Logistics Costs at 4 Year High
The May Logistics Managers’ Index reads in at 69.5, down (-0.4) from April’s reading of 69.9.
This report was issued June 2 by Arizona State University, the University, Colorado State University, Florida Atlantic University, Rutgers University, and the University of Nevada, Reno, and in conjunction with the Council of Supply Chain Management Professionals (CSCMP)
The report notes that while the rate of expansion is down from last month, this is still the second fastest level of expansion since March 2022’s reading of 76.2.
The slight slowdown in the rate of expansion can be traced to a few factors.
The expansion rate of Inventory Levels has slowed (-1.5) to 54.8. The majority of that slowdown came in the second half of the month as inventory levels went from robust expansion at 60.5 in early May to almost no movement at 50.9 later in the month.
This resulted in warehousing capacity moving (+5.0) back from contraction to mild expansion at 50.5.
Despite the slowdown in inventory expansion and increase in storage capacity, costs remain elevated. Inventory.
Costs are up (+9.4) to 84.1, which is the highest reading for this metric since May of 2022.
Warehousing prices remain elevated as well, coming in at 70.7, which is above the threshold for what the author's report considers a significant rate of expansion.
Transportation continues to move at a significant pace, with prices up. up (+1.0) to 96.0, which is the fastest rate of expansion ever recorded for any metric in the nearly ten-year history of the index.
Transportation capacity continues to contract quickly at 31.7, and Transportation utilization expansion remains elevated at 69.5.
The report notes that the transportation market has been tight, with prices growing at an unprecedented rate since the closure of the Strait of Hormuz. The spike in fuel has led to increases for all three of our price and cost metrics, with aggregate logistics costs reading in at 250.9, which is the highest reading since March of 2022.
U.S. supply chains have largely continued operating despite the disruption of 20% of the globe’s oil exports.
Upstream firms have pulled inventories forward to curtail future shortages and consolidate shipments, while downstream firms have kept things leaner in an attempt to mitigate tariffs.
Supply chains have been resilient despite these ongoing disruptions. However, in the past, this level of elevated cost has eventually led to significant levels of supply-driven inflation.