Global supply chains suffer from excess capacity, GEP’s July survey shows

Amid weak demand conditions and sustained destocking of warehouses, global supply chains showed an accelerated rise in excess capacity last month, as the GEP Global Supply Chain Volatility Index fell to -0.50 in July, from -0.26 in June, GEP said today.

The New Jersey-based supply chain software provider says its Global Supply Chain Volatility Index is a leading indicator tracking demand conditions, shortages, transportation costs, inventories, and backlogs based on a monthly survey of 27,000 businesses. Index numbers above zero mean that supply chain capacity is being stretched, while numbers below zero indicate that supply chain capacity is being underutilized.

The same index had also fallen in June, as demand for raw materials and components weakened sharply in Europe and North America.

For July, already depressed demand conditions declined at even sharper rates in Europe and the U.K., contrasting with a shallower demand downturn in North America, GEP said. Those forces pushed European supply chain spare capacity to its greatest level since the global financial crisis of 2008-2009, and helped shove global transport costs down to their lowest level since 2016.

"We're now in the 14th consecutive month of subdued demand across Europe, and our July data shows it's getting significantly worse across the continent, in contrast to North America,” Jonathan Kinghan, vice president, supply chain consulting, GEP, said ina release. “Our data does not indicate a 'soft landing' in Europe. As a result, companies have greater leverage to negotiate favourable terms from suppliers for 2024 and 2025."