Global supply chains remain underutilized, GEP report says

17 November 2023 Consulting.us 2 min. read
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Global supply chains continued to be underutilized in October, according GEP’s Global Supply Chain Volatility Index – which tracks demand conditions, shortages, transportation costs, inventories, and backlogs across 27,000 businesses globally.

The global index fell for the seventh consecutive month to reach -0.41 in October, down from -0.35 in September. An index value above 0 indicates supply chains are being stressed, while a value below 0 means supply chain capacity is being underutilized. The GEP index reached a peak of 6+ points in late 2021.

Last month saw the largest rise in excess capacity in Asian supply chains since June 2020, as the region’s economic resilience fades. The index dropped to -0.38 from -0.20 in September, reflecting the slowing momentum of Japan and China’s economies.

“The notable increase in supplier capacity in Asia, which was driven by China, provides global manufacturers with greater leverage to drive down prices and inventories in 2024,” said Jamie Ogilvie-Smals, vice president, consulting, GEP.

Global supply chains remain underutilized, GEP report says

Europe had the seventh successive month of excess vendor capacity in October. Though the region’s index score rose to -0.90 from -1.01 in September, the level of excess capacity is indicative of considerable economic fragility, according to the GEP report.

North America remained a relative bright spot, underpinned by the United States’ resilient economic performance. The region’s score fell marginally to -0.34 from -0.30.

Global purchasing activity fell again in October, with demand for raw materials and components remaining depressed. Companies continued to draw down inventories, signaling cash preservation efforts.

Reports of item shortages remained at their lowest level since January 2020 and worker shortages continued to not materially impact manufacturers’ ability to produce goods. Global transportation costs held steady with September, though oil prices have dropped in recent weeks.