The latest data from the GEP Global Supply Chain Volatility Index, which is an indicator tracking demand conditions, shortages, transportation costs, inventories and backlogs, shows the world’s supply chains have improved since the height of the pandemic in 2020.
In fact, it states the Volatility Index fell to 0.32 in March 2023, from 0.48 in February, signalling the lowest level of stress on the world’s supply chains since July 2020.
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The index, which is produced by S&P Global and GEP, states that although global demand for raw materials and components remains subdued, there are positive signs of improvement, particularly in Asia where purchasing managers increased orders for components in March.
China and India were the main drivers behind the surge. In the US and Europe, demand for raw materials and components is no longer falling as rapidly as companies have successfully drawn down some of their excess warehoused stocks.
According to Binayak Shrestha, global head of services delivery at GEP, a period of decreased demand has helped resolve the supply issues of materials and labour shortages and stockpiling and early signs of improving demand are now being observed.
Despite high-interest rates, demand for raw materials and components increased across Asia, and declines eased across the US and Europe.
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By GlobalDataShrestha adds: “So now is a good time for companies to lock in prices and key terms with suppliers for the coming months, which will also help tap down inflation.”
The GEP Global Supply Chain Volatility Index is derived from S&P Global’s PMI surveys, sent to companies in over 40 countries, totalling 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. A value below 0 indicates that supply chain capacity is being underutilised, reducing supply chain volatility. The further above or below 0, the greater the extent to which capacity is being stretched or underutilised.
