Shortage of materials still omnipresent

Global supply bottlenecks have become the norm since the outbreak of the Corona pandemic. Although they have been gradually reduced and many warehouses are now well stocked again - also due to weaker demand - the 2022 Christmas season is suffering from a lack of supplies. 

On the one hand, this is due to the high backlog in the order books. In sectors such as the automotive industry, the processing of open orders will in some cases continue until mid-2023. On the other hand, production in China is still not running smoothly due to the strict zero-covid strategy pursued there to date. In addition, the effects of the Ukraine war are also having a negative impact on the procurement of individual goods.

According to a survey by the Ifo Institute, in September 2022 65.8 percent of participants from industry were affected by material shortages, in automotive engineering with 82 percent and in mechanical engineering with 86.2 percent even considerably more. A clear majority also anticipates supply difficulties well into 2023.

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These goods could be in short supply for Christmas

Many companies across all sectors are suffering from supply bottlenecks. Products manufactured in Asia, such as electronic devices, toys and textiles, could still be in short supply in the run-up to Christmas, predicts the German Retail Association (HDE). Current stocks of bicycles and household appliances could also not sufficiently satisfy demand. "Basically, it can be said that bottlenecks can occur in all areas where electronic components are installed," says Klaus Wohlrabe, who is responsible for the surveys at Ifo. "This is also often the case with toys." 

In addition, reports of supply bottlenecks for medicines have been mounting for months. The German Federal Institute for Drugs and Medical Devices (BfArm) currently lists around 300 medicines that are in short supply, including antipyretics, cough medicines, antihypertensives, breast cancer drugs and gastric acid blockers. For many scarce remedies, there are still alternatives. However, some of these have less tolerable active ingredients. The reason for this is that manufacturers of medicines often have to rely on suppliers of active ingredients from China because of public procurement laws. A change in the legal situation is under discussion at the end of 2022.

Ukraine war as price driver

In March 2022, around 17 percent of industrial companies also reported sourcing imports from Russia. To the extent that these companies have been unable to adjust their supply chains and find alternatives, or have done so inadequately, the trade ban will also have an impact on shortages. Nationwide, natural gas and crude oil accounted for 55 percent of imports from Russia.  But metals and coal also play an important role. In this respect, the Ukraine war acts primarily as a price driver and is mainly responsible for strong inflation. This amounted to around ten percent in November 2022.

Strategies for the timely supply of goods

Local purchasing cannot change the global reasons for supply bottlenecks. However, it can adapt its procurement strategy to the circumstances. For the Christmas business and the following months, this means above all:

  • Plan supply in detail
  • Search for alternative sources of supply
  • Ordering goods and primary products in good time
  • Build up inventories

Companies that are already digitally positioned have an advantage here. For example, if they run their supply chain processes via a central enterprise resource planning (ERP), it is easier for them to coordinate with their suppliers. This electronic system for replenishment costing makes it easier for stakeholders to predict and coordinate supply bottlenecks.