GEP supply chain volatility index jumps amid safety stockpiling

20 January 2023 Consulting.us 1 min. read
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The GEP Global Supply Chain Volatility Index – which tracks demand conditions, shortages, transportation costs, inventories and backlogs – jumped to 1.61 in December 2022.

The 0.46-point increase from November was driven by greater safety stockpiling and continuing labor shortages. The GEP index score – which is derived from S&P Global PMI surveys sent to 27,000 companies in 40+ countries – has seen a steady decline since its more than 6.0-point peak in late 2021.

More businesses have been stockpiling inventories, particularly in North America and Europe, in response to a resurgence of Covid-19 in China and increased concerns over future supply and pricing. 

GEP Global Supply Chain Volatility Index

The December index report found that global shortages are at their lowest level since September 2020 as suppliers continue to adjust to market conditions. Easing demand has reduced competition for items.

The GEP report found declining demand for raw materials, commodities, and other components needed for finished goods, reflecting the growing risk of a recession.

Transportation costs in December were also at their lowest level in two years, reflecting weaker pressure on shipping, train, air, and road freight.

"We are shifting from a sellers' to a buyers' market, and companies should be pushing back hard on all price increases from their suppliers, which will continue to drive down inflation. Falling demand signals the increasing likelihood of a global recession in the first half of 2023," John Piatek, GEP's vice president of consulting, said.