An unusual shortage of important raw materials and indispensable supplier parts is slowing down the economic recovery after the Corona crisis.
Automakers are running out of computer chips, construction companies are running out of supplies, and many industries are suffering from plastic and rubber shortages.
The delivery bottlenecks even contributed to the ifo index, the monthly sentiment indicator for the entire German economy, falling in July.
According to a quarterly survey published on Monday by the Ifo Institute, almost 64 percent of companies complain that bottlenecks and problems with preliminary products are hindering their production - a negative record.
How can companies respond to the scarcity?
Mark Fehr
Editor in business.
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The globalization expert Nikolaus Lang is a partner at the BCG management consultancy, where, among other things, he heads the Global Advantage division. "Many companies will significantly expand their storage capacities in the future because the supply chains have become more vulnerable," says Lang. Since the 1980s, free world trade has enabled highly efficient just-in-time production with almost no inventory. With this concept, vendor parts ideally arrive at the factory just minutes before they are installed in the end product. But free world trade is now threatened by the tensions between China and the USA and other political conflicts. Brexit also closed old trade barriers. Most recently, the corona pandemic showed how vulnerable internationally networked supply chains are.
Lump risk in supply centers
Management consultant Lang explains this using the example of the Chinese metropolis of Wuhan, which was sealed off after the corona outbreak there in early 2020 to contain the epidemic.
This also brought production to a standstill in the entire Hubei province, which is an important location not only for the Chinese but also for the international auto industry.
At the time, around 20 percent of the steering wheels and steering systems installed by American car manufacturers came from factories around Wuhan, but deliveries were canceled due to the lockdown.
According to Lang, companies protect themselves against such risks by increasing their inventories and purchasing their raw materials and parts from different sources in the future.
Orders for stock do not always have to lead to larger stocks at the manufacturers themselves. The service provider Benteler Trading International intervenes between suppliers and their customers. The company, which emerged from the Benteler industrial group, purchases a wide variety of goods for customers, depending on their needs. However, the goods only become the property of the customer when he accepts them as required. "That can have positive consequences, not only for the pure financial figures," says Tobias Liebelt from Benteler Trading and gives the following example: Up until now, a major customer has ordered forged parts every month in India. Instead, he now orders the entire annual requirement at once and even receives a discount, resulting in optimized purchasing metrics. However, this also improves its carbon footprint,because the space in containers and trucks is better used and fewer vehicles are required. The service provider takes over the interim storage for its customers as required, if the storage costs are lower than the associated savings. "In general, we are seeing an increasing need for storage and are currently receiving more and more inquiries dealing with the subject of interim storage," says Liebelt.
Many suppliers take advantage of the shortage to charge higher prices. Companies must not allow themselves to be put on the cross with excessive price demands in the negotiations. The negotiation specialist René Schumann from the consulting firm Negotiation Advisory Group describes the case of a larger German medium-sized company whose IT and telephony supplier suddenly asked for 20 percent higher prices. The price increase was justified with index data from a research institute, while the Federal Statistical Office only showed a price increase of 4 percent for the product group concerned.
Schumann explains this discrepancy with the fact that suppliers refer to the price indices of a private institute for the important product groups EDP and telephony, which is not, however, neutral. Because its customers include important hardware manufacturers, so that the price indices are designed to be advantageous for the suppliers. Buyers should therefore ensure that objective indices are specified in the supply contracts.
Ifo economic researcher Klaus Wohlrabe described the sometimes sharp rise in purchase prices as problematic. “At the moment, manufacturers are still serving the demand for finished goods from their warehouses. But they are now also noticeably emptying, as they told us, "said Wohlrabe on the occasion of the publication of the Ifo survey on delivery bottlenecks on Monday. Accordingly, the scarcity of semiconductors and chips is particularly noticeable for manufacturers of electrical equipment, followed by the automotive industry. Manufacturers of rubber and plastic products are particularly suffering from the sharp rise in prices for plastic granulates. Manufacturers of electronic devices and mechanical engineering also complain about material shortages.