Global Supply Chain spare capacity shrinks in December

Manufacturers added safety buffers to inventories due to increased risk.

The GEP Global Supply Chain Volatility Index showed further reduction in spare capacity across global supply chains as the index rose to -0.15 in December from -0.20 in November, an S&P Global survey said.

For the first time since June, reports from global procurement managers of increased stockpiles due to price or supply fears were above historically typical levels. This suggests that firms see increased risk to their supply chain resilience.

Global manufacturers had raised safety buffers in their inventories in December, signalling a higher level of perceived supply chain risk.

Whilst safety stockpiling activity is up, the metric highlights robust supply levels, with reports from businesses of poor item availability at its lowest level in around five years.

Global manufacturers’ ability to process orders was not hindered by staff capacity in December, as has been the case for the past two years. Reports of backlogged work rising due to labor shortages remain close to historically typical levels.

The transportation cost indicator remained anchored around its long-term average value in December.

Over the same period, regional supply chain volatility also fell in North America to -0.53 from -0.36, signalling a greater level of supply chain lack in November given that post-US election bounce faded.

It also fell in the UK, standing at -0.41 from 0.21, the lowest in eight months. This suggests an increase in spare capacity at vendors that supply the UK Market.

Meanwhile, the index rose from -0.72 to -0.49 in Europe as manufacturers increased their safety stockpiling in December. However, factory purchasing volumes stayed weak amid the continent’s industrial recession.

The Asian index also fell to -0.09 from 0.15 in December, which suggests that Asian suppliers were less stretched than they were in November.