CLARK, N.J., — The GEP Global Supply Chain Volatility Index — a leading indicator tracking demand conditions, shortages, transportation costs, inventories and backlogs — fell to 0.97 in January, from 1.61 in December, showing that global supply chains continue to improve and are the least stressed since September 2020.
January’s data shows that item shortages are at their lowest in over two years; transport costs have broadly normalized; and companies are making progress in unwinding their inventory and safety stock buffers, which have been built up significantly in the past few years.
However, GEP’s Index shows that January is the seventh straight month of depressed global demand for the raw materials, commodities and other components needed to provide finished goods and services. Demand is the lowest in North America, signalling a persistent recession risk.
Commenting on the latest results, Mike Jette, GEP’s vice president of consulting, said: “Though supplier capacity does remain somewhat stretched, we are much closer to normal operating conditions across the world’s supply chains. The concern going forward is continuing weakness in demand, but it provides corporate procurement with significant leverage to secure better pricing and favorable terms.”
The key findings from January’s report:
DEMAND: Global demand for components, raw materials, commodities and items companies require to provide goods and services remains subdued, resulting in low new order intakes at suppliers. Suppliers to North America continue to report the strongest drop in demand. In contrast, input demand across Asia is less suppressed following the relaxation of COVID-19 restrictions in China.
INVENTORIES: Global business reports of safety stockpiling are back down as concerns over future supply and pricing ease.
LABOR SHORTAGES: Labor shortages are having less of an adverse effect on supplier capacity.
MATERIAL SHORTAGES: Business reports of item shortages are at their lowest since October 2020 as global supply and demand forces rebalance.
TRANSPORTATION: Global transportation costs are normalizing as pressures on shipping, rail, air and road freight soften.
REGIONAL SUPPLY CHAIN VOLATILITY: Europe remains the greatest pinch-point for suppliers. Supply chains connected to North America are the least stretched globally.
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