The GEP Global Supply Chain Volatility Index, a key indicator of supply chain activity, has remained in positive territory for the second consecutive month, indicating increased activity and capacity stretching across global suppliers. Asia is leading this growth, while North America and Europe present a mixed picture.
Asia’s Supply Chain Activity Surges
Asia is at the forefront of supply chain activity growth, with a significant increase in input demand as factory activity in major manufacturing and exporting economies such as China, Taiwan, Vietnam, and India accelerates. This consistent growth since April contrasts with North America’s suppliers, who are experiencing fluctuating capacity utilization.
North America and Europe: A Mixed Picture
In North America, factory input demand fell slightly in June, indicating reduced demand. However, since the beginning of 2024, North American vendors have generally been operating at full capacity. On the other hand, Europe’s manufacturing sector is still operating with some slack, with subdued factory purchasing activity across the continent. This suggests that Europe’s manufacturing recovery still has some way to go, despite significant improvements since the end of last year.
Rising Global Transportation Costs: A Warning Sign
A potential early warning sign of future overheating is the rise in global transportation costs, which reached their highest level since October 2022 in June. This increase is due to strengthening activity across global supply chains leading to higher shipping and container rates. However, reports of safety stockpiling remain low, suggesting that the market is currently well-positioned and stress levels are subdued.
Interpreting the Data and Key Findings
The GEP Global Supply Chain Volatility Index interprets data as follows: an index above 0 indicates that supply chain capacity is being stretched, with the degree of stretching increasing the further above 0 the index is. Conversely, an index below 0 indicates underutilization of supply chain capacity, with the degree of underutilization increasing the further below 0 the index is.
Key findings for June 2024 include stable inventory cycles, typical levels of material shortages, increased reports of labor shortages, and rising global transportation costs. Regionally, Asia’s supply chain volatility index rose to a 16-month high, while North America’s index fell slightly and Europe’s index remained unchanged.
