[cs_content _p=’4041′][cs_element_section _id=”1″ ][cs_element_layout_row _id=”2″ ][cs_element_layout_column _id=”3″ ][cs_element_text _id=”4″ ][cs_content_seo]The GEP Global Supply Chain Volatility Index, a key indicator of supply chain activity based on a survey of 27,000 businesses, has stayed in positive territory for the second month in a row, signaling increased global supply chain activity and capacity pressures. The index, standing at 0.13, highlights the significant role of Asian manufacturing growth, particularly in China, Taiwan, Vietnam, and India, in driving this trend.
Asian Manufacturing Surge
Asia has been at the forefront of supply chain growth, with factory activity in major economies accelerating since April. This growth has led to increased input demand and stretched supply chain capacity across the region. The surge in manufacturing activity in China, Taiwan, Vietnam, and India has been particularly notable, contributing to the overall positive outlook for global supply chains.
North American and European Markets
In contrast, North America has experienced fluctuating demand, with June seeing a slight decline in factory input demand. Despite this, North American suppliers have generally operated at full capacity throughout 2024. The European market, while showing signs of recovery, continues to operate with some slack in factory purchasing activity, indicating a slower rebound compared to Asia.
Rising Transportation Costs
An early warning sign of potential overheating in global supply chains is the rise in transportation costs, which reached a 20-month high in June. This increase in shipping and container rates is driven by the heightened activity in global supply chains, suggesting that companies should be prepared for higher logistics expenses in the coming months.
Key Findings from the GEP Index
Demand: Global demand for raw materials and components is trending towards a long-term average, led by strong growth in Asia.
Inventories: Firms have stabilized inventory levels, avoiding excessive stockpiling or aggressive destocking.
Material and Labor Shortages: Reports of shortages remain at historically typical levels, with labor shortages indicating a need for capacity expansion.
Transportation Costs: Shipping and container rates are under pressure due to increased supply chain activity.
Regional Insights
North America: The index fell to -0.11, indicating fluctuating demand but overall full capacity utilization.
Europe: The index remained at -0.13, showing ongoing recovery with reduced slack compared to 2023.
U.K.: The index rose to 0.49, signaling the strongest capacity pressures since January 2023.
Asia: The index increased to 0.35, highlighting significant growth in manufacturing and supply chain activity.
Future Implications for Asian Markets
Amol Jawale, vice president of consulting at GEP, suggests that companies in Asia should lock in pricing with key suppliers for 2025 to manage rising costs and price pressures. This advice is particularly relevant as Asian manufacturers gain momentum, which could lead to increased costs and price pressures for global companies.
About the GEP Global Supply Chain Volatility Index
The GEP Global Supply Chain Volatility Index is produced by S&P Global and GEP, tracking demand conditions, shortages, transportation costs, inventories, and backlogs. A value above 0 indicates stretched supply chain capacity, while a value below 0 indicates underutilization. The index provides valuable insights into regional supply chain activities, helping businesses anticipate and respond to market changes.
About GEP
GEP delivers AI-powered procurement and supply chain solutions, helping global enterprises become more agile and resilient. With a focus on innovation and efficiency, GEP supports over 550 Fortune 500 and Global 2000 companies in achieving strategic, financial, and operational goals. Headquartered in Clark, New Jersey, GEP has a global presence with offices and operations centers across Europe, Asia, Africa, and the Americas.\n\n[/cs_content_seo][/cs_element_layout_column][/cs_element_layout_row][/cs_element_section][/cs_content]
