Name: FLEXE, Inc.
Price range: $

Key Takeaways

The freight recession, which began in 2022, appears to be ending.
Downstream firms, such as retailers, are running lean inventories.
Upstream firms like manufacturers, wholesalers, and distributors are seeing inventories grow, indicating a return to normal seasonality.

The Current State of the Logistics Industry #

Recently we kicked off the Logistics Leadership Podcast season two with a focus on the current state of the logistics industry. In the episode, Karl Siebrecht (co-founder and CEO of Flexe) interviewed Dr. Zac Rogers, co-author of the Logistics Managers' Index (LMI), to gain insights into the industry's trends. Dr. Rogers explains how the LMI tracks logistics activity and sentiment, providing valuable data for understanding the industry's health. He notes that the freight recession, which began in 2022, appears to be ending, with transportation prices rising faster than capacity in recent months. While downstream firms (retailers) are running lean inventories, upstream firms (manufacturers, wholesalers, distributors) are seeing inventories grow, indicating a return to normal seasonality. Dr. Rogers also highlights the impact of COVID-19 on the industry, causing a bullwhip effect and subsequent inventory buildup.

This discussion on the LMI got us thinking… Because Flexe receives transactional quotes from a network of 800+ 3PL operators, what would we find if we overlaid Flexe's proprietary warehouse costs data over the warehouse costs reporting performed by the LMI?

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Here's What We Found #

To recap, the LMI uses a diffusion index: all numbers above 50 indicate expansion, those below 50 indicate contraction, and how far a value is from 50 indicates the rate of change. To produce this graph, Flexe normalized two years of pricing data and calculated percent change against a moving average to align with LMI’s diffusion index.

From This Overlay, We Can Observe Two Primary Trends #

In general, Flexe's 3PLs bid in alignment with larger industry trends. By looking at the first months of this overlay, which aligns with when retailers faced pandemic-related inventory surpluses, we see that in periods where the LMI reported rapidly increasing warehousing costs (09/2022 - 02/2023), Flexe's 3PL's also increased their transactional storage and handling quotes for new business. Similarly, when the LMI began to report increasing warehousing costs, but at slower rates (03/2023 - 08/2023), Flexe observed similar decelerating rate increases. And, by looking at when these changes happen in Flexe's data vs. the LMI, we see that Flexe’s data is often a leading indicator of the LMI.
Historically, Flexe’s 3PLs’ rates for storage and handling have trended together. In 2024, they’ve bifurcated. Although Flexe has seen storage rates decrease significantly since the beginning of the year, handling rates have increased, especially in strategic warehousing markets. This volatility is in direct contrast to the LMI’s warehouse cost reporting. This index has hovered around 65, indicating that respondents have felt continuously increasing warehousing costs throughout the year. Considering larger industry trends on ballooning vacancy rates, decreased utilization in existing facilities, and increased sublet listings, the stability of the LMI is somewhat surprising. However, by looking at Flexe’s pricing data, we can more precisely understand that increasing labor costs have offset decreasing storage costs, preventing shippers from seeing savings from their supply chain without large-scale redesigns or consolidations.

Net net, we found that Flexe's data generally leads the LMI. Further, analyzing both at the same time help illuminate reasons why shippers have failed to see significant savings from their warehousing footprint without consolidating their network or pursuing alternative warehousing and distribution strategies.