A newly released report from GEP has found the Supply Chain Volatility Index decreased again in October with no end in sight for supply chain underutilization.
The GEP Global Supply Chain Volatility Index – which tracks demand conditions, shortages, transportation costs, inventories and backlogs based on surveys of more than 27,000 companies – found that the index fell from -0.34 in September to -0.41 in October. It was the seventh successive month of rising spare capacity across the world’s supply chains, GEP said. The extent to which the supply chain was underutilized was greater in October than in September and August, the report said. When combined with a downturn in the demand for raw materials, components and commodities, the report said it indicates a rising slack in the global supply chain.
“While the shrinking of global suppliers’ order books is not worsening, there are no signs of improvement,” Jamie Ogilvie-Smals, vice president of consulting with GEP, said. “The notable increase in supplier capacity in Asia, which was driven by China, provides global manufacturers with greater leverage to drive down prices and inventories in 2024.”
The report said supplier spare capacity is rising in North America, highlight the country’s greater economic resilience and its divergence from Europe. In contrast, Asia’s suppliers have seen the largest rise in idle capacity since June 2020 as the region’s economic resilience fades, and Europe continued to see excess vendor capacity for the seventh consecutive month. Europe has now seen 17 consecutive months of subdued demand.
The report said demand for raw materials remains depressed, and inventories are falling. Reports of material shortages are at their lowest since January 2020, the report said, while labor shortages seems to not be impacting global manufacturers’ capacity to produce.