The October LMI shows supply chains are "more dynamic"The Logistics Manager’s Index (LMI), a key indicator of whether the logistics sector is growing or contracting, reads at 57.4 for October, unchanged from September, the result, authors say, “of cross-pressures”.
These cross-pressures include downward movements in inventories (down 5.6 points month-on-month) and warehousing metrics, which LMI authors believe has been counteracted by upward pressures in transportation metrics.
“The lack of movement hides significant differences across logistics metrics, with inventory and warehousing slowing down and transportation speeding up as firms move goods towards consumers in the first few weeks of the holiday season,” the October LMI report states.
"The beginning of holiday shopping in the second half of October clearly impacted our numbers, with early October’s overall index coming in at 53.7 and then shooting up to 60.3 in the second half of the month.
“This movement had different impacts on respondents depending on size, with smaller firms reporting significantly more robust growth (60.2) than their larger counterparts (56.60).”
Looking at the October data, the LMI report say inventories are likely dropping as holiday sales begin.
“Essentially, supply chains have gone from being somewhat static and weighted down by inventory, to moving in a more dynamic, seasonally consistent manner.”
The LMI is produced by researchers at Arizona State University, Colorado State University, Florida Atlantic University, Rutgers University, and the University of Nevada, Reno in conjunction with the Council of Supply Chain Management Professionals (CSCMP).
It is a combination of eight unique components which make up the logistics industry, including: inventory levels and costs, warehousing capacity, utilisation, and prices, and transportation capacity, utilisation, and prices.
The LMI is calculated using a diffusion index, where a reading above 50.0 indicates logistics is expanding while a reading below 50.0 indicates the logistics industry is shrinking.
"When asked to predict what conditions will be over the next 12 months, respondents foresee a rate of expansion of 64.6, which is up (up 5.0) from September’s future prediction of 59.6 and would be above the all-time average," the report continues. "Respondent expectations vary across the supply chain, with Upstream respondents predicting overall expansion of 64.5, and Downstream respondents predicting a significantly slower (although still notable) rate of expansion at 59.5."