- Excess global supply chain capacity shrinks to its lowest
level in nine months, showing the first signs of recovery in global
manufacturing
- Demand for raw materials, commodities and components, while
subdued, also trends higher in January
- Asian supply chains at their busiest in nearly a year as
factory purchasing rebounds in region's key markets
CLARK, N.J., Feb. 13, 2024 /PRNewswire/ -- The GEP Global
Supply Chain Volatility Index — a leading indicator tracking
demand conditions, shortages, transportation costs, inventories and
backlogs based on a monthly survey of 27,000 businesses — rose to
-0.12 in January, from -0.44 in December, its highest level since
last April, indicating that spare capacity across global supply
chains has shrunk notably.
Although this is the ninth successive month of excess capacity
at global suppliers, the downturn eased to its weakest since last
April. The index suggests that underlying trading conditions may be
starting to improve as recession and inflation fears fade and
businesses prepare for a stronger 2024.
The most noteworthy impact from the Red Sea disruption was to
transportation costs, which rose to a 15-month high in January, as
commercial ships took the lengthier route around the Cape of Good
Hope. There was also a slight pick-up in safety stockpiling, with
reports from businesses of inventory building due to supply or
price fears at the highest since last June. That said, they were
well below the levels seen in 2021-2022 during the post-pandemic
supply crunch.
Regionally, Asia's supply
chains were at their busiest in nearly a year as factory purchasing
activity in China, South Korea and India rebounded, suggesting manufacturers
there are gearing up for growth. In a similar vein, suppliers to
North America and Europe saw their spare capacity shrink during
January. Less slack was also seen for the U.K.'s suppliers, who
have experienced subdued demand for 19 consecutive months.
"The world's supply chains got busier in January, and activity
at our global manufacturing clients is ticking up," explained
Daryl Watkins, senior director,
consulting, GEP.
"With input demand trending higher, led by Asia, signalling a return to positive growth
in the coming months, it is imperative business keeps tamping down
suppliers' price increases so inflation continues to trend down,"
said Watkins, summarizing the implications.
JANUARY 2024 KEY
FINDINGS
- DEMAND: Purchases of raw materials, commodities and
components remained subdued, although the decline eased to its
weakest since last April, hinting at improving demand.
- INVENTORIES: Reports of safety stockpiling due to supply
or price concerns ticked up to a seven-month high in January as
disruption through the Suez Canal led some companies to build up
inventory buffers.
- MATERIAL SHORTAGES: Global supply conditions remain
healthy — reports of item shortages remain among the lowest seen in
four years.
- LABOR SHORTAGES: Labor availability remains
unproblematic for global suppliers, with reports of backlogs rising
due to a lack of staff holding close to historically typical
levels.
- TRANSPORTATION: Global transportation costs rose to a
15-month high in January, signalling some contagion from the
disruption to shipping through the Suez Canal.
REGIONAL SUPPLY CHAIN VOLATILITY
- NORTH AMERICA: Index
rose to -0.33, from -0.39, indicating the 10th consecutive month of
underutilized supplier capacity.
- EUROPE: Index rose
to -0.63, from -0.92, the lowest level of excess vendor capacity in
five months.
- U.K.: Index rose to -0.62, from -1.05, showing spare
capacity at U.K. suppliers almost halving, which is a positive sign
after 19 consecutive months of subdued input demand.
- ASIA: Index rose to
0.14, from -0.42, indicating the strongest pressure on the region's
supply chains in almost a year amid improving demand in key
exporting nations.
For more information, visit www.gep.com/volatility.
Note: Full historical data dating back to January 2005 is available for subscription.
Please contact economics@spglobal.com.
The next release of the GEP Global Supply Chain Volatility
Index will be 8 a.m. ET, March 13, 2024.
About the GEP Global Supply Chain Volatility Index
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 value above 0 indicates that supply chain capacity is being
stretched and supply chain volatility is increasing. The further
above 0, the greater the extent to which capacity is being
stretched.
- A value below 0 indicates that supply chain capacity is being
underutilized, reducing supply chain volatility. The further below
0, the greater the extent to which capacity is being
underutilized.
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.
About GEP
GEP® delivers AI-powered procurement and 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
procurement and 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 procurement and 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.
About S&P Global
S&P Global (NYSE: SPGI) S&P Global provides essential
intelligence. We enable governments, businesses and individuals
with the right data, expertise and connected technology so that
they can make decisions with conviction. From helping our customers
assess new investments to guiding them through ESG and energy
transition across supply chains, we unlock new opportunities, solve
challenges and accelerate progress for the world. We are widely
sought after by many of the world's leading organizations to
provide credit ratings, benchmarks, analytics and workflow
solutions in the global capital, commodity and automotive markets.
With every one of our offerings, we help the world's leading
organizations plan for tomorrow, today.
Disclaimer
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distributing, transmitting or otherwise of any data appearing is
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Phone: +1 732-382-6565
Email: derek.creevey@gep.com
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Joe Hayes
Principal Economist
S&P Global Market Intelligence
T: +44-1344-328-099
joe.hayes@spglobal.com
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