"Many buyers fly by sight during the Corona Crisis"
Second BME survey confirms: one in five German companies is affected by supply shortfalls. Protective equipment is considered a critical good.
For the second time in three weeks, The Association for Supply Chain Management, Procurement and Logistics in Germany (BME) asked its members about the effects of the Corona Crisis on their business activities. "The latest figures show that the challenges for industrial buyers, logisticians and supply chain managers remain significant," emphasises Olaf Holzgrefe, Head of International and Affairs at the BME.
The survey results of the largest buyers' association in Europe also highlight that the pandemic has affected industrial sectors to varying degrees and that some sectors are proving to be more resilient than others. "The key challenge for procurement and supply chains is the continued dynamism of Covid-19, which means that ‘fly by sight’ is still the order of the day. However, our survey also shows that the Corona associated supply chain disruptions are partially levelling off," says Holzgrefe. If however, one system supplier fails, the entire production process could rapidly be at risk.
The crisis in procurement and the supply chain continues to spread – albeit more slowly than expected in the first BME survey at the beginning of April. While the number of companies that perceive the pandemic as having a strong impact on their business activities remains almost unchanged at 22 percent, the proportions have changed relative to the first survey. Thus, the proportion of critical disruptions has increased significantly. While three weeks ago, 15 percent of companies did not experience any negative effects, this figure has now fallen to just seven percent.
In summary, it can be said that the supply chains of 53 percent of the buyers surveyed by the BME, have now been noticeably or critically affected by the crisis. In this context, the procurement of protective equipment for companies themselves is seen as particularly problematic. Holzgrefe: "The purchase of protective equipment has become a top priority in a number of companies. It has become a critical good that threatens the production process if it cannot be sourced". The BME sees a need for action here on the part of the Federal Government, else not only the health sector but also industry will fail because of a ‘cent item’.
A closer look at the supply chains reveals that 63 percent of the surveyed buyers are struggling with delivery delays – in comparison, 70 percent at the beginning of April. However, the proportion of delivery failures has increased and now stands at 22 percent. "It is still difficult to forecast future developments of delivery delays and failures," explains Judith Richard, a speaker in the BME's specialist group "Supplier Management". It is notable, however, that 28 percent of purchasing organizations have now activated so-called back-up suppliers, to ensure the supply of materials. "In turn, this shows that strategically smart preparatory work has been done here," adds Richard.
The matter of "liquidity" is also becoming increasingly important. Due to the production stop in the automotive industry, numerous clients have fallen away for the component supplier industry. On the other hand, many companies continue to produce and are increasing their inventories in order to to meet demand and deliver when production recommences.
The view of the BME across Germany's national borders does not show a clear picture. Italy is still the buyers' problem child. Only companies with systematic importance still have options here. In addition to France, buyers also see Spain as a challenge; however, the situation there should soon relax somewhat due to the reopening of many production facilities on the Iberian Peninsula.
Apart from delivery delays, the Chinese procurement market is also slowly returning to normal. However, in the Indian procurement market and in the US sales market, the situation is worsening. In international logistics, freight and transport capacities are the dominant topics alongside production capacities in the region. "Transport capacities in air freight are scarce. Prices have risen immensely," reports Carsten Knauer, Head of Logistics and Supply Chain Management at the BME. In his opinion, the challenges of European logistics lie more in the area of border controls and quarantine regulations for truck drivers. Delays in delivery are therefore a possible consequence. In some areas, rail transport has proven to be a good alternative to trucking.
At the end, the BME ventures to take a look into the glass ball again. The question of how things will continue after the Crisis, is answered by the majority of buyers with just one word: ‘digitalisation’. Holzgrefe: "In future, terms such as transparency in the supply chain or proactive digital risk management will play a greater role. The BME is also observing a trend towards regional procurement in order to strengthen the supplier base in Europe. "In doing so, we want to continue to actively support our members within the framework of the BME's B2B activities in Europe," Holzgrefe concludes.
Save the Date: On the 21st of April, the BME launched the third buyers' survey on the current impact of the Corona crisis on supply chains. In an open webinar, the BME will present the results of the "BME Survey Covid-19 Part 3" in detail on April 30th from 16:00 to 16:45. If you are interested in participating in the BME survey or webinar, please send an e-mail to bme.international(at)bme.de.
For further information and interview questions on the above topic:
Olaf Holzgrefe, Head of International and Affairs at the BME.