CLARK, N.J. – The GEP Global Supply Chain Volatility Index signaled that global supply chain pressures rose to a three-year high in March, reflecting the immediate economic impact of the energy price shock and maritime disruption caused by the war in the Middle East.

The index is a leading indicator tracking demand conditions, shortages, transportation costs, inventories and backlogs, based on a monthly survey of 27,000 businesses. 

The index soared from 0.09 in February to 0.57 in March, its highest level since January 2023.

In March, global manufacturers increased safety stockpiling in response to maritime disruption, higher transportation costs and supplier price increases. Reports of inventory buffers being accumulated were the highest in three years, with increases across all major regions.

Uncertainty resulting from the conflict weighed on manufacturers’ input demand, with factories around the world cutting purchasing volumes. Notably, item shortages hit a three-year high despite slowing demand, signaling the emergence of bottlenecks, with the availability of materials such as polymers, PVC and rubber, as well as energy-intensive metals such as aluminum and copper, reportedly deteriorating the most.

Surging oil prices pushed global transportation costs to a four-year high in March. The impact was felt globally but especially strongly in Asia, given its reliance on Middle East oil. Taiwan, Vietnam, South Korea and Japan reported surging producer price inflation during March.

“The war is pushing up costs, triggering stockpiling and creating shortages across supply chains, but it has not yet escalated into a broad-based shock that materially slows global economic growth,” said Mukund Acharya, vice president, consulting at GEP. “Companies need to secure supply where it matters most while avoiding broad stockpiling that can lock in higher costs.”

Key findings:

  • Demand: After rising to its strongest level in four years in February, the global input demand indicator – which tracks purchases of raw materials and intermediate goods by factories – weakened in March, signaling a tapering of worldwide manufacturing buying activity. This was principally led by a pickup in retrenchment across Asia as purchasing picked up slightly in North America and Europe, reflecting stockpiling here ahead of further anticipated price rises and supply chain disruption.
  • Inventories: Reports of stockpiling due to price or supply concerns shot up to their most prevalent in three years during March. While greater inventory building was witnessed in all major markets, it was Europe where reports were most common. 
  • Material shortages: The items in the short supply tracker rose sharply in March, signalling an immediate emergence of bottlenecks across global supply chains following the outbreak of war in the Middle East. According to the measure, businesses reporting item shortages were their greatest since April 2023.
  • Labor shortages: Reports of backlogs accumulating due to inadequate labor supply ticked up to a three-month high in March and were slightly above the historical average.
  • Transportation: The oil price shock caused by the war in the Middle East sent global transportation costs surging in March, rising to the highest level in nearly four years.