GEP Global Supply Chain Volatility Index shows that global supply chain pressures surged in April to their highest level since the pandemic-era disruptions of late 2022, as the war in the Middle East fueled inflation fears, shortages and aggressive stockpiling by manufacturers worldwide.
The GEP Global Supply Chain Volatility Index jumped to 1.64 in April, from 0.57 in March, its highest reading since October 2022.
"Even if tensions in the Middle East ease quickly, global supply chains are unlikely to normalize for another six to 12 months," says John Piatek, VP, consulting, GEP. "What stands out in April's data is how broadly the disruption is spreading. Shortages worsened across every major region, signaling this is no longer an isolated transport shock. Companies worldwide are now scrambling to secure supply and protect themselves against further inflation and disruption."
Key takeaways:
· Businesses globally ramped up safety stockpiling of goods and raw materials at the fastest rate in three years. European manufacturers reported the most aggressive inventory building, signaling heightened concern over supply availability and costs.
· Reports of item shortages rose to their highest level since November 2022.
· Asia reported the sharpest deterioration in supply chain conditions during April, driven by surging transportation costs, worsening shortages and rising purchasing activity. Bottlenecks also intensified significantly across Europe and North America.
· Global transportation costs climbed to a record high in April, reflecting maritime disruption, soaring fuel prices and logistical challenges linked to the war in the Middle East.
- Global demand for production inputs such as raw materials, commodities and intermediate goods rose in April, with purchasing its strongest in more than four years. The expansion reflected front-loaded buying activity in anticipation of price inflation and supply disruption, rather than growth due to improving underlying manufacturing conditions.
- To mitigate further price rises and supply disruption, global manufacturers more aggressively built buffers into their inventories. Reports of safety stockpiling surged higher in April and were their most widespread since January 2023 as oil prices remained volatile and uncertainty regarding the war in the Middle East continued.
- The items in short supply indicator rose again in April to its highest in nearly 3.5 years, signaling that shortages of critical materials and inputs were the highest since late 2022, towards the end of the post-pandemic supply squeeze.
- Labor shortages remained contained in April, although they were marginally above the long-run average at the global level. By region, reports of manufacturing backlogs rising due to staff shortages were their greatest in Europe.
- The global transportation costs tracker soared to a record high in April (data were first collected in 2005), reflecting surging fuel prices, as well as rising maritime shipping and freight rates.
