**Global**: The GEP Global Supply Chain Volatility Index reveals a contraction in supply chains, with notable declines in North America and the UK, while some recovery emerges in Europe and stable conditions in Asia, amid rising tariffs and economic uncertainty affecting manufacturers’ strategies.
In March, the global supply chain faced a significant contraction as the GEP Global Supply Chain Volatility Index recorded its lowest figure in nearly five years, dropping to -0.51. This marks the highest level of spare capacity in global supply chains since May 2020, during the peak of the COVID-19 pandemic. This downturn indicates a troubling trend for manufacturers around the world, particularly in North America.
Factories in the United States, Mexico, and Canada have sharply reduced purchasing activity, largely attributed to ongoing tariffs and related uncertainties. The most pronounced decline in activity was observed in Canada. John Piatek, vice president of consulting at GEP, explained, “March’s sharp decline in supplier activity was due to the stifling effect of tariffs and tariff-related uncertainty, which had its strongest impact in North America.”
In the UK, supplier activity has contracted at a rate not seen since the global financial crisis, with spare capacity rising to levels only previously exceeded during the pandemic and earlier economic downturns. UK factories have been notably aggressive in destocking and cutting expenditures in anticipation of an economic slowdown. The GEP data indicates that procurement managers in the UK significantly reduced buying and inventories, reflecting caution amid economic challenges.
Conversely, while European supply chains showed significant slack, there are early signs of recovery, with a slower decline in demand for raw materials observed. The European index improved slightly from -0.72 to -0.63.
Asian supply chains presented a different picture, running largely at full capacity. There was a slight increase in procurement activity in March, particularly driven by markets in China and India.
The report also highlighted that manufacturers’ stockpiling has hit a nine-year low, as procurement leaders remain cautious about future demand. “Now, organizations are aggressively exploring every possible way to eliminate costs, push suppliers to absorb tariffs, and de-risk their global supply chains,” Piatek noted in his analysis.
Despite the significant fluctuations in various regions, the indicator measuring global demand for raw materials, components, and commodities remained stable, suggesting that while purchasing activity may be softening in some areas, it is not entirely diminished.
Transportation costs have decreased to their lowest point of the year so far, with levels nearing long-term averages. Reports on labour shortages have remained contained, indicating that companies are not currently hindered by workforce constraints.
Overall, the latest findings from GEP illustrate a fragmented landscape across global supply chains, with varying degrees of strain and recovery experienced in different regions. As manufacturers navigate these challenges, the increasing pressure of tariffs and economic uncertainty continues to shape their operational strategies.
Source: Noah Wire Services
