DEMAND FOR MATERIALS AND COMPONENTS REMAINS DEPRESSED, ESPECIALLY IN NORTH AMERICA, AS RECESSION RISK PERSISTS: GEP GLOBAL SUPPLY CHAIN VOLATILITY INDEX
The GEP Global Supply Chain Volatility Index, reported on February 14, 2023, fell to 0.97 in January, marking the lowest volatility since September 2020. Item shortages are decreasing, and transportation costs are normalizing as companies unwind their safety stocks.
Despite these improvements, global demand for raw materials and components remains significantly depressed, particularly in North America, raising persistent recession concerns. The report highlights a continued decline in procurement activity while Asian markets show signs of recovery post-COVID-19 restrictions.
- Global supply chains showing improvement, least stressed since September 2020.
- Item shortages are at their lowest in over two years.
- Transportation costs have normalized.
- Companies are unwinding safety stock buffers.
- Seventh consecutive month of depressed global demand for raw materials.
- Demand downturn most severe in North America, indicating recession risk.
- Global supply chain volatility now at its lowest level since
September 2020 - Item shortages continue to ease; transportation costs normalize; and businesses unwind safety stocks
- Businesses continue to reduce input purchases, with demand downturn the most severe in
North America
January's data shows that item shortages are at their lowest in over two years; transport costs have broadly normalized; and companies are making progress in unwinding their inventory and safety stock buffers, which have been built up significantly in the past few years.
However, GEP's Index shows that January is the seventh straight month of depressed global demand for the raw materials, commodities and other components needed to provide finished goods and services. Demand is the lowest in
Commenting on the latest results,
The key findings from January's report:
- DEMAND: Global demand for components, raw materials, commodities and items companies require to provide goods and services remains subdued, resulting in low new order intakes at suppliers. Suppliers to
North America continue to report the strongest drop in demand. In contrast, input demand acrossAsia is less suppressed following the relaxation of COVID-19 restrictions inChina .
- INVENTORIES: Global business reports of safety stockpiling are back down as concerns over future supply and pricing ease.
- LABOR SHORTAGES: Labor shortages are having less of an adverse effect on supplier capacity.
- MATERIAL SHORTAGES: Business reports of item shortages are at their lowest since
October 2020 as global supply and demand forces rebalance.
- TRANSPORTATION: Global transportation costs are normalizing as pressures on shipping, rail, air and road freight soften.
- REGIONAL SUPPLY CHAIN VOLATILITY:
Europe remains the greatest pinch-point for suppliers. Supply chains connected toNorth America are the least stretched globally.
Note: Full historic data going back to
About The GEP Global Supply Chain Volatility Index
The GEP Global Supply Chain Volatility Index is produced by
The headline figure is the GEP Global Supply Chain Volatility Index. This a weighted sum of six sub-indices derived from PMI data, PMI Comments Trackers and PMI Commodity Price & Supply Indicators compiled by
The GEP Global Supply Chain Volatility Index is calculated using a weighted sum of the z-scores of the six indices. Weights are determined by analyzing the impact each component has on suppliers' delivery times through regression analysis.
The six variables used are 1) JP Morgan Global Quantity of Purchases Index, 2) All Items Supply Shortages Indicator, 3) Transport Price Pressure Indicator, and Manufacturing PMI Comments Tracker data for 4) stockpiling due to supply or price concerns, and backlogs rising due to 5) staff shortages and 6) item shortages.
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
For more information on PMI surveys, PMI Comments Trackers and PMI Commodity Price & Supply Indicators, or the GEP Supply Chain Volatility Index methodologies, please contact economics@spglobal.com.
About GEP
GEP® delivers transformative 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 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 supply chain consulting and strategy firm, and a leading managed services provider by ALM,
About
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.
About PMI
Purchasing Managers' Index™ (PMI™) surveys are now available for over 40 countries and also for key regions including the eurozone. They are the most closely watched business surveys in the world, favored by central banks, financial markets and business decision-makers for their ability to provide up-to-date, accurate and often unique monthly indicators of economic trends.
Media Contact | ||
|
|
|
Disclaimer
The intellectual property rights to the data provided herein are owned by or licensed to
This Content was published by
View original content to download multimedia:https://www.prnewswire.com/news-releases/demand-for-materials-and-components-remains-depressed-especially-in-north-america-as-recession-risk-persists-gep-global-supply-chain-volatility-index-301746536.html
SOURCE GEP