Waning demand easing supply chain bottlenecks - Tradeshift
A study from a key provider of data around digital trade shows that activity across retail, manufacturing and transport & logistics dropped sharply in Q3.
The Index of Global Trade Health report from Tradeshift shows global supply chain activity fell by 5% in Q3, with new orders quickly drying up as rising costs and global uncertainty mount.
The Index also showed global order volumes dropped 7% below expected Q3 levels, following a 6% drop in the previous quarter. It’s the most significant six-month fall since the height of the pandemic, Tradeshift says.
Manufacturing dropped 11% below the expected Q3 range, while retail supply chain activity was 9% down – the slowest growth in 18 months.
Tradeshift says waning demand in these sectors is also causing lower demand in the transport and logistics sector, with activity here 8% lower than expected, the second consecutive quarter of declining growth.
Waning demand is easing supply chain bottlenecks
“The good news is that supply chain bottlenecks are easing, and shipping costs are falling,” said Christian Lanng, CEO of Tradeshift. “The bad news is this is largely a result of waning demand, and that trend now appears to be accelerating.”
He adds: “This is particularly hard for smaller suppliers who have simply swapped pressure in one direction for an equally treacherous kind of pressure in the other direction.
“If suppliers get into financial difficulty and begin to fold, we could see a repeat of the problems supply chains faced during the pandemic.”
Tradeshift’s analysis places Europe at the heart of the latest slowdown. Supply chain activity across the Eurozone fell by 6%, as the energy crisis triggered by Russia’s invasion of Ukraine wiped out consumer spending and placed significant cost pressures on supply chains.
Yet a different picture is emerging in the US. Momentum is slowing but at a much gentler rate than elsewhere in the world. Total transaction volumes tracked at just 2% below the expected level in Q3. In China, local supply chain activity also grew at a relatively healthy rate in Q3, just 1% down on expected levels.
“Supply chains in the US seem to have stabilised,” said Lanng. “As long as consumers keep spending, they may even start to see an upside from lower operating costs.
“But Europe faces a much harder road ahead. The energy crisis comes down to a failure to maintain the balance between access, sustainability and security of supply. As organisations take a hard look at the resilience of their supply chains, maintaining this balance should be front of mind.”