Inventory levels shot up in February as suppliers raced to stock up ahead of possible tariffs from the current administration, according to researchers at Florida Atlantic University (FAU), Arizona State University, Colorado State University, Rutgers University, and the University of Nevada at Reno.
“The rapid stockpiling of inventories represents a shift back to the COVID style ‘just-in-case’ inventory policies and puts enormous pressure on the warehousing segment, which has been under intense price pressure as of late,” says Steven Carnovale, associate professor of supply chain management in FAU’s information technology and operations management department. “The uncertainty associated with the how, where and when of tariffs and other trade related policy is having a demonstrable effect in how supply chains adapt in real time. We are seeing signals of massive stockpiling effects and a race for resources globally, which is driving heightened costs in warehousing, transportation and inventories. This puts immense pressure on supply chains globally.”
Key takeaways:
- The February Logistics Manager’s Index (LMI) reads in at 62.8, up (+0.8) from the January reading. A score above 50 indicates that the logistics industry is expanding, while a score below 50 indicates that the industry is shrinking. This is the fastest reading of expansion in the overall index since June 2022. All eight metrics used to calculate the score saw an increase.
- In response to rising inventory levels, inventory cost and warehousing prices also increased in February’s reading to 77.3 and 77, respectively. Both are reading at their highest level of expansion in several years as the supply chains struggle to keep up with the influx of inventory that came in to work around potential tariffs.
- Overall, respondents signaling heightened pressures are to be expected across all elements of the supply chain, with costs along warehousing and transportation over the next 12 months expected to grow the most amidst such inflationary and economic policy concerns.
