As the world continues to grapple with the aftermath of the COVID-19 pandemic, recent data from GEP’s Global Supply Chain Volatility Index indicates a potential return to normalcy with suppliers nearing full capacity.
Rebounding from the Pandemic
The global supply chain landscape is showing signs of recovery from the COVID-19 disruptions, with a recent GEP survey revealing a significant uptick in supplier activity. The survey, encompassing around 27,000 businesses, found suppliers operating at near full capacity in February, a stark contrast to the previous years’ underutilization.
North American Resurgence
North America, in particular, displayed robust supplier activity, with the index highlighting “stretched” capacities as manufacturers anticipate increased production. This marks the first instance since March 2023 of such heightened activity levels, leading to growing backlogs. Europe and Asia, while still facing challenges, are also experiencing positive shifts, with Asia demonstrating economic resilience and inventory restocking efforts.
Materials Demand and Global Logistics
Contrary to the downward trend over the past two years, demand for raw materials and components has surged, reversing inflationary pressures and inventory reductions. Despite geopolitical tensions affecting commercial shipping in the Red Sea, the impact on global supply chains has been minimal, with logistics costs even declining in February.
Labor Market and Automation
The labor market, previously in crisis, is showing signs of stabilization, with shortages no longer as acute as in 2021 and 2022. Automation has played a crucial role in mitigating labor constraints, particularly in the U.S., where high labor costs make robotics an attractive solution. This trend is expected to persist, further bolstering supply chain resilience.
Inventory Strategies and Economic Outlook
Manufacturers are caught between responding to current demand and anticipating future needs. With strong consumer demand persisting, building up inventories is a strategic move to avoid lost sales opportunities. While concerns about suppliers at full capacity potentially fueling inflation exist, the overall sentiment is cautiously optimistic, with no immediate signs of inflationary pressure.
The latest GEP index results offer a hopeful perspective for supply chain directors, suggesting a shift towards stability and growth. With suppliers ramping up operations and embracing automation, the post-pandemic supply chain landscape appears to be on a path to renewed vigor and efficiency.
