It May be Time to Lock in Prices with Suppliers for 2024 As Demand for Raw Materials and Components is Rebounding

Supply chain volatility is now at its lowest since mid-2020. Moreover, green shoots are showing as demand improves in the United States, the European Union, and especially Asia, according to the March indicators of the GEP Global Supply Chain Volatility Index.

Demand by purchasing managers in Asia, specifically in China and India, for components and raw materials is rising strongly. While in the U.S. and Europe, demand, while still subdued, is now also improving – despite high inflation and interest rate – suggesting companies are past the trough seen in late 2022.

Interpretating the data:

• When the SCVI > 0, supply chain capacity is being stretched. The further above 0, the more stretched supply chains are.
• When the SCVI < 0, supply chain capacity is being underutilized. The further below 0, the more underutilized supply chains are.

What Does GEP Global Supply Chain Volatility Index’s March 2023 Data Tell Us?

• Muted demand for components and raw materials since September 2022 has enabled companies to resolve material shortages, backlogs and stockpiling.
• Businesses are cutting down on safety stocks as supplier lead times shorten and there is lesser worry around rising pricing and supply disruptions. In fact, safety stockpiling is reportedly at its lowest since July 2020.
• Labor shortages have had little adverse impact on suppliers. This shows current employee numbers are adequate to cope with the growing demand.
• Item shortages reported by businesses are at their lowest since September 2020.
• Transportation costs have slipped below their long-term average with the easing of pressure on shipping, railroad, air freight and road freight.
• Supply chains in the U.K. lag other regions and are not operating as efficiently.

What Does This Mean?

Right now, it’s a buyers’ market and the ideal time to lock-in prices and terms. Decreased demand has helped resolve supply issues of materials as well as labor shortages and stockpiling. Now that there are early signs of improving demand, despite high interest rates, this is the ideal time for companies to lock in prices and key terms with suppliers and logistics companies for the coming months and even the coming year, because if demand continues to rise, prices will likely increase in step.

Learn more and request the full report at www.gep.com/volatility

About the GEP Global Supply Chain Volatility Index

The index is derived from S&P Global’s PMI™ surveys, sent to companies in over 40 countries, totaling around 27,000 companies. These countries account for 89% of global gross domestic product (GDP) (source: World Bank World Development Indicators).