The latest supply chain report indicates a shift in transportation prices, which have moved into expansion mode for the first time in 19 months. Retailers are increasing their inventories, driving growth in the Logistics Managers’ Index (LMI) to 55.6 in January, a 5 percentage point increase from the previous month. All eight components of the index are showing growth, with transportation prices seeing a significant jump of 12.7 points to 55.8, marking a sharp reversal from previous contractions.
The report attributes this growth to a restocking of inventories, particularly among retailers, following a successful holiday season. This surge in transportation prices is seen as a positive sign for the industry, indicating a potential shift towards growth after a lengthy period of downturn. While transportation capacity and utilization are still growing, the rate has slowed compared to previous months.
Looking ahead, respondents expect to see further growth in transportation prices and utilization, while inventory levels have also shown an increase for the first time in three months. The report points to a shift in merchandise strategies, with companies favoring just-in-time approaches over just-in-case measures. Downstream companies, such as retailers, are restocking at a faster pace compared to upstream providers, who are cutting stock levels due to semiconductor shortages.
Overall, the report suggests a promising outlook for the transportation industry, with potential interest rate cuts and continued growth in prices and utilization anticipated in the coming months. Inventory costs have also increased, reflecting the rise in merchandise levels. While the warehousing metrics have slightly dipped, overall expansion is still observed in capacity and prices.
In conclusion, the transportation sector is showing signs of recovery and growth, with positive projections for the future. The LMI, compiled by several universities in collaboration with supply chain management professionals, is expected to continue its upward trend in the coming year.
