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Home » Global supply chain activity stabilizing despite Omicron variant spike
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Global supply chain activity stabilizing despite Omicron variant spike

Global supply chain activity stabilizing despite Omicron variant spike
January 19, 2022
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US supply chain activity finished Q4 within touching distance of pre-pandemic forecasts, as global transaction volumes between buyers and suppliers showed increasing signs of stabilizing, new data from Tradeshift reveals. But signs of a protracted slowdown across Chinese supply chains suggest further disruption could lie ahead.

According to Tradeshift’s Q4 2021 Index of Global Trade Health, the recovery in activity across US supply chains continues to track at a significantly higher level than the rest of the world. Momentum dipped slightly in Q4, falling one point compared to the previous quarter, but an index score of 97 (against a baseline of 100) for the period means the cumulative growth in activity since the pandemic sits just 3 points below the pre-pandemic forecast.

Logjams start to ease

Spiking cases of the Omicron variant tempered the overall momentum across global supply chains, but the impact has been generally far less severe than during previous waves. Total growth in global transaction volumes during Q4 remained level with the previous quarter, finishing the year with an index score of 75.

Global order volumes appeared to stabilize, dropping a modest 0.5 points in Q4 after a series of wild peaks and troughs in activity during previous quarters. A seven point rise in transaction volumes across the transport and logistics sector also suggests that supply chain bottlenecks are starting to ease. Invoice volumes failed to accelerate as expected in Q4 however, suggesting suppliers are still struggling to fulfil the existing backlog of orders.

“We saw a massive spike in orders in the second quarter of 2021 and that should have triggered a glut of invoices from suppliers at the end of the year,” said Christian Lanng, co-founder and CEO of Tradeshift. “We’re seeing some early signs that the pressure on supply chains is starting to ease, but if invoice volumes continue to follow the current trajectory, then it could be at least a year before we see order backlogs fully subside. ”

China’s lockdowns could extend disruption

Tradeshift’s data suggests global supply chains have generally proven far more resilient to the Omicron variant than previous waves. In China, however, tough Covid prevention measures and softening local demand triggered a 10 point fall in transaction volumes against the forecast range. Q4’s Index score of 86 puts cumulative growth in Chinese supply chain activity at its lowest level since the beginning of the pandemic.

“China’s decisive action early on in the pandemic enabled local supply chains to get back up and running before the end of the world, but the same strict policies now seem to be having the opposite effect,” said Lanng. “A spate of lockdowns in key industrial regions across China could trigger more shortages of crucial manufacturing components and extended order backlogs in international markets.”

In the Eurozone, a 20-point drop in invoice traffic compared to the previous quarter suggests rising prices and parts shortages continue to disrupt order fulfilment. Transaction volume growth across the region slipped by eight points in Q4, ending the quarter with an index score of 76. UK supply chains also lost momentum after a steep fall in supplier invoices processed. An index score of just 49 puts recovery significantly below the global trend. Order volumes remained above the expected range, however, suggesting recovery could accelerate if current bottlenecks continue to ease.

https://hub.tradeshift.com/research-and-reports/tradeshifts-index-of-global-trade-health-q4-2021/
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Logistics Procurement
KEYWORDS Tradeshift
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