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Major supply bottlenecks: "You should take care of Christmas presents early"

Major supply bottlenecks : "You should take care of Christmas presents early"

Christian Kille, professor of retail logistics, expects bottlenecks at Christmas. There are major delivery bottlenecks. Ships are jammed in front of the ports. Containers are missing. Many products could become more expensive.

Anyone trying to buy a bicycle or even have one repaired is currently hearing wild stories in the trade. For example, from people who use their holiday in France to organise some spare parts for a Shimano gear system while on a small detour to Bordeaux, which are then installed in Berlin. The market is empty because the Germans, like many other Europeans, discovered their love of bicycles in the Corona pandemic - and because subsequent deliveries from Asia are stuck in container backlogs. Like many other products for consumers and industry.

Almost three-quarters of all retailers complain about delivery problems, according to the Ifo Institute in Munich. The problems are particularly severe in the bicycle trade, in consumer electronics, in do-it-yourself stores with well over 90 percent each, and in household appliances and computers. So will Christmas presents be in short supply? "One should take care of Christmas gifts early. It is possible that goods will not reach the shops until after the holidays because of the traffic jams at the ports," says Christian Kille, professor of retail logistics in Würzburg and expert of the logistics association BVL.

What is unfortunate for consumers has dramatic consequences in German industry, as can be seen, for example, with car manufacturers. Opel, for example, is shutting down its Eisenach plant until the end of the year because of a shortage of semiconductors. At Daimler, production has been cut back. Audi also stopped assembly lines.

"Shortages of raw materials and supply chain problems are hitting the German economy across the board," says Volker Treier, head of foreign trade at the Association of German Chambers of Industry and Commerce (DIHK). "The current development may noticeably complicate the economic recovery process after the crisis.“

Problems with supply chains

How could it come to this? One reason is "the sometimes significantly higher demand for raw materials, as the global economy is recovering faster than expected," says Marcel Fratzscher, head of the German Institute for Economic Research DIW in Berlin. Not everyone was prepared for this. Some experts also speak of misplanning on the part of the industry. Because it was uncertain how long Corona would burden the global economy, fewer orders were placed and production was cut back. Then everything went faster, more orders were placed, the suppliers couldn't keep up.

Then there are the problems with the supply chains: "On the one hand, the closure of the Suez Canal in spring is still having an effect, on the other hand, an important Chinese port was closed in August because of Corona. Now ships are piling up outside the ports in Europe," says logistics expert Kille. "Then there is a lack of loading capacities in passenger planes because of the restricted international flight operations. In addition, there is a lack of containers in China because the country exports on a large scale but imports comparatively little, so correspondingly few containers come to China."

Once the goods are in Europe, there is also a problem. Even if they could unload the ships faster in Rotterdam or Hamburg: There are not enough transport capacities, for example with trucks - among other things because there are not enough drivers. "At the moment, we assume that there is a shortage of 60,000 to 80,000 truck drivers in Germany alone," says Dirk Engelhardt, spokesman for the board of the logistics association BGL. Up to 15,000 more are needed every year.

Logistics expert Kille expects that the bottlenecks, especially in the automotive industry, will probably disappear in the second half of 2022. But: "New ones could then arise as a reaction to the high demand today." Because at the moment dealers are ordering 200 parts, for example, although they only need 100, in the hope of getting at least 50. As a result, manufacturers order more raw materials and adjust production. "This can lead to a parts glut.“

Many products will very likely become more expensive - for the end customer and for German industry. In a survey by the German Association of Materials Management, Purchasing and Logistics, 69.6 percent of the purchasing managers questioned said that prices had risen sharply recently. Another 27.3 percent spoke of moderate price increases.

Another consequence of the shortage: companies are saying goodbye to just-in-time production, where suppliers deliver parts and materials exactly when they are to be installed. Instead, companies are building up their own warehouses again in order to still have material in stock in times of supply bottlenecks.

45 percent of the companies surveyed by the BME are doing so in order to be able to serve customer requests in the fourth quarter. The DIHK even says it’s 57 percent of the companies surveyed. The disadvantage: stocks cost money and will drive up prices even more. (Original text: Björn Hartmann / Translation: Mareike Graepel)