The latest report on the GEP Global Supply Chain Volatility Index reveals a notable uptick in February, indicating a shift in demand conditions, shortages, transportation costs, inventories and backlogs across global supply chains.
In February, the index rose further, reaching -0.08 from January’s -0.12. This marks the highest level in 10 months, signifying a resurgence in capacity pressures after nearly a year of declining supplier activity. Despite the underutilization of global supplier capacity, the trend suggests a shift towards greater demand and utilization of resources.
Recovery in global demand
Global demand for raw materials, commodities and components showed signs of recovery last month. This comes after almost two years of decline due to destocking and high inflation. Moreover, input demand in Asia was stable, which signals restocking and economic resilience across the region. Similarly, signs of inventory building in North America signal manufacturers’ readiness for growth.
Minimal impact of Red Sea attacks
The GEP Global Supply Chain Volatility Index revealed the minimal impact of tensions in the Red Sea on global supply chains. GEP notes that the most prominent effect of tensions in the region was on transportation costs in January. However, global logistics costs fell during February.
“Globally in February, we’re seeing supply chains being more utilized, suppliers are busier, and input demand and manufacturing are turning a corner after nearly a year of low capacity utilization,” explained Mukund Acharya, vice president, consulting, GEP.
Key findings
The GEP Global Supply Chain Volatility Index revealed some key findings for February 2024. Despite global demand for raw materials, commodities and components being relatively weak by historical standards, the decline halted with signs of improvement across major markets.
When it comes to inventory, the GEP Global Supply Chain Volatility Index revealed that it reached a seven-month high in January as the Suez Canal disruption led to an increase in safety stockpiling. However, reports of firms building inventory buffers to protect against shortages or price changes declined in February. Moreover, reports of item shortages revealed that the shortage levels remained among the lowest in four years.
Regarding labor shortages, there was an increase in the frequency of global manufacturers reporting shortages. Meanwhile, reports of poor labor recorded the highest levels in six months but remained slightly above historical levels.
Finally, global transportation costs saw a decrease in February. This indicates a decline in the impact of disruption to shipping through the Suez Canal on global supply chains.
Read: Dubai CommerCity sees 158 percent jump in orders fulfilled digitally in 2023
Regional supply chain volatility
In North America, the GEP Global Supply Chain Volatility Index increased to 0.17, its highest since January 2023. This indicates an increase in supplier capacity and near-term production growth for manufacturers. Meanwhile, in Europe, the index increased from -0.63 to -0.41, indicating a remarkable improvement despite the economic stress the continent is facing. In Asia, the index stabilized at -0.02, falling slightly from 0.14 in January. The increase in manufacturer purchasing growth in India balanced the weak demand in Japan, Vietnam, and Taiwan.
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