GEP supply chain volatility index continues to decline

The GEP Global Supply Chain Volatility Index – which tracks demand conditions, shortages, transportation costs, inventories, and backlogs – fell to 0.48 points in February, down from 0.97 in January and 1.61 in December.

As global supply chains continue their climb back to respectability, the index reached its lowest point since August 2020. An index value above 0 means supply chains are being stressed, while a value below 0 represents supply chain capacity is being underutilized. The GEP index reached a peak of over 6 points in late 2021.

Global demand for raw materials and components remained depressed in February, though procurement and supply managers in Asia reported an uplift in purchasing for the first time since July 2022.

"The world's supply chains are much improved and now operating very efficiently,” Michael Seitz, vice president of consulting, GEP Asia, said. “For the first time since July 2022, input demand across Asia entered positive territory, with the region reporting healthier supplier order books, which will likely fuel prices and inflation."

Reports of stockpiling, meanwhile, reached their lowest level in two-and-a-half years.

Labor shortages are having little effect on supplier capacity, meaning staffing levels are adequate for workloads and demand.

Item shortages were also at their lowest reported point since September 2020, as supply and demand forces align.

Transportation costs have broadly normalized, with lower pressure on all forms of transport.

Europe remains the largest bottleneck for suppliers, though the UK and North America saw spare capacity increase for the first time since summer 2020.