading are: Consumer Goods, Electronics, Food & Drug, and Logistics industries. The three industries reporting decreased Transportation Capacity during March/April are the Automotive, Shipping & Transportation, and Warehousing industries. The Accessories & Apparel industries reported little-to-no change over this period.

transportation capacity

Transportation Utilization
The Transportation Utilization Index registered 68.2 percent in March/April. This is an increase of 0.3 percentage points from the January/February reading of 67.9.
The four industries reporting increased Transportation Utilization during the March/April reading are the Accessories & Apparel, Consumer Goods, Electronics, and Food & Drug. The four industries reporting decreasing Transportation Utilization are the Automotive, Logistics, Shipping & Transportation and Warehousing industries.

transportation utilization

Transportation Prices
The Transportation Prices Index registered 70.5 percent in March/April. This is a decrease of 4.8 percentage points from the January/February reading of 75.3. Similarly to Warehousing Utilization, the previous reading’s rate of growth was so high that a slight drop may have been expected.
The two industries reporting an increased rate of Transportation Prices during the March/April reading are the Electronics and Food & Drug industries. The six industries reporting a decreasing rate of growth in Transportation Prices are the Accessories & Apparel, Automotive, Consumer Goods, Logistics, Shipping & Transportation and Warehousing industries.

transportation 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.

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