Supply Chain Index Hits Highest Score in Two Years
The supply chain index rose to its highest reading in the past two years in September, signaling that the logistics industry has recovered, according to researchers at Florida Atlantic University and four other schools.
The supply chain index rose to its highest reading in the past two years in September, signaling that the logistics industry has recovered, according to researchers at Florida Atlantic University and four other schools.
The Logistics Managers’ Index Report was 58.6 for September, up from last month’s reading of 56.4. It is also the highest level since September 2022, reflecting the rebounding of the overall economy.
“The increase in inventory levels certainly reflects retailers’ perspective of consumer confidence, as pre-planned holiday orders are reflected in this number,” said Steven Carnovale, Ph.D., associate professor of supply chain management in FAU’s information technology and operations management department.
The LMI, a survey of director-level and above supply chain executives, measures the expansion or contraction of the logistics industry using eight unique components: inventory levels, inventory costs, warehousing capacity, warehousing utilization, warehousing prices, transportation capacity, transportation utilization, and transportation prices.
Along with FAU, researchers at Arizona State University, Colorado State University, Rutgers, and the University of Nevada at Reno calculated the LMI using a diffusion index. A score above 50 indicates that the logistics industry is expanding, while a score below 50 indicates that the industry is shrinking.
Inventory levels increased in September as downstream retailers began restocking their supplies in anticipation of the upcoming peak season. In response, downstream warehousing prices and transportation prices also rose, suggesting that the retail supply chains are gearing back in motion.
“Inventories are starting to build downstream at the retail level, leading to an increase in freight and warehouse activity and something resembling a traditional peak season for the first time in the 2020s,” said Zachary S. Rogers, Ph.D., associate professor of supply chain management at Colorado State University. “This all points to an expectation that consumers will be busy this holiday season, with spending likely to boost both the supply chain and overall economy through the rest of 2024.”
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