The holiday inventory supply chains spent the summer planning for is beginning its move downstream, into a network with considerably less room than it had a month ago.
The September Logistics Managers’ Index, released Oct. 6, rose to 70.2, its second-highest reading in four years, as inventory growth accelerated and warehouse and transportation capacity both moved sharply into contraction. Last month’s update asked what would happen once front-loaded inventory was inside the system.
October is starting to answer: more of it is heading toward retailers just as the space and trucks needed to move it get harder to find. For food, beverage, and consumer brands moving product through the Midwest, that puts a premium on solving warehousing, transportation, and retail readiness together.
The Inventory Shift Has Started Upstream
The LMI’s Inventory Levels index rose 6.1 points to 58.9, reversing two months of cooling. The growth is concentrated with wholesalers and distributors, who reported expansion at 61.4 against 53.8 for retailers. The LMIs’ researchers note that inventory typically transfers from the wholesale level to retail around mid-October.
More is coming behind it. The report cites Port of Los Angeles projections for import volumes running more than 50% above last year through the first two weeks of October. Inventory Costs climbed to 79.9. The handoff to retail hasn’t happened yet, and the next several weeks are when it does.
What this means for you: The holiday inventory handoff to retail is weeks away, with more imports right behind it. Confirm your warehouse capacity and inbound schedules now, before space and dock appointments get harder to find.
Warehouse Space Tightened at a Pace Not Seen Since 2022
Warehousing Capacity fell 14.2 points to 39.3, the fastest contraction since March 2022. Utilization rose to 64.3, and Warehousing Prices held at 73.5.
For smaller and mid-size shippers, the squeeze is tighter still. Firms with fewer than 1,000 employees reported Warehousing Capacity at 36.0, compared with 44.1 for larger companies, and the small-firm reading dropped 20 points in a single month. Space gets scarce first for the companies with the least leverage to secure it.
New supply won’t close the gap. CBRE reported that second-quarter completions fell to 47.9 million square feet, the lowest quarterly total since 2016, while vacancy declined for the first time since 2022. Among the 100 largest industrial leases signed in the first half, food and beverage occupiers more than tripled their footprint to 16.6 million square feet. LMI respondents expect capacity to be essentially flat over the next 12 months, at 50.6 Overflow space found in November will cost more than space secured now.
What this means for you: Warehouse space is disappearing fast, especially for small and mid-size shippers, and new buildings aren't coming to the rescue. If you'll need extra room for peak or next year, secure it now, before you're competing for overflow space at November prices.
Freight Volume Turned Positive, Capacity Didn’t Follow
Cass Freight Index shipments rose 2.1% year over year in August, the first annual gain since January 2023. Expenditures rose 18.7%, and the Cass Truckload Linehaul Index climbed 11.3% That is a change from September’s update, when costs were rising on falling volume.
The trucks haven’t come back to meet it. LMI Transportation Capacity dropped to 34.4, its tenth straight month of contraction, and Transportation Prices reached 92.7.
DAT showed how little slack is left. In the week ending Oct. 3, the national van spot rate jumped 11 cents to $3.13 per mile and the van load-to-truck ratio rose from 11.1 to 13.7 Reefer averaged $3.69, and the Great Lakes posted the highest van linehaul rate of any top region at $2.59. DAT attributed the move to quarter-end shipping, not a lasting shift in demand. A routine calendar event was enough to move national rates 11 cents in a week. That is worth watching as wholesale inventory moves toward retailers in the weeks ahead.
What this means for you: Freight demand is finally growing, but trucks aren't keeping up. Even a routine quarter-end push sent rates jumping, so the coming retail handoff could do the same. Book transportation early, build some cushion into your delivery timelines, and budget for elevated freight costs through peak.
Diesel Is Off Its Peak and Still Above $6
The EIA’s weekly benchmark set a record of $6.529 per gallon on Sept. 21 before easing to $6.382 on Sept. 28. The Midwest average was $6.526, above the national figure.
That is some relief from the September peak, and still a long way from normal transportation economics. With capacity tightening and linehaul rates rising, fuel is one more reason to keep a quick return to cheaper freight out of Q4 plans and 2027 budgets.
What this means for you: Diesel has dipped slightly from its record, but it's still above $6, and the Midwest is paying even more. Don't plan your Q4 or 2027 budgets around freight costs coming back down. Build in room for fuel surcharges, and look for ways to cut miles, like positioning inventory closer to your customers.
The Consumer Is the Open Question
All this inventory is being positioned against a less certain demand backdrop. The Conference Board’s consumer confidence index fell to 81.9 in September, its lowest level since 2014, and LMI respondents cut their 12-month inventory growth forecast by 10.5 points.
That matters with Inventory Costs near 80, because slow-turning stock gets expensive quickly. The advantage this peak is capacity that can flex up now without locking in excess fixed space after the holidays.
What this means for you: Shoppers are feeling the least confident they have in over a decade, so holiday demand is hard to predict, and holding unsold inventory is getting expensive. Look for warehouse space that can scale up for peak and back down after the holidays. That way you're covered if demand surges, without paying for empty space in January if it doesn't.
Retail Execution Is Where the Costs Stack
As inventory moves downstream, freight and storage are only part of the cost. Product still has to be labeled, configured, packed, and delivered to each retailer’s requirements. When trucks are scarce and warehouse utilization is rising, every extra touch gets more expensive, and so does every rejected delivery that creates one.
That makes retail-ready work inside the same warehouse network more valuable. Kitting, relabeling, repacking, and display assembly can happen before the product leaves the building, removing handoffs at the point in the season where they are hardest to absorb.
What this means for you: In a tight peak, every extra stop and rejected retail delivery costs more than usual. Have labeling, kitting, and repacking done in the same warehouse that stores your product. Your goods then ship retail-ready the first time, without extra handoffs or chargebacks.
Worth a Conversation
Peak season is arriving all at once. Inventory is about to move to retailers, while warehouse space, trucks, and fuel are all tight and getting more expensive. Shopper demand is also harder to predict than usual. The shippers who come through this well will lock in flexible warehouse space and transportation now, budget for higher freight costs, and make sure their product ships retail-ready the first time.
Connect with our team to talk through capacity, positioning, and retail readiness for the rest of Q4 and into 2027.