Global supply chains show signs of strain, GEP index finds

Global supply chains continued to show increasing levels of spare capacity in March, according to the latest GEP Global Supply Chain Volatility Index, with Canadian, U.S. and Mexican manufacturers scaling back.

The index fell for the third consecutive month to its lowest level in nearly five years, dropping to -0.51 in March, reflecting the most spare capacity across global supply networks since the peak of the COVID-19 pandemic in 2020. GEP’s index tracks global demand, shortages, transportation costs, inventories and backlogs through a monthly survey of 27,000 businesses.

A key trend in the latest report was a marked slowdown in manufacturers stockpiling inventory. GEP said the level of inventory building in March was the lowest in nine years, as procurement leaders grew increasingly cautious amid concerns about weakening future demand.

“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, where manufacturers reported cutbacks to purchasing activity and inventories,” said John Piatek, vice-president, consulting at GEP. “Until just last week, most companies had taken a wait-and-see approach. Now, organizations are aggressively exploring every possible way to eliminate costs, push suppliers to absorb tariffs and de-risk their global supply chains.”

The report showed North America experienced the steepest drop among major regions, with the index falling to -0.63 from -0.18 in February. GEP said U.S., Canadian and Mexican manufacturers scaled back significantly during the month.

In the U.K., the index slumped to -1.23—its lowest level in nearly five years—as factories aggressively reduced spending and inventory, suggesting growing concern about a potential downturn.

Meanwhile, the outlook in Europe showed tentative signs of stabilization. The regional index edged up to -0.63 from -0.72, indicating continued underutilization but with a slower pace of decline in factory input demand. GEP noted that demand for raw materials, commodities and components on the continent fell by the smallest margin in almost three years.

In Asia, supply chains continued to operate near full capacity. The regional index slipped slightly to -0.12 from 0.00, with procurement activity ticking up, especially in China and India.

Across the various supply chain components tracked by GEP, inventories stood out as a key indicator of industry sentiment. Reports of safety stockpiling by manufacturers dropped to their lowest since July 2016.

“The data continues to point to the adoption of a ‘wait-and-see’ mentality among buyers as uncertainty regarding worldwide trade conditions remains rife,” the report stated.

Other indicators in the index showed that global material shortages remained below long-term averages, suggesting strong supply levels, while labour shortages remained contained and transportation costs were close to average.

The GEP Global Supply Chain Volatility Index is considered a leading gauge of supply chain conditions worldwide and is watched closely by industry stakeholders.