GEP Global Supply Chain Volatility Index declines in September

This is the lowest in 14 months.

The GEP Global Supply Chain Volatility Index decreased in September to -0.43 from -0.37 in August.

This is the lowest level recorded in 14 months, indicating the greatest level of global supply chain spare capacity since July 2023.

The increase in underutilised vendor capacity was driven by a further decline in global demand.

Reports of stockpiling for the month due to price or supply concerns remained below the long-term average.

The item shortages indicator fell to its lowest level since January 2020, suggesting improved global raw material availability as factories retrench.

Additionally, reports of staff shortages leading to a rise in backlogs at manufacturers were in line with historically typical levels in September, indicating that labour supply is generally capable of meeting demand.

Factory purchasing activity was at its weakest, with procurement trends in all major continents worsening in September and signalling gloomier prospects for economies heading into the fourth quarter.

Supplier spare capacity increased again in North America.

U.S. manufacturers aggressively lowered their purchasing volumes in September due to the slowing U.S. economy denting factory orders.

Supply chain spare capacity also rose to a year-to-date high.

Slowing economic conditions in other parts of the globe led factory procurement activity in China to fall for the third straight month in September.

Adding to that was the devastating impact of Typhoon Yagi across Southeast Asia, particularly affecting Vietnam, causing vendors supplying this part of the region to suffer.

“September is the fourth straight month of declining demand and the third month running that the world’s supply chains have spare capacity, as manufacturing becomes an increasing drag on the major economies,” explained Jagadish Turimella, President of GEP. “With the potential of a widening war in the Middle East impacting oil and the possibility of more tariffs and trade barriers in the new year, manufacturers should prioritize agility and resilience in their procurement and supply chains.”