DEMAND FOR COMPONENTS AND RAW MATERIALS IMPROVES IN ASIA, PUSHING UP SUPPLY AND INFLATIONARY PRESSURES GEP GLOBAL SUPPLY CHAIN VOLATILITY INDEX
- Global demand remains depressed, but trend improving in North America and Asia
- Global supply chain volatility continues to recede. Now at its lowest level since August 2020
- Item shortages are minimal, and businesses unwind their safety stocks to make inventories leaner
CLARK, N.J., March 13, 2023 /PRNewswire/ -- The GEP Global Supply Chain Volatility Index — a leading indicator tracking demand conditions, shortages, transportation costs, inventories and backlogs — improved further in February to 0.48, from 0.97 in January, indicating the lowest level of stress across the world's supply chains since August 2020.
Demand for raw materials and components, while remaining depressed, especially in the U.K., eased in February in North America. Notably, procurement and supply managers in Asia are reporting an uplift in purchasing for the first time since July 2022.
Commenting on the February data, Michael Seitz, vice president of consulting, GEP Asia, said: "The world's supply chains are much improved and now operating very efficiently. 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."
The key findings from February's data:
DEMAND: Global demand for components, raw materials, commodities, and items that companies require for their goods and services remains depressed, but the trend improved during February as
procurement leaders in Asia increased purchasing.
INVENTORIES: Notably, global companies are unwinding their safety stocks as falling lead times, improved material supplies and an uncertain economic outlook prompt more businesses to make
inventories leaner. Reports of stockpiling are now at their lowest in two-and-a-half years.
LABOR SHORTAGES: Labor shortages are having little adverse effect on supplier capacity, indicating that staffing levels are sufficient to deal with workloads and demand.
MATERIAL SHORTAGES: Business reports of item shortages are at their lowest since September 2020 as global supply and demand forces become more aligned.
TRANSPORTATION: Global transportation costs have normalized and remain stable due to lower pressures on shipping, rail, air, and road freight.