- North American suppliers struggling to meet orders due to a
lack of staff
- Manufacturing recession in Europe eases in March, but steep downturn in
Germany remains a major drag on
the continent
- Despite Red Sea and Panama Canal disruptions, transportation
costs and stockpiling fell in March because of decreases in
container rates
CLARK, N.J., April 12, 2024 /PRNewswire/ -- The GEP Global
Supply Chain Volatility Index — a leading indicator tracking
demand conditions, shortages, transportation costs, inventories and
backlogs based on a monthly survey of 27,000 businesses — fell for
the first time this year to -0.32 in March, from February's
10-month high of -0.08. While this does signal a pickup in the
level of spare capacity at global suppliers, underlying data show
this was due to global manufacturers using up inventory surpluses,
some of which were accumulated because of Red Sea and Panama Canal
disruptions, and cutting back on stockpiling activity, with
companies displaying a preference to clear stocks before placing
bumper orders with their vendors.
Continuing the year-to-date trend, demand for raw materials,
commodities and components continued to recover in March. Notably,
Asia was the primary driver of
this improvement, led by India and
China, with factories across the
region boosting their purchases of inputs by the strongest degree
since December 2021. Given
Asia's importance to global
production, this provides a strong indication of future growth for
the wider manufacturing economy.
Notably, North American suppliers experienced difficulties in
meeting orders, as backlogs of work due to a lack of staff
increased. This suggests a strong pipeline of orders for the coming
months.
In Europe, the slowest decline
in input demand for a year provides evidence of the continent's
industrial recession easing. However, the continued struggles of
manufacturers in Germany remained
a considerable drag.
Global transportation costs fell to their lowest level since
last December as the diminishing impact of the Suez Canal
disruption led container rates to decline. Our data shows no
discernable impact to the world's supplies from either the Red Sea
attacks or from reduced capacity on the Panama Canal, as businesses
adjusted to longer delivery schedules.
"In March, orders placed with Asia's suppliers ramped up, which is a strong
signal of accelerating growth in manufacturing in the coming
months," explained Roopa Makhija,
president and co-founder, GEP. "In North America, suppliers are
reporting difficulties meeting orders due to staff shortages,
signaling capacity constraints, even though input demand declined
slightly. This does mean that manufacturers have strong pipelines
which undermines the Fed's expressed desire to cut interest rates,
at least in the near-term."
Interpreting the data:
- Index > 0, supply chain capacity is being stretched. The
further above 0, the more stretched supply chains are.
- Index < 0, supply chain capacity is being
underutilized. The further below 0, the more
underutilized supply chains are.
MARCH 2024 KEY FINDINGS
- DEMAND: Global demand for raw materials, commodities and
components edged closer to its long-term average in March,
signaling recovery in the global manufacturing industry.
Asia was the primary driver of
this positive trend, with purchasing activity across the region
rising at the strongest pace in over two years.
- INVENTORIES: There was a sharp reversal in global
businesses' inventories in March, partly reflecting the winding
down of surpluses built up because of the Red Sea disruption.
Reports of safety stockpiling were at their lowest since
November 2019, before the
pandemic.
- MATERIAL SHORTAGES: Reports of item shortages remained
among the lowest seen in four years.
- LABOR SHORTAGES: There continued to be evidence of
growing staffing capacity constraints in March, particularly in
Europe and North America, as global reports of
manufacturing backlogs rising because of labor shortages were their
highest since last August.
- TRANSPORTATION: Global transport costs fell to their
lowest in the year to date in March as the impact on supply chains
from the Red Sea disruption receded.
REGIONAL SUPPLY CHAIN VOLATILITY
- NORTH AMERICA: Index
fell to -0.31, from 0.17, signaling a renewed increase in spare
capacity following the uptick in pressure in February. This
reflected a reduction in inventories, alleviating some strain on
the region's vendors.
- EUROPE: Index fell
to -0.62, from -0.41. Albeit down on the month, the index is much
higher than it was at the end of 2023. Still, recession in
Germany's manufacturing economy is
weighing on the continent.
- U.K.: Index rose further in March to -0.17, from
-0.34, its highest level in a year and signaling a shrinking amount
of spare capacity across the U.K.'s supply chains.
- ASIA: Index
little-changed at -0.07, down only narrowly from -0.02. Overall,
the index points to Asian suppliers operating at close to full
capacity as regional input demand grew at the fastest pace for over
two years.
For more information, visit www.gep.com/volatility.
Note: Full historical data dating back to January 2005 is available for subscription.
Please contact economics@spglobal.com.
The next release of the GEP Global Supply Chain Volatility
Index will be 8 a.m. ET, May 13, 2024.
About the GEP Global Supply Chain Volatility Index
The GEP Global Supply Chain Volatility Index is produced by
S&P Global and GEP. It is derived from S&P Global's PMI®
surveys, sent to companies in over 40 countries, totaling around
27,000 companies. The headline figure is 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.
- 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 U.K. For more information about the
methodology, click here.
About GEP
GEP® delivers AI-powered procurement and 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 procurement and 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 procurement and 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.
About S&P Global
S&P Global (NYSE: SPGI) S&P Global provides essential
intelligence. We enable governments, businesses and individuals
with the right data, expertise and connected technology so that
they can make decisions with conviction. From helping our customers
assess new investments to guiding them through ESG and energy
transition across supply chains, we unlock new opportunities, solve
challenges and accelerate progress for the world. We are widely
sought after by many of the world's leading organizations to
provide credit ratings, benchmarks, analytics and workflow
solutions in the global capital, commodity and automotive markets.
With every one of our offerings, we help the world's leading
organizations plan for tomorrow, today.
Disclaimer
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