By Natalie Mojica
U.S. supply-chain pressures have caused record-high inventory costs and suggest rising inflation will continue.
Colorado State University’s latest Logistics Managers’ Index, used as a measure to record these costs, showed that “continued inventory congestion has driven inventory costs, warehousing prices, and overall aggregate logistics costs to all-time high levels…putting even more pressure on already-constrained capacity.”
Under the Logistics Managers’ Index, 50 is the dividing line between expansion and contraction. Graphs show inventory levels dipping from 80.2 in February to 75.7 in March, while their associated costs rose to 91. Warehouse capacity also suffered a large drop, resulting in price increases for storage units increasing to 90.5.
The report also indicated that increased inflation can lower consumer demand and that inventory costs “are anticipated to remain very high throughout the next 12 months.” Some respondents want to retain a lot of their inventory in the next year and will have to pay higher prices to do so. The survey suggested that one explanation is that “the continued fears about inflation may have led firms to build inventories as a hedge against higher future costs.”
As for transportation prices, while they haven’t changed drastically from the month earlier, utilization and capacity rates both increased.
“The transport sector is at a much stronger place in terms of supply and demand relative to the last freight recession we saw in 2019,” noted Zac Rogers, an assistant professor of supply-chain management at Colorado State.
However, diesel fuel prices that are still 64% higher than they were a year ago could harm the transportation industry if they don’t lower soon.
