Global Supply Chains are Operating more Efficiently, Report Finds

The GEP “Global Supply Chain Volatility Index” report showed that global supply chains are now operating more efficiently. The GEP’s Volatility Index dropped to a level of 0.32 in March 2023 from 0.48 in February 2023. That figure represents “the lowest level of stress” on global supply chains since July 2020. 

The “GEP Global Supply Chain Volatility Index,” which is produced by S&P Global and GEP, surveys roughly 27,000 companies in over 40 countries every month. According to the index, a value above zero indicates supply chain capacities are being stretched, leading to an increase in supply chain volatility. A value below zero suggests supply chain capacities are being underutilized, which means reduced supply chain volatility.

After recording a Volatility Index score of more than 1.5 in December 2022, the GEP Global Supply Chain Volatility Index has gone down in three consecutive months, meaning global supply chains have become less volatile since the end of 2022.

The GEP report showed that supply chains were operating efficiently in both the United Kingdom and North America during March 2023. During the same period, supply chain conditions “almost completely normalized” in Asia and Europe.

Additionally, businesses around the globe are reducing their safety stocks, which are at their lowest rate since July 2020.

There is also no shortage of materials available around the world; the GEP report said that item shortages are at their lowest levels since September 2020.

The report also found that global transportation costs have fallen below their long-term average thanks to lessening pressures on shipping, rail, air and road freight. 

“A period of decreased demand has helped resolve the supply issues of materials and labor shortages, and stockpiling, and we’re now seeing early signs of improving demand,” said Binayak Shrestha, the global head of services delivery for GEP. “Despite high interest rates, demand for raw materials and components increased across Asia, and declines eased across the U.S. and Europe. 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 tamp down inflation.”