- Global supply chain volatility now at its lowest level since September 2020
- Item shortages continue to ease; transportation costs normalize; and businesses unwind safety stocks
- Businesses continue to reduce input purchases, with demand downturn the most severe in North America
CLARK, N.J., Feb. 14, 2023 /PRNewswire/ -- 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.
Note: Full historic data going back to January 2005 is available; please contact firstname.lastname@example.org.
About The GEP Global Supply Chain Volatility Index
The GEP Global Supply Chain Volatility Index is produced by S&P Global and GEP. The GEP Global Supply Chain Volatility 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 (Source: World Bank World Development Indicators).
The headline figure is the GEP Global Supply Chain Volatility Index. This 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.
The GEP Global Supply Chain Volatility Index is calculated using a weighted sum of the z-scores of the six indices. Weights are determined by analyzing the impact each component has on suppliers' delivery times through regression analysis.
The six variables used are 1) JP Morgan Global Quantity of Purchases Index, 2) All Items Supply Shortages Indicator, 3) Transport Price Pressure Indicator, and Manufacturing PMI Comments Tracker data for 4) stockpiling due to supply or price concerns, and backlogs rising due to 5) staff shortages and 6) item shortages.
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 UK. The regional indices measure the performance of supply chains connected to those parts of the world.
For more information on PMI surveys, PMI Comments Trackers and PMI Commodity Price & Supply Indicators, or the GEP Supply Chain Volatility Index methodologies, please contact email@example.com.
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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Purchasing Managers' Index™ (PMI™) surveys are now available for over 40 countries and also for key regions including the eurozone. They are the most closely watched business surveys in the world, favored by central banks, financial markets and business decision-makers for their ability to provide up-to-date, accurate and often unique monthly indicators of economic trends.
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