• North American suppliers struggling to meet orders due to a lack of staff
• Manufacturing recession in Europe eases in March, but steep downturn in Germany remains a major drag on the continent
• Despite Red Sea and Panama Canal disruptions, transportation costs and stockpiling fell in March because of decreases in container rates

CLARK, N.J., April 12, 2024 -- The GEP Global Supply Chain Volatility Index — a leading indicator tracking demand conditions, shortages, transportation costs, inventories and backlogs based on a monthly survey of 27,000 businesses — fell for the first time this year to -0.32 in March, from February's 10-month high of -0.08. While this does signal a pickup in the level of spare capacity at global suppliers, underlying data show this was due to global manufacturers using up inventory surpluses, some of which were accumulated because of Red Sea and Panama Canal disruptions, and cutting back on stockpiling activity, with companies displaying a preference to clear stocks before placing bumper orders with their vendors.

Continuing the year-to-date trend, demand for raw materials, commodities and components continued to recover in March. Notably, Asia was the primary driver of this improvement, led by India and China, with factories across the region boosting their purchases of inputs by the strongest degree since December 2021. Given Asia's importance to global production, this provides a strong indication of future growth for the wider manufacturing economy.

Notably, North American suppliers experienced difficulties in meeting orders, as backlogs of work due to a lack of staff increased. This suggests a strong pipeline of orders for the coming months.

In Europe, the slowest decline in input demand for a year provides evidence of the continent's industrial recession easing. However, the continued struggles of manufacturers in Germany remained a considerable drag.

Global transportation costs fell to their lowest level since last December as the diminishing impact of the Suez Canal disruption led container rates to decline. Our data shows no discernable impact to the world's supplies from either the Red Sea attacks or from reduced capacity on the Panama Canal, as businesses adjusted to longer delivery schedules.

"In March, orders placed with Asia's suppliers ramped up, which is a strong signal of accelerating growth in manufacturing in the coming months," explained Roopa Makhija, president and co-founder, GEP. "In North America, suppliers are reporting difficulties meeting orders due to staff shortages, signaling capacity constraints, even though input demand declined slightly. This does mean that manufacturers have strong pipelines which undermines the Fed's expressed desire to cut interest rates, at least in the near-term."

Interpreting the data:

• Index > 0, supply chain capacity is being stretched. The further above 0, the more stretched supply chains are.
• Index < 0, supply chain capacity is being underutilized. The further below 0, the more underutilized supply chains are.

MARCH 2024 KEY FINDINGS

• DEMAND: Global demand for raw materials, commodities and components edged closer to its long-term average in March, signaling recovery in the global manufacturing industry. Asia was the primary driver of this positive trend, with purchasing activity across the region rising at the strongest pace in over two years.
• INVENTORIES: There was a sharp reversal in global businesses' inventories in March, partly reflecting the winding down of surpluses built up because of the Red Sea disruption. Reports of safety stockpiling were at their lowest since November 2019, before the pandemic.
• MATERIAL SHORTAGES: Reports of item shortages remained among the lowest seen in four years.
• LABOR SHORTAGES: There continued to be evidence of growing staffing capacity constraints in March, particularly in Europe and North America, as global reports of manufacturing backlogs rising because of labor shortages were their highest since last August.
• TRANSPORTATION: Global transport costs fell to their lowest in the year to date in March as the impact on supply chains from the Red Sea disruption receded.

REGIONAL SUPPLY CHAIN VOLATILITY

• NORTH AMERICA: Index fell to -0.31, from 0.17, signaling a renewed increase in spare capacity following the uptick in pressure in February. This reflected a reduction in inventories, alleviating some strain on the region's vendors.
• EUROPE: Index fell to -0.62, from -0.41. Albeit down on the month, the index is much higher than it was at the end of 2023. Still, recession in Germany's manufacturing economy is weighing on the continent.
• U.K.: Index rose further in March to -0.17, from -0.34, its highest level in a year and signaling a shrinking amount of spare capacity across the U.K.'s supply chains.
• ASIA: Index little-changed at -0.07, down only narrowly from -0.02. Overall, the index points to Asian suppliers operating at close to full capacity as regional input demand grew at the fastest pace for over two years.

For more information, visit www.gep.com/volatility.

Note: Full historical data dating back to January 2005 is available for subscription. Please contact economics@spglobal.com.

The next release of the GEP Global Supply Chain Volatility Index will be 8 a.m. ET, May 13, 2024.

About the GEP Global Supply Chain Volatility Index

The GEP Global Supply Chain Volatility Index is produced by S&P Global and GEP. It is derived from S&P Global's PMI® surveys, sent to companies in over 40 countries, totaling around 27,000 companies. The headline figure is a weighted sum of six sub-indices derived from PMI data, PMI Comments Trackers and PMI Commodity Price & Supply Indicators compiled by S&P Global.

• 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 Europe, Asia, North America and the U.K. For more information about the methodology, click here.

About GEP

GEP® delivers AI-powered procurement and 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 procurement and 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 procurement and supply chain consulting and strategy firm, and a leading managed services provider by ALM, Everest Group, NelsonHall, IDC, ISG and HFS, among others. Headquartered in Clark, New Jersey, GEP has offices and operations centers across Europe, Asia, Africa and the Americas. To learn more, visit www.gep.com.

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