Clark, N.J., May 15, 2023 – The GEP Global Supply Chain Volatility Index — a leading indicator tracking demand conditions, shortages, transportation costs, inventories and backlogs — shows that for the first time since June 2020, global supply chain capacity is now underutilized, indicating a shift to a buyers’ market.
Following inventory drawdowns (which are still ongoing) and 10 months of depressed global demand, the GEP Global Supply Chain Volatility Index fell below zero in April to -0.04, from 0.32 in March, a striking contrast from the picture a year ago when GEP’s index stood at 4.61, one of the highest levels of volatility in the 20 years of data.
While global demand for raw materials, commodities and components remains subdued, it is much improved from the trough in December 2022, indicating some stability in the face of consistently high interest rates and a global manufacturing sector under intense pressure.
Lower global input demand is in large part due to organizations’ drawdown of their inventories and safety stocks. Reports of stockpiling items due to price or supply fears are now running below historic norms, indicating that firms’ concerns toward inflation and supplier delivery times have alleviated.
Commenting on the April data, Volker Roelofsen, vice president, supply chain consulting, GEP, said: “After months of companies aggressively destocking, there is now excess capacity in the world’s supply chains, providing buyers with greater leverage to extract favourable prices and terms for the second half of 2023 and into 2024. The good news is that companies’ demand for components and raw materials, while subdued, is holding steady, indicating that central banks are, at least for now, successfully engineering a measured slowdown.”
The key findings from April’s data:
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The GEP Global Supply Chain Volatility Index is produced by S&P Global and GEP. It is derived from S&P Global’s PMI™ surveys, sent to companies in over 40 countries, totaling around 27,000 companies. The headline figure is a weighted sum of six sub-indices derived from PMI data, PMI Comments Trackers and PMI Commodity Price & Supply Indicators compiled by S&P Global.
A Supply Chain Volatility Index is also published at a regional level for Europe, Asia, North America and the U.K. For more information about the methodology, click here.
GEP® delivers transformative supply chain solutions that help global enterprises become more agile and resilient, operate more efficiently and effectively, gain competitive advantage, boost profitability and increase shareholder value. Fresh thinking, innovative products, unrivaled domain expertise, smart, passionate people — this is how GEP SOFTWARE™, GEP STRATEGY™ and GEP MANAGED SERVICES™ together deliver supply chain solutions of unprecedented scale, power and effectiveness. Our customers are the world’s best companies, including more than 550 Fortune 500 and Global 2000 industry leaders who rely on GEP to meet ambitious strategic, financial and operational goals. A leader in multiple Gartner Magic Quadrants, GEP’s cloud-native software and digital business platforms consistently win awards and recognition from industry analysts, research firms and media outlets, including Gartner, Forrester, IDC, ISG, and Spend Matters. GEP is also regularly ranked a top supply chain consulting and strategy firm, and a leading managed services provider by ALM, Everest Group, NelsonHall, IDC, ISG and HFS, among others. Headquartered in Clark, New Jersey, GEP has offices and operations centers across Europe, Asia, Africa and the Americas. To learn more, visit www.gep.com.
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