DC Velocity - May 2019

newsworthy

BUSINESS ACTIVITY IN THE LOGISTICS SECTOR CONTINUED to grow in March, although at a slower rate in comparison to February and year-ago levels, the Council of Supply Chain Management Professionals (CSCMP) said.

The trade group’s Logistics Manager’s Index (LMI) registered 60.4 in March, down from February’s reading of 61.95 and down considerably compared to March 2018, when it registered 75.71. Despite the decline, the LMI remains above the 50-point mark, indicating expansion in the logistics sector, according to the group’s March Logistics Manager’s Index Report.

Researchers said inventory levels and inventory costs were down sharply during the month— 12. 7 percent and 4.59 percent, respectively—indicating that companies are adding inventory but at slower levels than in the past. Warehousing trends and overall economic conditions may be driving the changes. Warehousing capacity held steady (up 1. 42 percent to a reading of 50) in March, and warehouse prices were up, meaning that it has become more expensive to store inventory, so companies may be cutting back, the researchers said. Firms may also be responding to an economic slowdown in the first quarter of 2019, researchers added. “Whether inventories will be built back up if warehouse prices stabilize or consumer sentiment improves remains to be seen,” according to CSCMP.

The researchers also highlighted transportation metrics, which they say have been the most dynamic over the history of the LMI. Transportation capacity is growing, but at a slightly slower rate compared with February, the report showed. Prior to its stabilization in March, this metric had increased in every period since reaching a low point in March/April 2018, according to CSCMP. The rate of growth for transportation costs has decreased for the fifth consecutive period, and at a reading of 65.5, is down considerably from its peak of 95.8 in March/April 2018, the report showed.

—Victoria Kickham

Industry growth slowed
in March, according to
Logistics Manager’s Index The U.S. freight market in 2020 will likely have moderately positive economic condi-
tions, following “a great year for 3PLs and
freight brokers, and a very tough year for
shippers” in 2018, loadboard operator DAT
Solutions said.

Demand for freight transportation will probably not remain at the same high levels seen in 2018, a year marked by a historic capacity crunch and high trucking rates. Many fleets have already responded to that shortage by investing in additional trucks and by raising salaries for drivers, DAT Senior Market Analyst Peggy Dorf told the audience at the Transportation Intermediaries Association’s (TIA) Capital Ideas Conference and Exhibition in Orlando, Fla., in April.

In addition, the freight market faces a “looming regulatory shadow” with the pending phase-out of AOBRDs, the automatic on-board recording devices that were granted a grandfathered exception to the federal electronic logging device (ELD) mandate that took effect in late 2017. The forecast is even further complicated by wild-card variables such as the rise in extreme weather events—such as floods throughout the Midwest and hurricanes Michael and Florence—and wide swings in politics and policies during the coming presidential election year, Dorf said.

Despite those threats, the U.S. freight market is likely to cruise to continued success through 2020, she said. The industry will be buoyed by healthy economic conditions, both on the consumer level—as measured by employment, wages, taxes, and purchasing—and on the industrial side, as measured by activity in sectors such as manufacturing, oil and gas, and housing, Dorf said.