Global supply chains hit highest stress since 2022 crisis; firms hoard inventory

According to the GEP Global Supply Chain Volatility Index, supply chain strain has reached its highest level since the 2022 crisis. Firms are reporting elevated safety stockpiling, with reports of hoarding behavior at their highest since the immediate post-pandemic period. Companies across manufacturing, consumer goods, and energy sectors are racing to secure raw materials and finished goods inventory ahead of what many fear will be sustained inflationThe rate at which prices rise across an economy. and further geopolitical shocks. The Iran war, in particular, has disrupted energy and logistics flows, compelling supply chain managers to build buffers and longer lead times.

Manufacturers and retailers are facing a difficult calculus: build larger inventory positions to protect against shortages and inflationThe rate at which prices rise across an economy., but risk being saddled with obsolete or excess stock if demand weakens. This dynamic is particularly acute for electronics, semiconductors, and petrochemical-dependent products. Energy costs remain elevated, making logistics more expensive, while shipping routes through the Suez Canal and other chokepoints face elevated risk due to geopolitical tensions. Some firms have begun exploring nearshoring or reshoring options to reduce dependency on long, fragile supply chains.

For investors, the supply chain strain narrative cuts both ways. Near-term, it pressures margins for companies with low pricing power and high logistics exposure (e.g., retailers, consumer packaged goods). However, it may support demand for capital-intensive infrastructure and logistics services. Industrial and materials companies that can pass through costs or offer supply-chain solutions could outperform. The risk is that if demand rolls over sharply, companies find themselves with bloated, illiquid inventory positions that depress earnings and cash flow. Central banks and policymakers are watching this closely, as aggressive inventory building can mask underlying demand weakness and distort inflationThe rate at which prices rise across an economy. statistics.