Logistics economy continues expansion streak in December

Economic activity in the logistics industry slowed but remained in high growth territory in December, as companies up and down the supply chain dealt with high inventory levels, tight warehousing and transportation capacity, and higher business prices during the peak holiday shipping season, according to the latest Logistics Managers' Index (LMI) report, released Tuesday.

The LMI registered 70.1 for the month, down 3.3 points from November’s reading but up 3.4 points compared to a year ago. The index has remained above 70 for the past 11 months, indicating strong expansion across the industry, according to LMI researchers.

An LMI reading above 50 indicates growth in the industry, and a reading below 50 indicates contraction.

December’s activity reflects the continued effects of consumer pressure on retailers and the supply chain’s ability to respond with inventory and transportation capacity to meet that demand. A resulting rush to load up on inventory ahead of peak season may exacerbate the strain on the supply chain that characterized most of 2021, the LMI researchers said.

“Essentially, downstream retailers struggled to find enough capacity to handle consumer demand during the holiday rush, while their upstream vendors labored to store and manage the deluge of inventory that flowed into supply chains throughout 2021,” according to the LMI report. “Considerable stress was put onto supply chains to avoid missed sales during the holiday rush. Not every item consumers were looking for [was] available on shelves or online, but [the] shortages were significantly milder than the bleak prognostications of a holiday with no toys or Christmas trees that had been predicted earlier in the fall. [This] month’s report indicates that supply chains are now dealing with the aftermath of this herculean effort. This is likely to continue to [place] strain on supply chain capacity well into the new year, and possibly through to 2023.”

Inventory levels across the supply chain continued to grow in December, increasing nearly 3 points to a reading of 61.6, while warehousing and transportation capacity continued to contract, at readings of 46.4 and 42.6, respectively. Growth in the price indices slowed, but remained well above historic averages, with the warehousing price index registering 82.1 and the transportation price index at 87.6, according to the report. The 12-month outlook calls for prices to remain high well into 2022.

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.