A recently released supply chain report found that the rate of transportation capacity reduction in September increased exponentially.
During 16 months in a row transportation capacity has been declining. A recent reading of the Logistics Managers’ Index (LMI) found that the index fell 330 basis points from August to 37,2% in a month.
LMI is a diffusion index, where a value greater than 50% indicates expansion, respectively, a rate below 50% indicates a fall-off.
Transportation capacity has been in the 30% range (“significant reduction”) during 12 months of the last 14.
Respondents also lowered their expectations for future transportation capacity. Despite a slight increase (52%), the 12-month forecast fell 480 basis points from the previous month.
The total LMI, that measures activity at various points in the supply chain, was 72,2%, still in a “strong growth” mode, but is down 160 basis points (bps) since August. The index has been above the 70% bottom for eight consecutive months and 11 months out of the last 13. Two exceptions are the “sell-off feature during the 4th quarter”.
Lack of storage space and increased transportation costs
Warehouse volume (47,9%) remained in the fall, but was 880 basis points higher than a month ago. Warehouse capacity declined during 13 months as the warehouse crisis “was exacerbated by the slow pace of transportation as firms tried to build up stock ahead of time to stay ahead of possible delivery delays.”
Warehouse prices (89,3%) rose 130 basis points, that`s a record high. The data series grew by 18,8 percentage points over last year. According to the 12-month forecast for storage volumes (87,9%), “respondents expect to pay higher prices for the rest of the year and till 2022.”
Supply costs (86,6%) increased by 20,1 percentage points compared to September 2020 and by a similar amount compared to the same month in 2019.
LMI is the result of a collaboration between Arizona State University, Colorado State University, Rochester Institute of Technology, Rutgers University and the University of Nevada at Reno, held together with the Council of Supply Chain Management Experts.