Logistics Industry Regains Stability as Transportation Metrics Rebound

After more than three years of recession, the logistics industry is finally showing signs of
stability, according to a transportation sentiment survey released on 4 November.

The October Logistics Manager’s Index (LMI)—a composite of eight key components that
represent the logistics sector—showed no change from September’s reading.

Transportation capacity held steady at 54.5 in October. The LMI is based on a diffusion index,
where any reading above 50.0 indicates expansion in logistics activity, while a figure below 50.0
signals contraction.

“The lack of movement in the overall index is the result of cross-pressures from downward
movements in inventories and warehousing metrics, counteracted by upward pressures in
transportation metrics,” the report stated.

Inventory Levels fell by 5.6 points into contraction territory at 49.5, while Warehousing Utilization
slowed by 8.8 points to a modest expansionary rate of 56.5.

Meanwhile, transportation metrics posted strong gains. The Transportation Index rose by 7.5
points to 61.7, while Transportation Utilization climbed 7.3 points to 57.3—both marking
significant rebounds from September’s stagnant readings around 50.0.

An increase in Transportation Prices, coupled with a slight downtick (–0.7) in the expansion of
available Transportation Capacity (54.5), broke a two-month trend of negative freight inversion.
“Given the very slim margins of last month’s negative inversion (a 0.9-point gap) as well as
seasonal factors, it is unsurprising that transportation markets have swung back toward
expansion,” the report noted. “As might be expected, this is largely due to activity at
downstream retailers.”

Downstream firms reported a Transportation Price expansion of 70.0 and Transportation
Capacity at 56.1. In contrast, upstream firms posted a milder Transportation Price expansion of
56.4 and Transportation Capacity of 53.6.

“Essentially, it seems that retailer expectations of consumer spending over the holiday shopping
season—and the subsequent movement of inventories to serve that demand—has halted the
previous downward trend we had been observing,” the report said.

“Taken altogether, it seems likely that inventories are dropping as holiday sales begin, easing
the prior tightness in warehousing and leading to greater utilization of transportation due to the
increased movement of goods. Essentially, supply chains have gone from being somewhat
static and weighed down by inventory to moving in a more dynamic, seasonally consistent
manner.”