If you want to know where the U.S. economy is headed, ask a logistics manager. At least that's the theory behind a new economic index that was launched last September by five universities, and backed by the Council of Supply Chain Management Professionals (CSCMP).
The "Logistics Manager's Index" (LMI), similar in approach to the long-running "Purchasing Managers Index" produced each month by the Institute for Supply Management (ISM), is based on a monthly poll asking logistics managers to rate whether factors such as warehousing capacity, utilization, and prices; inventory levels and costs; and transportation capacity, utilization, and prices are increasing, decreasing, or staying the same. The information can act as a leading indicator of the health of the overall economy, according to Dale S. Rogers, professor of logistics and supply chain management at Arizona State University, one of the five schools collaborating on the index.
"For example, a lot of times if you know what's happening in trucking, you know what's going to happen [to the economy] in the future," Rogers said in an interview.
Separate indices for the various elements are combined to create the overall LMI score, which is indicated as a percentage. The November/December LMI came in at 62.9 percent, an increase of 8 percentage points from the October reading of 54.9 percent. The LMI is calculated using a "diffusion" index—a reading above 50 percent indicates logistics activity is expanding, and a reading below 50 percent indicates it is shrinking. Some of the results are also broken down by industry, such as furniture or retail. Although the Index is currently based only on responses come from U.S. managers, their companies do business throughout the world.
In addition to support from Arizona State and CSCMP, researchers from Colorado State University, Portland State University, Rutgers University, and University of Nevada, Reno are working on the index. DC Velocity and CSCMP's Supply Chain Quarterly are the index's media partners.
The idea for the index arose from the Great Recession of 2007-09. Many industry observers noticed a significant softening in transportation and logistics demand in 2007, a year before the economic crisis began to hit hard. "It was clearly a leading indicator, but we didn't realize how much," Rogers said. "So we began to wonder whether there was some way for us to track this on an ongoing basis."
The index is still in its early stages, and Rogers and his colleagues are seeking more logistics managers to take part. Currently the poll is sent to all CSCMP members and is now being expanded to readers of DC Velocity and CSCMP's Supply Chain Quarterly. Participants receive a special report with the index results and are invited to an event at CSCMP's Annual Conference. Those who would like to be part of the standing panel that takes the brief survey should contact Rogers at dale.rogers@asu.edu.
