Transportation prices and warehouse utilization rose in the latest supply chain management report, signaling that the logistics industry could be making a comeback, according to researchers at Florida Atlantic University and four other schools.
Transportation prices and warehouse utilization rose in the latest supply chain management report, signaling that the logistics industry could be making a comeback, according to researchers at Florida Atlantic University and four other schools.
The Logistics Managers’ Index Report (LMI) was 55.6 in May, up 2.7 points from April’s score of 52.9. Seven out of the eight key metrics used to calculate the score saw expansion, while one of the metrics lagged, according to the report.
“The growth in various segments of the logistics industry bodes well for availability and access to goods for consumers, consumers’ availability, and access to goods. This growth has been partially driven by an easing of congestion in the Panama Canal and along Red Sea shipping routes,” said Steven Carnovale, Ph.D., an associate professor of supply chain management in the information technology and operations management department in the College of Business. “However, heightened transportation pricing could signal increased pricing in a few months’ time as retailers and manufacturers will likely pass these added costs downstream to consumers.”
The Logistics Managers’ Index Report, 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 calculate 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.
An uptick in warehouse utilization and transportation prices drove growth in May’s LMI score. Transportation prices increased 13.7 points from 44.1 to 57.8, the highest level since June 2022, while warehouse utilization scored a 64 in May, an 8.9-point increase. Researchers attributed this growth to confidence from downstream retailers looking to expand on their capabilities and demand.
“Transportation pricing is up along with increased warehousing capacity levels, signaling continued high levels of demand from retailers and on the consumer side. As the summer season starts, the increased capacity should allow for retailers to stock more inventory to maintain products on shelves for consumers when demand levels are at their highest outside of the pre-holiday rush,” Carnovale said.
While the logistics industry has been struggling for the past two years, researchers noted that May’s growth suggests that the industry is on a gradual recovery.
“We are not quite ready to call an end to the freight recession that has been ongoing for the past two years,” said Zachary S. Rogers, Ph.D., associate professor of supply chain management at Colorado State University. “But the past few readings suggest that the logistics industry is moving back toward growth, which would be a positive sign for the overall economy.”
-FAU-
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