October marked the seventh straight month of rising spare capacity rates within global supply chains, according to a recent survey conducted by GEP, a supply chain and procurement software provider. GEP said that the underutilized capacity, coupled with a downturn in demand for raw materials, shows rising slack in global supply chains.
The GEP Global Supply Chain Volatility Index — an industry indicator tracking demand conditions, backlogs, shortages, inventories and transportation costs — once again fell in October to -0.41 from -0.35.
The survey, published November 15, showed that the extent to which supplier capacity went underutilized was higher in October 2023 than it was in September and August.
Asian suppliers experienced the biggest increase in idle capacity since June 2020 due in part to falling pressures on factories as well as sustained demand weakness. The survey’s authors wrote that some of the region’s largest economies, such as China and Japan, are losing momentum while India continues to perform well.
The EU had excess vendor capacity for a seventh straight month in October. The EU also experienced its 17th consecutive month of subdued demand levels.
Read more: Suppliers’ Spare Capacity During July Came Close to May 2020 Levels
Conditions improved in North America where excess supply chain capacity was lower than the rest of the world.
“While the shrinking of global suppliers’ order books is not worsening, there are no signs of improvement,” said Jamie Ogilvie-Smals, the vice president of consulting for GEP. “The notable increase in supplier capacity in Asia, which was driven by China, provides global manufacturers with greater leverage to drive down prices and inventories in 2024.”
Though stabilized, demands for raw materials, components and commodities remain depressed. Meanwhile, reports of item shortages remain at their lowest level since January 2020.
The GEP Global Supply Chain Volatility Index is produced by GEP and the financial information company S&P Global. The index is derived from surveys of 27,000 businesses in 40 countries around the globe. A value above zero indicates supply chain volatility is growing while a value below zero indicates reduced supply chain volatility.
