08.11.2021 // Politics

BME: Supply chain problems will continue to keep purchasing on its toes in 2022

56th Symposium on Purchasing and Logistics DIGITAL opens with 900 participants. Virtual congress ends on Wednesday.

Gundula Ullah, Chairwoman of the Board of the German Association for Supply Chain Management, Procurement and Logistics (BME), gave this year's opening speech, in which she also commented on the effects of the Corona crisis on purchasing, logistics and supply management. There are many fears in the business community that the Covid 19 pandemic is far from over, despite initial successes in combating the virus. Photo: Socrates Tassos/FUNKE Foto Services

Scenarios for the further development of the global economy after the end of the Covid 19 pandemic and ways to sustainably strengthen supply chains suffering from material shortages were the central topics of the opening plenary "Navigating the Next Normal" at the 56th BME Symposium Purchasing and Logistics DIGITAL on Monday. Under the motto "#newhorizons", the BME's largest network event offers the 900 participants a virtual platform for the discussion of current and future procurement strategies until Wednesday (10 November).

"We have all been through exhausting and gruelling months of the Corona crisis. The pandemic is not only an economic challenge for our companies, it also demands everything from people, especially mentally and physically," emphasised Gundula Ullah, Chairwoman of the Board of the German Association for Supply Chain Management, Procurement and Logistics (BME), in her welcoming speech on Monday.

"Companies have to reinvent themselves in the face of the multitude of complex and challenging megatrends. Old tried and tested business processes are suddenly obsolete, outdated, perhaps no longer suitable for realising the sales and profit targets set, even in these 20s," said Ms Ullah.

In her opinion, looking ahead to Next Normal also means setting the right course today for the successful business future of one's own company. This is where procurement and supply chain professionals are needed at the latest. They should be pioneers of the digital revolution in the company and realise on a daily basis that procurement and supply management, as ideal interfaces to the other corporate divisions, offer plenty of impetus for new ideas.

The BME Chairwoman also commented on the effects of the Corona crisis on purchasing, logistics and supply management. There are many fears in the economy that the Covid 19 pandemic is far from over, despite initial successes in combating the virus. Now winter is just around the corner. And with it, the number of infections is rising. Whether these incidences could lead to further disruptions in the supply chains and impairments in the production processes remains to be seen - but it cannot be ruled out.

Commenting on the current supply situation in the fourth quarter, Gundula Ullah said that German industry - across all sectors - was suffering greatly from the severe shortage of raw materials and production materials. In view of the deteriorating business outlook in the manufacturing sector, it is to be feared that the supply bottlenecks could last well into next year.

However, there is a silver lining on the economic horizon: the German government's autumn projection predicts an increase in gross domestic product of 2.6 per cent this year. In 2022, an increase of 4.1 per cent is possible. In this context, the statement by the Federal Minister of Economics, Peter Altmaier, also gives hope. The autumn projection shows "that Germany is back on the growth path after the Corona crisis".

Under the title "Crazy World?" Prof. Henning Vöpel, Director of the Centre for European Policy, described "Scenarios of a Post-Pandemic World Economy" in the plenary session of this year's Purchasing and Logistics Symposium. The international community is currently experiencing a turning point. In his opinion, the world after Corona will be characterised by at least four major phenomena. In detail, these are de/re-globalisation, digitalisation, decarbonisation and demography.

The Covid 19 pandemic has immediate and structural consequences for the global economy. The economic recovery will be delayed due to supply bottlenecks and frail supply chains. The former director of the Hamburg Institute of International Economics (HWWI) mentioned the raw material and energy crisis as well as the shortage of semiconductors and other inputs. Vöpel concluded with a look into the future. According to him, uncertainty and complexity would determine the next few years. The only way to reduce uncertainty about the future is to shape it.

After the opening plenary, the question "What are the developments on the commodity markets and how does purchasing deal with them?" was the central topic of the "Specialist Conference on Procurement Markets". Maren Liedtke, raw materials geologist at the German Raw Materials Agency (DERA), emphasised that the supply bottlenecks caused by the pandemic pose major challenges for the industry. The demand for industrial raw materials remains high. At the same time, there is a shortage of containers in Asia. There are also traffic jams at European, Chinese and US ports. Supply chains are also suffering from staff shortages.

According to Maren Liedtke, the global freight problems caused by Corona make it difficult to transfer raw materials and materials quickly - from China to Europe, for example. In addition to the sharp rise in freight costs, freight and waiting times for handling have increased.

Liedtke concluded by pointing to the large number of new technologies that were changing the raw material requirements of companies. For example, many "high-tech raw materials that are needed for the energy and mobility turnaround as well as for digitalisation are secondary and special metals with small markets today". For German industrial companies, this means rethinking and realigning their purchasing strategy if necessary. This also includes a broader diversification of supply sources outside China.

In the online conference "Supply Chain Risk Management", which took place at the same time, suitable instruments for stabilising supply chains suffering from a lack of raw materials and materials were presented, among other things: Bernd Weimer, Purchasing Manager at JUMO GmbH & Co. KG, Fulda, explained strategies for electronics purchasing in times of collapsing supply chains. He pointed out that "ensuring availability and cost-effectiveness for our customers has top priority". Despite significant price increases and extremely long delivery times, the raw materials, components, semi-finished products and raw materials required by JUMO would continue to be procured as far as possible. Since March of this year, weekly meetings have been held between Purchasing, Development, Production and Sales as part of a task force to ensure that products can be delivered. The aim is, among other things, to recognise shortages at an early stage and to be able to react to them quickly. The task force also tries to actively detect future supply gaps.

In his conclusion, Weimer stressed that the further impact of the COVID-19 pandemic was unpredictable. He also noted that "more and more electronic components are no longer available on the market". At the same time, he said, the danger of production standstills was increasing.

At the "Global Sourcing" conference, Christian Ott, Head of Procurement and Logistics at August Mink GmbH & Co. KG, presented flexible procurement strategies for uncertain times and volatile markets. Different supply chains offer great potential, but also have considerable risks. This becomes apparent when comparing different procurement models. If, for example, a company buys production materials in Germany, communication is simple, flexibility in adjustments is high and transport distances are short. On the negative side, however, are the considerable unit costs. Often there is also the danger of "over-engineering".

The situation is different when the production material is procured in Asia. Here, production usually takes place in large quantities. The advantage of this sourcing model is the low unit costs. On the other hand, the administrative effort is immense, transport costs fluctuate, flexibility is low and storage costs are high. Another disadvantage is the language barrier.

In his presentation, Ott also mentioned a hybrid procurement model: production could take place in Asia. Storage and delivery, on the other hand, would be handled by partners in Germany or the EU. The positive aspect is that the financial risks are lower. There is also no language barrier. The main negative is the higher unit costs. Ott: "We have to think globally, but act locally at the same time".

"The global economy is on its way out of the Corona Valley," said Katharina Utermöhl, European economist at Allianz SE, in her statement. In 2021, she said, global gross domestic product (GDP) is expected to rise by 5.5 per cent. For next year, she expects a GDP plus of 4.2 per cent, Ms Utermöhl added. By comparison, US GDP is expected to grow by 6.1 and 4.1 per cent in 2021 and 2022, respectively, according to Allianz Research forecasts. China would then come in at +7.9 per cent and 5.2 per cent. For Germany, a GDP increase of 3.0 percent and 4.0 percent is expected.

While the consumer continues to keep the economic engine running, industry remains the problem child. There is no short-term improvement in sight. Rather, according to Utermöhl's assessment, global supply chains are likely to remain under stress until 2023.

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