Supply chain index sours in Q3 2023 as lead times and costs rise
The Dun & Bradstreet Global Business Supply Chain Continuity Index declined 5.8% in Q3 compared to 2022, as overall business optimism also falls
Supply chains are taking a turn for the worse after a period of improvement according to the Dun & Bradstreet Global Business Supply Chain Continuity Index, as the survey recorded a 5.8% decline in confidence among business leaders in Q3 2023 compared to Q2, sitting at 50.6, which indicates a slim margin of positive sentiment.
The index found that increased delivery times and rising costs are behind the decline, with outstanding inventory days the most significantly declining sub-index in the measure.
When asked what the top risks were to their supply chains, respondents cited economic uncertainty as the top threat (27%), followed by regulatory challenges (21%) and rising raw material prices.
The index authors note that stress from geopolitical changes and a softening global economy are some of the leading factors changing the supply chain landscape. This may be behind large businesses being the least optimistic, as they have wider exposure to international risks due to longer and more dispersed supply chains.
However, in the longer-term regulatory impacts could also be significant. Analysts highlighted mining & metals, construction, and transportation as some of the sectors most at risk to increasing stringency in climate and emission regulations.
In terms of countries, Taiwan (46.3), Turkey (47.1), and Mexico (47.4) were least optimistic, whereas Japan (57.6) and South Korea (55.7) were most optimistic, and the US and Germany saw some of the largest Quarter-on-Quarter (QoQ) declines, with the former falling 10.2% and the latter 8.9%.
These scores sit within a wider reduction in business confidence, as the Global Business Optimism Index declined 1.5% QoQ, with the negative sentiment most prevalent in advanced economies, where there was a 2% fall, compared to a 0.4% uptick in emerging economies
“The declines in Global Business Optimism, Supply Chain Continuity, and Financial Confidence indices reflect the underlying stress in the global economy,” said Arun Singh, Global Chief Economist, Dun & Bradstreet. “While the unprecedented monetary tightening has helped control inflation in some countries, it has also introduced the spectre of an economic slowdown and stress in the balance sheets of businesses. However, the global economy has not fared as badly as feared, as most businesses anticipate a 2% to 6% growth in their investment levels across technology, real estate, product development, and sustainability initiatives, offering hope for improvement in economic conditions.”