GLOBAL SUPPLY CHAINS NOW HAVE SPARE CAPACITY FOR THE FIRST TIME SINCE JUNE 2020 AS 10 MONTHS OF SUBDUED DEMAND, INVENTORY DE-STOCKING AND HIGH INTEREST RATES BITE

GEP GLOBAL SUPPLY CHAIN VOLATILITY INDEX

• Although global demand remains subdued, there has been an uptick since December's trough, while the trend actually improved slightly in North America in April, indicating some economic resilience
• Excess supply chain capacity was also driven by global organizations' drawdown of their safety stocks, which have fallen below their historic average for the first time in three years
• Supply chain pressures in Asia ease as the economic rebound from China's reopening peters outs

CLARK, N.J., May 15, 2023 /PRNewswire/ -- The GEP Global Supply Chain Volatility Index — a leading indicator tracking demand conditions, shortages, transportation costs, inventories and backlogs — shows that for the first time since June 2020, global supply chain capacity is now underutilized, indicating a shift to a buyers' market.

Following inventory drawdowns (which are still ongoing) and 10 months of depressed global demand, the GEP Global Supply Chain Volatility Index fell below zero in April to -0.04, from 0.32 in March, a striking contrast from the picture a year ago when GEP's index stood at 4.61, one of the highest levels of volatility in the 20 years of data.

While global demand for raw materials, commodities and components remains subdued, it is much improved from the trough in December 2022, indicating some stability in the face of consistently high interest rates and a global manufacturing sector under intense pressure.

Lower global input demand is in large part due to companies' drawdown of their inventories and safety stocks. Reports of stockpiling items due to price or supply fears are now running below historic norms, indicating that firms' concerns toward inflation and supplier delivery times have alleviated.

Commenting on the April data, Volker Roelofsen, vice president, supply chain consulting, GEP, said: "After months of companies aggressively destocking, there is now excess capacity in the world's supply chains, providing buyers with greater leverage to extract favourable prices and terms for the second half of 2023 and into 2024. The good news is that companies' demand for components and raw materials, while subdued, is holding steady, indicating that central banks are, at least for now, successfully engineering a measured slowdown."