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Home » Logistics industry growth reaches two-year high

Logistics industry growth reaches two-year high

LMI indicates strong economic growth in the industry, but high prices and tight capacity contribute to headaches throughout the supply chain.

April 6, 2021
Victoria Kickham
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High prices and tight capacity across warehousing and transportation markets is creating more complexity in logistics, as supply chain congestion and delays continue worldwide. That’s according to data from the latest monthly Logistics Manger’s Index (LMI) report, released today.

The LMI for March reached a two-year high reading of 72.2, indicating continued economic expansion across the logistics industry, driven by the economic recovery from the pandemic. An LMI above 50 indicates expansion, and a reading below 50 indicates contraction in the market. LMI researchers cited growth in inventory costs, warehousing and transportation utilization, warehousing and transportation prices, and inventory levels in March, all of which came alongside contraction in warehousing and transportation capacity—factors that are contributing to a messy and expensive market, especially for shippers.

“We’re seeing really tight capacities and record high price growth across the board,” said LMI researcher Zac Rogers, assistant professor of supply chain management at Colorado State University, emphasizing that the market is having a hard time adding capacity to meet growing demand. The LMI’s March transportation prices index rose nearly three points to a reading of 90.6, its highest level since June 2018, while transportation capacity fell nearly eight points to a reading of 30.4, its lowest point since last September. Warehousing prices rose 2.5 points to a reading of 81.5 during the month—its highest level in the history of the LMI—while warehousing capacity reached 43.3, its seventh straight month of contraction.

“There’s not going to be much more slack in capacity next year … and I think prices are going to remain high,” Rogers added, citing the LMI’s future predictions index, in which respondents indicated continued pressure for the market to close the gap between capacity and demand for both transportation and warehousing.

LMI researchers cited the late March blockage of the Suez Canal as a key contributor to the ongoing logistics congestion worldwide. The ramifications of the incident are expected to be felt for months, as ocean carriers scramble to make up for lost time and shippers deal with delays. The trucking market will continue to feel pressure as well, they said, as a backlog of ordered yet unproduced trucks is likely to remain high due to a shortage of semiconductors, a growing element of car and truck production. Ironically, the LMI researchers wrote this month, the lack of capacity in the logistics market is hurting semiconductor production, which in turn is hurting the ability to bring new capacity into the logistics market and creating a negative feedback loop that, in the short-term, "will be tough to break," they said.

“We are really close to peak capacity for the existing logistics systems,” Rogers said. “Cars and trucks are getting so smart … [the industry] is slow bringing them on because of bottlenecks caused by semiconductor [shortages].”

March’s LMI of 72.2 was up slightly compared to February’s reading of 71.4 and up markedly from the March 2020 reading of 58.9.

The LMI tracks logistics industry growth overall and across eight areas: inventory levels and costs; warehousing capacity, utilization, and prices; and transportation capacity, utilization, and prices. The report is released monthly by researchers from Arizona State University, Colorado State University, Rochester Institute of Technology, Rutgers University, and the University of Nevada, Reno, in conjunction with the Council of Supply Chain Management Professionals (CSCMP).

Visit the LMI website to participate in the monthly survey.

Supply Chain Strategy
KEYWORDS LMI - Logistics Managers' Index
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Victoria kickham headshot
Victoria Kickham started her career as a newspaper reporter in the Boston area before moving into B2B journalism. She has covered manufacturing, distribution and supply chain issues for a variety of publications in the industrial and electronics sectors, and now writes about everything from forklift batteries to omnichannel business trends for DC Velocity.

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