Clark, N.J., June 13, 2023 – The GEP Global Supply Chain Volatility Index — a leading indicator tracking demand conditions, shortages, transportation costs, inventories and backlogs — indicates that global suppliers now have the greatest level of spare capacity since the height of the COVID-19 pandemic three years ago.
The GEP Global Supply Chain Volatility Index, based on data derived from a monthly survey of 27,000 businesses, fell further below zero in May to -0.28, down from -0.04 in April, its lowest level since May 2020. The difference compared to a year ago, when the index recorded 4.72 — one of the highest levels of stress on global supply chains in two decades of data — is striking.
Global demand for raw materials and components worsened during May, especially across Europe, showing fresh signs of economic weakness. Falling demand for raw materials and improved supply has drastically reduced the need for businesses to stockpile items, with companies continuing to de-stock after building up huge excesses of inventory between 2020 and 2022.
Most telling, for the first time since August 2020, suppliers in Asia saw spare capacity rise. GEP’s Supply Chain Volatility Index for Asia had avoided falling below zero up until May because of the bump in economic activity following China’s reopening. It has since petered out and suppliers have caught up with their backlogs. In Europe and North America, vendor capacity went underutilized by an even larger degree than in April.
Commenting on the May data, Pramod Gupta, vice president, supply chain consulting, GEP, said: “As a result of the gradual managed slowdown in economies worldwide, companies continue to aggressively draw down inventories as they anticipate negotiating lower prices going forward. We expect this buyers’ market to continue through at least the third quarter.”
May 2023 Report Highlights
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The next release of the GEP Global Supply Chain Volatility Index will be 8 a.m. ET, July 14, 2023.
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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