Supply and Demand: February Marks Milestone for Transportation Price Drop!

So, the Logistics Managers' Index (LMI) just reported some pretty interesting news about transportation prices.

Apparently, they hit an all-time low in February, according to the LMI. The reading for transportation costs was 36.1, which is a whopping 5.9 percentage points lower than in January and below the previous high in December.

Now, if you're wondering how this works, a value above 50 means expansion, while one below 50 means contraction. And let me tell you, the rate drops were no joke, especially later in the month compared to the beginning.

But wait, there's more!

The severe winter storms in December caused a bump in demand that pushed shipments into January, which contributed to the rate index. However, transportation capacity grew rapidly once again in February, compared to the all-time high reached in October.

Even though it was 5.1 points lower than in January, transportation utilization was still on the rise.

Interestingly enough, downstream respondents (mostly retailers located closer to the consumer) gave a rating of 59.5 for transportation costs, while upstream wholesale respondents only gave a reading of 45.1. It seems that downstream supply chain participants were more concerned about transportation prices than those upstream.

When asked to predict transportation prices for the upcoming year, respondents gave a neutral response of 50, although those downstream projected significant rises and those upstream predicted falling rates.

But here's the catch: inventory levels expanded at a similar pace to January, but inventory costs continued to rise rapidly. And get this, after 30 months of contraction, warehousing capacity finally entered expansion territory for the first time, while utilization continued to rise.

However, warehouse prices are still pretty high, but they are 13.1% lower than a year ago when inventories reached their peak.

The report stated that a lack of supply has been the primary driver behind inflation over the last year, including the necessary supply of warehousing.

But it seems like things might be turning around as recent updates for less-than-truckload intra-quarter shipments indicate that shipments have stabilized.

All in all, the LMI for February was 54.7 points, down 2.9 points from January.

This index is the result of a partnership between several universities and the Council of Supply Chain Management Professionals.