BUSINESS US supply chain prices soar as Logistics Managers' Index sets new records


US supply chain prices soar as Logistics Managers' Index sets new records


09:46, October 11, 2021

DENVER, the United States, Oct. 10 (Xinhua) -- Transportation and warehouse prices skyrocketed and set new records in September as the supply chain bent under mounting pressure.

A Costco Wholesale retail club is photographed in Austin, Texas, US on December 12, 2016. (Photo: Agencies)

"For the fourth consecutive month we observe an all-time high reading for warehousing prices. Interestingly, this still comes in behind transportation prices, which read in at an astronomical rate," noted Zachary Rogers, co-founder of the monthly Logistics Managers' Index (LMI).

The LMI, issued by Colorado State University monthly, measures key supply chain data from 100 upper-level industry managers in the country to analyze month-to-month changes in warehousing, transportation and inventory.

"Across America, trucking companies joined ports as post-COVID labor shortages in key industries has also hampered supply chain efficiency," reported the Boston Globe on Thursday.

With over 1,500 FedEx trailers departing Southern California every day, these costs add up quickly, said the LMI report.

In addition, the "bottleneck" at ports where freighters are waiting to unload cargo has led "global schedule reliability to drop to an all-time low of 33.6 percent in August of 2021," down over 30 percent from this time a year ago.

The average delay for late vessel arrivals continued to deteriorate, increasing to 7.57 days in August, according to data from Sea-Intelligence, a provider of research and analysis, data services, and advisory services within the global supply chain industry.

The cost to ship a container across the Pacific leap to more than 3,000 U.S. dollars last month. What's worse, each day a freighter drifts idly waiting to unload costs around 20,000 U.S. dollars, according to media reports.

"Up To 4 Trillion U.S. dollars In Revenue May Have Evaporated In Supply Chain Disruptions," said a PRNewswire headline earlier this year, citing a survey of top-level U.S. and European business executives.

LMI's transportation capacity metric reading was down 3.3 percent from August, "marking the 12th out of the last 14 months that this metric has been in the 30's -- a value representing significant contraction," the report noted.

With shipping lanes and ports jammed, big companies have shifted gears.

Retailers like Walmart, Costco, Target and Ikea have chartered their own container ships in an attempt to avoid delays associated with other ships, according to the report.

"Coca-Cola has gone in another direction, chartering a bulk vessel that is generally used for (the supply of) raw materials to ship sorely needed manufacturing materials to the U.S.," the LMI said.

The good news is that "the U.S. economy is on a strong growth path and cash-rich consumers are spending robustly on both services and goods," CoBank, a national cooperative bank serving vital industries across rural America, said in a report on Friday.

Yet while the U.S. economy "is running hot, it is still very much in the grips of the pandemic. Its negative influence, however, has steadily shifted from curtailing demand to derailing supply chains," said the quarterly report from CoBank's Knowledge Exchange.

Persistent supply chain disruptions and labor shortages are adding significant costs to business operations, and consumers will feel these impacts through higher prices for months to come, CoBank said.

"Supply chain snarls are likely to persist well into 2022, and so will elevated inflation," said Dan Kowalski, vice president of CoBank's Knowledge Exchange division.

Kowalski told the media this week that he expected the consumer price index, which nudged up 5.2 percent from last year, "will change in the months ahead and many businesses will raise prices."

This week, Morning Consult also released results of a comprehensive survey evaluating "the impact of recent supply-chain dynamics on consumers," which found that consumers are experiencing shortages and shipping delays in a number of categories.

The survey asked 2,200 U.S. adults what products they're having difficulty in procuring and how they have adapted their buying behaviors in the face of delays and shortages.

"In many cases, they are opting not to purchase as a result," said Morning Consult.

"Consequently, businesses struggling with logistical snarls are losing a portion of potential consumer demand," the survey said, adding that consumers felt housing, grocery and car shortages most serious during the post-pandemic period.

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