GEP: Supply Chain Issues Remain Despite Stable Appearances

Supply chain volatility has continued to test organisational capacity in ways that extend beyond traditional metrics. According to GEP, transportation costs have fallen and oil prices have declined, yet procurement pressures remain elevated across global networks.

The persistence of these pressures could mean that logistical improvements alone cannot resolve deeper structural concerns.

GEP's Global Supply Chain Volatility Index examined responses from 27,000 businesses to understand how companies are managing materials flow and capacity constraints during periods of instability.

The index provides insight into how procurement strategies are evolving in response to ongoing uncertainty in global trade environments.

Capacity constraints and backlogs

Manufacturers reported increased backlogs in June. According to GEP, shortages of critical inputs reached their highest levels since late 2022.

The data could show that production schedules are being disrupted by materials availability rather than processing capacity. Supply chain bottlenecks in Q3 became a concern as businesses faced challenges meeting customer demand due to insufficient raw materials.

The demand for critical minerals and raw materials has increased. This has been partially attributed to semiconductor production requirements, smartphone manufacturing and energy transition projects. The convergence of these sectors competing for similar materials has intensified pressure on upstream suppliers.

Across North America and Asia, demand for intermediate goods, commodities and raw materials remained strong. Europe demonstrated weaker input demand during the same period, reflecting divergent economic conditions across major manufacturing regions.

Buffer inventory strategies

Companies chose to build buffer inventories as a hedge against future shortages. According to GEP, manufacturers reported safety stockpiling at the highest level since January 2023.

Purchasing volumes exceeded immediate production needs. This strategy reflected organisational concern about input availability in subsequent quarters.

"The rise in stockpiling and persistent order backlogs point to one clear conclusion: businesses still do not trust the global trading environment to remain stable," says John Piatek, Vice President of Consulting at GEP.

"Despite lower oil prices and easing transportation costs, companies continue buying ahead because they expect further disruption."

John added that while this pattern could benefit the global economy in the near term, it also indicates manufacturers remain cautious and are planning for additional disruption in international trade.

Material purchasing patterns

Raw materials purchasing in June maintained strong momentum. According to GEP, input buying increased at the fastest rate since April 2022.

Japan, China and Vietnam experienced acceleration in purchasing growth. This pattern suggests that regional supply chains are operating at different speeds based on local demand conditions and varying degrees of recovery from previous disruptions.

Supply issues remained elevated compared to historical norms. However, the number of items in short supply decreased in June, which could indicate that some global shortages have begun to ease.

Labour shortages affected manufacturing capacity in some regions. This created an additional constraint for companies attempting to fulfil existing orders and contributed to the widening gap between production capability and customer demand.

Supply and demand gaps

Performance gaps between supply and demand remained wide across multiple sectors. Procurement teams responded by increasing advance purchasing and expanding inventory holdings.

These decisions added strain to global supply chain capacity. The combination of stockpiling, strong demand and persistent backlogs created a system operating near maximum throughput.

According to GEP, the data demonstrates that procurement leaders are prioritising resilience over efficiency. Companies are accepting higher inventory costs and earlier purchasing commitments to protect against potential disruptions.

The patterns observed in June raise questions about how supply networks will adapt to sustained uncertainty. Organisations continue to prioritise material security even as some traditional cost pressures have eased, suggesting a fundamental shift in procurement strategy that may persist beyond immediate volatility.