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Weekly Roundup - Reduction in Spare Capacity, Disruptions in German Companies and Commitment to Sustainability Goals

Yulia Fedorova

16 Feb 2024

The GEP Global Supply Chain Volatility Index, based on a survey of 27,000 businesses, increased to -0.12 in January from -0.44 in December, indicating a notable reduction in spare capacity across global supply chains. Despite the ninth successive month of excess capacity at global suppliers, the downturn eased to its weakest point since last April, suggesting an improvement in underlying trading conditions as recession and inflation fears recede. The disruption in the Red Sea led to a 15-month high in transportation costs and a slight increase in safety stockpiling, albeit below the levels seen during the post-pandemic supply crunch. Regionally, Asia's supply chains were the busiest in nearly a year, while spare capacity in North America, Europe, and the U.K. decreased. Daryl Watkins, senior director at GEP, noted a positive growth trend in input demand, primarily led by Asia, emphasizing the need to control suppliers' price increases to combat inflation.

The survey commissioned by Kinaxis reveals that 73% of German companies face supply chain disruptions several times a year. These disruptions prompt the need for swift responses, with 80% of companies aiming to react within two to three days. However, a significant portion struggles with siloed information, leading to delays in identifying affected areas. Looking ahead, German companies are preparing for future challenges, with international conflicts and energy prices expected to have the most significant impact on supply chains. Additionally, 73% of companies anticipate that artificial intelligence will play a crucial role in mitigating supply chain risks. Concurrent planning, AI, heuristics, and optimization emerge as solutions to address the challenges faced by companies in managing disruptions effectively.

Germany is grappling with internal divisions over the Supply Chain Law, designed to combat human rights abuses and environmental destruction by multinational corporations. Despite broad support, the Free Democratic Party's opposition has stalled the law, raising questions about Germany's reliability and its commitment to the EU's sustainability goals. This impasse has strained relations within the German coalition government and led to frustration and resentment among its EU partners. Chancellor Olaf Scholz faces a difficult decision in navigating competing interests within the coalition government and considering the broader implications for Germany's role in the EU. The decisions made in Berlin in the coming days will be pivotal in determining the trajectory of EU policy and Germany's place within it.

Read more on recent highlights
Dive deep into research

"The role of digital knowledge servitization in supply chain management" by Pizzichini, L., Temperini, V., Caboni, F. and Papa, A. (2023)

"Exploring barriers to collaborative innovation in supply chains – a study of a supplier and two of its industrial customers" by Anderson, H., Müllern, T. and Danilovic, M. (2023)


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