Subscribe to our free, weekly email newsletter!


Logistics business: ISM PMI bodes well for overall economic outlook

ISM monthly manufacturing report shows 12 straight months of growth.
By Jeff Berman, Group News Editor
May 20, 2010

The economic recovery took what could be viewed as a strong step forward based on the Institute of Supply Management’s (ISM) most recent monthly manufacturing report.

The index the ISM uses to measure the sector, or PMI, came in at 60.4% in April. Any reading that is 50 or better represents economic growth. And April represents the ninth consecutive month that the PMI has eclipsed 50, while adding that the overall economy has been on a growth track for 12 straight months. On an annual basis, it is significantly higher than the 40.4% PMI from April 2009.

According to Norbert J. Ore, the chair of the ISM’s Manufacturing Business Survey Committee, April’s growth rate is the fastest since June 2004’s PMI of 60.5%. Ore noted in a statement that New Orders for manufacturers remain strong, with the New Orders Index averaging out at 61.6%, coupled with the ISM’s Employment Index growing for the fifth straight month.

“Overall, the recovery in manufacturing continues quite strong, and the signs are positive for continued growth,” stated Ore.

What’s more, the ISM reported that 17 of the 18 manufacturing industries reported monthly growth for the second straight month.

In an interview with Modern, Ore explained that this shows the manufacturing base has broadened and more companies are benefitting from the economic recovery.

“Before only 10 or 12 industries were showing growth,” said Ore. “Now, the recovery appears to be going in more directions.

The continuing uptick in New Orders also bodes well for continued economic growth, noted Ore. For the last 10 months, New Orders have been averaging 61.5%, and this shows the “depth and breadth” of the recovery, which Ore said will likely continue through the second quarter and into the third quarter.

Inventories—at 49.4%—were down 5.9% from March. Even though it is below 50%, the ISM notes that an Inventories index exceeding 42.6% is consistent with expansion in the Bureau of Economic Analysis’ figures on overall manufacturing inventories.

Even thought Inventories are down sequentially, Ore said the economy is still growing although the rate at which it is growing is slightly slower. And inventories are continuing to grow through what Ore called a significant de-stocking cycle.

“Going through this de-stocking cycle means that manufacturers may have overshot the mark, which will lead to a re-stock, said Ore. “And when you look at Customers’ Inventories falling 6.0% to 33.0 it says we are still not getting the job done with customers and re-stocking their positions.”

When lowering inventory levels, Ore said one of the ways of doing that is to order stock more often in smaller quantities. And when replacing inventory, the typical strategy, he said, is to order less often and in larger quantities. But it does not always work out that way, as many businesses, instead, will order more often and in larger quantities.

And as a major index for logistics services and freight transportation services providers, Ore pointed out that New Orders subsequently leading to higher Inventories, will mean good things for overall business, as logistics costs typically 5% to 10% of New Orders’ costs.

About the Author

image
Jeff Berman
Group News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff joined the Supply Chain Group in 2005 and leads online and print news operations for these publications. In 2009, Jeff led Logistics Management to the Silver Medal of Folio’s Eddie Awards in the Best B2B Transportation/Travel Website category. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. If you want to contact Jeff with a news tip or idea,
please send an e-mail to .(JavaScript must be enabled to view this email address).


Subscribe to Modern Materials Handling magazine

Subscribe today. It's FREE!
Find out what the world’s most innovative companies are doing to improve productivity in their plants and distribution centers.
Start your FREE subscription today!

Recent Entries

This complimentary white paper addresses areas of potential benefit to a grocery distributor considering an investment in automated case picking technology.

In 2015, a new era in shipment pricing will go into effect when major carriers implement dimensional ("dim") weight pricing for all ground packages regardless of their size. This complimentary white paper, "Dimensional Weight: Don't Let it Weigh You Down", can help you optimize your packaging operation to minimize the financial impacts of dimensional weight pricing.

Replacing older, less-efficient lift trucks at the right time can reduce your maintenance costs, improve your productivity and, most importantly, save money and maximize your return on investment. So how do you determine the right time to make a new, significant purchase? Download this complimentary white paper for guidance on how to determine the ideal time to replace lift trucks and how planned replacement can benefit your operation.

The prolonged operating hours of automated distribution operations leave limited time for maintenance. For tightly-scheduled fulfillment operations, unplanned downtime not only cuts into slim profit margins, it jeopardizes future business and customer loyalty. Download this complimentary white paper to learn five mission-critical benefits of implementing a resident maintenance program.

Debut of Pharma EXPO plays crucial role in increase.

About the Author

Bob Heaney is a seasoned professional with over 25 years of distinguished leadership experience in research, analysis, and advisory roles in Supply Chain Engineering. Heaney’s coverage area within Aberdeen includes various elements of Supply Chain Execution (Transportation Management, Warehouse Management, Distributed Order Management and Supply Chain Visibility). Contact Bob Heaney


© Copyright 2013 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA