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Global Supply Chain Volatility Points to Future Challenges

The GEP Global Supply Chain Volatility Index functions as a key economic metric, derived from a comprehensive monthly analysis involving 27,000 businesses. The latest data indicates that global supply chains are facing significant underutilization, a trend that remains evident as we move towards 2026.

Key Findings

November's index settled at -0.29, highlighting a continued surplus of capacity among suppliers globally, particularly affecting the manufacturing sector. North America has notably experienced the sharpest decline, with a regional index plunging to -0.53. This shift is largely attributed to reduced input demand from manufacturers, who are scaling back orders in anticipation of the new year. This signals a concerning trend, suggesting a weakening outlook for the upcoming manufacturing cycle.

In Asia, the situation presents a mixed picture. While the overall index moved to -0.16 from -0.30, indicating a slight decrease in excess capacity, the Chinese manufacturing sector continues to struggle with declining purchasing activity. However, there are pockets of resilience in the ASEAN countries, including Indonesia and Vietnam, which demonstrate relatively better performance in terms of manufacturing demand.

Europe also reflects a fragile economic landscape. The index here dipped slightly to -0.33, revealing persistent challenges in industrial demand. Major players like Germany and France are displaying caution, opting for reductions rather than expansions in their purchasing strategies. This reluctance suggests a hesitancy to invest in increased production capacity amidst ongoing economic uncertainties.

The Impending Buyers' Market

What stands out across these regions is the global excess capacity which has created a 'buyers' market.' Companies are facing minimal price pressures from their suppliers. The limited purchasing cost escalations, except for tariffs, underline the absence of significant inflationary forces in the sector.

John Piatek, Vice President of Consulting at GEP, remarked, “With supply chains this slack, it remains a buyers' market heading into 2026, and companies have real leverage to secure favorable terms for the year ahead.” This flexibility could provide a strategic advantage for businesses as they navigate upcoming contracts and negotiations in the procurement process.

Interestingly, issues such as stockpiling and material shortages have stayed at historically low levels, reinforcing the notion that manufacturers currently prefer operating with lean warehouses rather than sustaining large inventories. The global tracker of item shortages is also well below its long-term average, indicating that factories are in a healthy position sourcing necessary components without trouble.

Furthermore, labor-related issues are only marginally above historical averages, suggesting that labor shortages are not exerting pressure on production capacity at this moment. Meanwhile, transportation costs have shown a slight increase but remain consistent with long-term averages, contributing to a more predictable operating environment.

Conclusion

As we approach 2026, the findings of the GEP Global Supply Chain Volatility Index offer a revealing snapshot of the current state of global manufacturing. North America's steep decline in demand is particularly notable, suggesting that stakeholders should brace for potential turbulence in the manufacturing landscape. On the other hand, regions like ASEAN may offer some bright spots amid this broader uncertainty. In this context, understanding and adapting to these emerging dynamics will be critical for businesses seeking to thrive in an evolving economic climate. As more data emerges in the coming months, close attention to these trends will be essential for effective strategic planning and operational resilience.

For further insights, GEP will release its next Global Supply Chain Volatility Index on January 13, 2026.