Manufacturers' Safety-Stock Hoarding More Than Doubled in North America in October

North American manufacturers more than doubled their precautionary stockpiling in October compared with September, according to the latest GEP Global Supply Chain Volatility Index, as factories bought ahead of expected inflation and renewed supply disruptions.

The index, compiled monthly from a survey of 27,000 businesses, tracks demand conditions, shortages, transportation costs, inventories and backlogs. Its October reading points to a sharp divergence: buying to hedge future risk is accelerating even as overall global supply chain pressures eased during the month, helped by declining material and labor shortages.

Europe recorded the other standout move. Inventory building there rebounded sharply after a weaker September, mirroring the North American pattern. GEP, a supply chain technology firm, reads the combined surge as manufacturers purchasing additional materials to protect production lines against higher future costs and potential shortages — even as the pace of global purchasing growth moderates.

What does the buying surge mean for supply chains?

The commercial logic cuts both ways. In the near term, the inventory buildup supports manufacturing activity and keeps freight flows moving, particularly for inbound materials. But buffer stock ties up working capital, and once companies judge their inventories sufficient, purchasing demand can fall away quickly.

"Manufacturers are increasingly concerned about what's ahead, particularly inflation and the risk of renewed supply disruptions," said John Piatek, Vice President, Consulting, at GEP. "They're responding by building larger inventory buffers to protect production and manage future costs."

Piatek flagged the timing risk explicitly. "The concern is what happens next. This additional purchasing is supporting manufacturing activity today, but it also ties up working capital. Once inventories are built, purchasing could slow, creating a drag on manufacturing and the wider economy in 2027," he said.

For carriers and forwarders, that sequencing matters. A purchasing pullback after restocking completes would trim volumes precisely when the industry would be counting on sustained demand. Shippers, meanwhile, face a cost squeeze from the other direction.

Where are transport costs heading?

Global transportation costs rose in October for the second consecutive month, according to the index, adding to already elevated inflationary pressure on manufacturers. For shippers, that means the window for cheap inbound moves is narrowing even as the rationale for front-loading purchases strengthens — a combination that pushes landed costs higher on both the freight and the goods side.

The underlying demand picture remained resilient despite the hedging anxiety. Purchasing demand continued to grow, supported by sustained strength across Asia and improving demand in Europe. Global manufacturing activity held up, and the report notes that overall supply chain pressures eased in October as material and labor shortages declined.

That mix — easing shortages but rising transport costs — suggests the volatility manufacturers fear is less about capacity availability today and more about price and disruption risk tomorrow. The stockpiling data indicates they are willing to pay now, in working capital and storage, to avoid paying more later.

Whether that trade-off holds depends on what happens to inflation and freight rates through the coming quarters. If the current hoarding cycle completes on schedule, GEP's own analysis points to softer purchasing and a potential drag on manufacturing output into 2027.