GEP: Global supply chains near full capacity for first time in nearly a year

15 March 2024 Consulting.us 2 min. read
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Global supply chains approached full capacity for the first time in nearly a year, according to the February edition of the GEP Global Supply Chain Volatility Index.

The global index score rose to -0.08 in February from -0.12 in January, as input demand began to recover across all major markets after nearly two years of decline due to destocking and high inflation.

GEP’s monthly survey tracks 27,000 businesses globally to measure demand conditions, shortages, transportation costs, inventories, and backlogs. An index value above 0 indicates supply chains are being stressed, while a value below 0 means supply chain capacity is being underutilized.

There was evidence of inventory building in North America as manufacturers prepare for growth. The North American index score rose to 0.17 from -0.33 in January, with capacity at suppliers stretched for the first time since March 2023.

GEP: Global supply chains near full capacity for first time in nearly a year

Europe’s index rose to -0.41 from -0.63, though the continent continues to experience economic stress. Factory purchasing in Europe remained depressed amid an ongoing recession in Germany’s manufacturing sector.

Asia’s index dropped slightly to -0.02 from 0.14, as sharp manufacturer purchasing growth in India failed to offset weaker demand in Japan, Vietnam, and Taiwan.

“Globally in February, we saw supply chains being more utilized, suppliers are busier, and input demand and manufacturing are turning the corner after nearly a year of low-capacity utilization,” said Mukund Acharya, vice president, consulting, GEP. “Suppliers to North America were the busiest globally last month, spurred by the Inflation Reduction Act and Bipartisan Infrastructure Law driving economic activity in construction, semi-conductors, and renewables.”

The GEP report found the Red Sea attacks have had a negligible impact on supply chains thus far. Though there was an uptick in transportation costs in January, costs fell in February.

Meanwhile, after reaching a seven-month high in January, reports of safety stockpiling also fell in February.

Reports of labor shortages remained at historically typical levels.