Report: Can’t Get Enough Logistics Infrastructure, for Now
The October Logistics Managers’ Index of 71.6% was the highest the overall index had reached since June 2018.
The logistics industry continues to grow at a brisk pace after bottoming out six months ago. Firms participating in the most recent monthly Logistics Managers’ Index (LMI) reported increasing levels of inventory, contracting capacity and increasing levels of both utilization and price.
E-commerce activity, predicted to be up by 50% year-over-year in Q4, is playing an important role. “E-commerce tends to be more logistics-intensive, requiring firms to carry more inventory and utilize more trucks and warehouses,” a summary to the index explained. “Because e-commerce is growing at quadruple the predicted rate, it has been difficult for firms to procure the infrastructure necessary to fulfill consumer demand.”
Of course, the unanswered question is how long this streak will continue beyond the 2020 holiday season. “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,” the LMI summarized. “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]. 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.”
The October LMI score of 71.6% was the highest the overall index had reached since June 2018. It sank to an all-time low of 51.3% in April 2020. Any score above 50% represents expansion.
The LMI is the product of a collaboration among Arizona State University, Colorado State University, Rochester Institute of Technology, Rutgers University, the University of Nevada at Reno, and the Council of Supply Chain Management Professionals. If you want to dig into the details, the LMI is found here.