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Changes in supplier lead times can signal shifts between buyers’ and
sellers’ markets.
A movement of the suppliers’ delivery index above 50 means delivery
times have shortened on average, which usually means suppliers have
become less busy due to demand for their products falling.
Conversely, a delivery times index reading below 50 signals a
lengthening of suppliers’ delivery times, which is usually caused by
strong demand making suppliers busy and unable to meet orders
without incurring delivery delays.
Shorter delivery times is often indicative of a shift to a buyers’ market,
with suppliers often keen to offer discounts to generate sales.
On the other hand, longer delivery times often indicates a shift to a sellers’ market, as manufacturers are willing to pay more to ensure delivery of the raw materials they require to maintain production.
In most cases, the end result is a passing-on of the higher costs to
customers by manufacturers, so longer lead times lead to higher output
prices and vice versa.
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