GEP Worldwide, a consultancy and software firm, says that, during April 2023, global supply chain capacities were underutilized for the first time since June 2020, meaning supply chains have experienced a reduction in volatility.
GEP's Global Supply Chain Volatility Index — a tool tracking demand conditions, supply chain shortages, transportation costs, inventories and backlogs — fell from 0.32 in March 2023 to -0.04 in April 2023. According to the GEP, a value below zero indicates that global supply chain capacities are being underutilized.
The Index, derived from S&P Global data from almost 27,000 companies in 40 countries around the world, fell in both Europe and North America. Suppliers that were doing business in Asia felt the least amount of strain since August 2020, thanks to China's fully reopened economy.
Demand levels were much higher in April 2023 when compared to their low point in December 2022, alleviating concerns of a deep recession, therefore, creating some more stability for global supply chains.
In April 2023, reports of item shortages were at their lowest levels since September 2020. While metals and chemicals have experienced fairly low shortages, semiconductors and electrical items continue to suffer from poor availability.
The Volatility Index also showed that labor shortages had almost no adverse effects on suppliers, meaning current staffing levels around the globe are good enough to keep up with ongoing demands.
Global transportation costs showed signs of normalizing in April 2023 when compared to less than a year ago, when companies were facing up to 200% price increases in the spot rates for air and shipping. Now that demand levels have begun to go back to normal over the last 12 months, transportation prices have fallen correspondingly.
“After months of companies aggressively de-stocking, there is now excess capacity in the world’s supply chains, providing buyers with greater leverage to extract favorable prices and terms for the second half of 2023 and into 2024,” said Volker Roelofsen, vice president of supply chain consulting at GEP.
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