The global logistics industry once again contracted
during June 2023 due, in part, to declining inventory levels, after the sector registered an LMI (Logistics Managers’ Index) score of 45.6. This marks the fourth consecutive month that the index has reached a new all-time low and the second month in a row it has fallen as the sector continues to shrink.
Any reading above 50.0 on the LMI indicates the logistics market is expanding while a score below 50.0 signifies the logistics market is contracting.
Inventory levels are contracting at the second-fastest rate in index history according to the June 2023 Logistics Managers’ Index Report. The inventory level score of 42.9 during June was the second-lowest reading in the LMI’s history of tracking that metric.
Despite the growth rate for inventory costs falling by 7.3 points from May 2023 to June, the LMI projects this metric is expanding.
All other categories analyzed by the June 2023 LMI Report grew from May including warehousing capacity (up 6.8 points), warehousing utilization (up 2.1 points), warehousing prices (up 0.6 points), transportation capacity (up 1.9 points), transportation utilization (up 1.3 points) and transportation prices (up 4.8 points). Still, transportation utilization and transportation prices are projected to contract.
“Evidence of a return to normal can be seen in data from the U.S. Census Bureau tracking the seasonally adjusted inventory-to-sales ratio for total business inventories for 2015-2023,” the report’s authors wrote. “After the whirlwind of the last few years, it appears that firms are getting back to the inventory-to-sales ratios that they saw pre-pandemic — something they had been striving to do through 2021 and 2022. The overriding issue in the logistics industry is that, during that whirlwind, a large volume of warehousing and freight capacity was brought online, some of which is not currently being utilized as things get back to normal. There is still a mismatch between capacity and demand, but if… demand is beginning to stabilize, then supply chains should have an easier time right-sizing their logistics capacity going forward.”
Data for the Logistics Managers’ Index is collected each month in a survey of more than 100 leading logistics professionals conducted 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). Respondents are asked to identify monthly changes across eight metrics while also forecasting future trends for each category over the next 12 months.
