- Global suppliers report capacity pressures, with index in
positive territory for a second consecutive month
- Asian manufacturing growth accelerating in China, Taiwan, Vietnam and India
- In contrast, demand at North American suppliers fell
slightly because of lower orders, indicating a tightening
economy
- Transportation costs rise to 20-month high, as greater
activity drives up shipping and container rates
CLARK, N.J., July 12, 2024 /PRNewswire/ -- For the second
consecutive month, 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 — continued in positive
territory. This indicates another month where global supply chains
got busier and capacity was stretched across suppliers worldwide.
At 0.13, the index was little-changed from May's 14-month high of
0.21.
At the forefront of supply chain activity growth is Asia, where input demand jumped as factory
activity in major manufacturing and exporting economies — led by
China, Taiwan, Vietnam and India — accelerated.
In contrast to Asia, which has
seen steady month-over-month growth since April, North America's suppliers oscillate between
under- and overutilized capacity. In June, factory input demand
fell slightly, with suppliers experiencing reduced demand. However,
on average since the start of 2024, North American vendors have
generally been operating at full capacity.
The European market is still operating with some slack as
factory purchasing activity across the continent remains subdued.
This suggests the region's manufacturing recovery still has a way
to go, though conditions have vastly improved compared with the end
of last year.
An early warning sign of potential overheating ahead is global
transportation costs, which rose to their highest level since
October 2022 in June as strengthening
activity across global supply chains led to higher shipping and
container rates. For now, reports of safety stockpiling remain low,
suggesting the market is well placed in a "goldilocks" zone and
stress levels are subdued.
"Asian manufacturers are gaining momentum, which, if sustained
into the second half of the year, will mean a return of increasing
costs and price pressures for global companies," explained
Amol Jawale, vice president,
consulting, GEP. "Now is the perfect time for a company's
procurement to lock in pricing with key suppliers for 2025."
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.
JUNE 2024 KEY FINDINGS
- DEMAND: Global demand for raw materials, commodities and
components is now trending broadly level with its long-term
average, indicating that global manufacturing has moved toward an
upswing in the business cycle. Asia remains at the forefront of this upturn,
led by India, China, Taiwan
and Vietnam.
- INVENTORIES: The inventory cycle has stabilized, with
firms neither building up stocks excessively nor aggressively
destocking to improve cashflow and cut costs.
- MATERIAL SHORTAGES: Global reports from businesses of
items in short supply remain anchored at historically typical
levels.
- LABOR SHORTAGES: As was the case in May, reports from
global suppliers of an inability to meet orders due to staff
shortages were more common than seen historically on average. This
suggests capacity expansion is required to sustainably meet current
and future demand.
- TRANSPORTATION: Global transportation costs rose to a
20-month high in June, with shipping and container rates under
pressure because of increasing supply chain activity.
REGIONAL SUPPLY CHAIN VOLATILITY
- NORTH AMERICA: Index
fell to -0.11, from 0.09, down slightly from May's three-month
high. The index has fluctuated between positivity and negativity
this year but signals full capacity utilization on average in
2024.
- EUROPE: Index
unchanged from May's 14-month high of -0.13. There continues to be
some slack across Europe's
manufacturing sector, although it is much reduced from 2023
levels.
- U.K.: Index rose to 0.49, from 0.15, signaling
strongest capacity pressures since January
2023.
- ASIA: Index rose
further in June to 0.35, from 0.19, a 16-month high, as Asian
supply chains became busier amid strengthening factory activity in
major markets such as China,
Vietnam, Taiwan and India.
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, August 12, 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
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