For the second consecutive month, the GEP Global Supply Chain Volatility Index continued in positive territory. This indicates another month where global supply chains got busier, and capacity was stretched across suppliers worldwide. At 0.13, the index was little-changed from May’s 14-month high of 0.21.
At the forefront of supply chain activity growth is Asia, where input demand jumped as factory activity in major manufacturing and exporting economies — led by China, Taiwan, Vietnam and India — accelerated.
In contrast to Asia, which has seen steady month-over-month growth since April, North America’s suppliers oscillate between under- and overutilized capacity. In June, factory input demand fell slightly, with suppliers experiencing reduced demand. However, on average since the start of 2024, North American vendors have generally been operating at full capacity.
The European market is still operating with some slack as factory purchasing activity across the continent remains subdued. This suggests the region’s manufacturing recovery still has a way to go, though conditions have vastly improved compared with the end of last year.
An early warning sign of potential overheating ahead is global transportation costs, which rose to their highest level since October 2022 in June as strengthening activity across global supply chains led to higher shipping and container rates. For now, reports of safety stockpiling remain low, suggesting the market is well placed in a “goldilocks” zone and stress levels are subdued.
“Asian manufacturers are gaining momentum, which, if sustained into the second half of the year, will mean a return of increasing costs and price pressures for global companies,” explains Amol Jawale, vice president, consulting, GEP. “Now is the perfect time for a company’s procurement to lock in pricing with key suppliers for 2025.”
Key Takeaways:
Global demand for raw materials, commodities and components is now trending broadly level with its long-term average, indicating that global manufacturing has moved toward an upswing in the business cycle. Asia remains at the forefront of this upturn, led by India, China, Taiwan and Vietnam.
- The inventory cycle has stabilized, with firms neither building up stocks excessively nor aggressively destocking to improve cashflow and cut costs.
- Global reports from businesses of items in short supply remain anchored at historically typical levels.
- As was the case in May, reports from global suppliers of an inability to meet orders due to staff shortages were more common than seen historically on average. This suggests capacity expansion is required to sustainably meet current and future demand.
- Global transportation costs rose to a 20-month high in June, with shipping and container rates under pressure because of increasing supply chain activity.
