Every second company in Germany is currently struggling with delivery bottlenecks: automobiles, retail, pharmaceuticals, the metal and electrical industries, they are all affected. Transshipment ports are closed, some borders are tight, transports are overbooked and containers are jammed. Unloading is also delayed. Corporations are lowering their profit expectations, others are postponing sales dates, and manufacturers are announcing price increases. Something has been brewing. Will there be empty shelves at Christmas? Or is it about more: a shift in power in world trade?
“The added value in the entire chain is shifting strongly towards the beginning, to sourcing, i.e. procurement and logistics,” says e-commerce specialist Sebastian Funke. And Marcus Diekmann, managing director of the bicycle dealer Rose Bikes and founder of the “Dealers Help Dealers” initiative, sees Europe and Germany poorly positioned between a China that strengthens its own domestic market and a strong North America. Europe must now ensure that resources are secured in order to ensure its own supply. “Otherwise,” he says, “what we experience today will shape our everyday lives in the future.”
Here are some examples of sectors that are particularly troubled at the moment.
cars
Almost all car manufacturers lack computer chips, dozens of which are in modern vehicles. Many buyers were too cautious about their calculations in 2020, while other companies were hoarding the parts. In addition, the coveted e-cars need more chips: high-tech for 800 euros is on average under their hood, twice as much as with combustion engines.
Due to the lack of semiconductors, car factories are canceling shifts or, like Opel in Eisenach, will close by the end of the year. The result: In the past month, fewer cars were delivered in Germany than in any other September since 1991. So that everything does not come to a standstill, the manufacturers slim down: For a while, Audi only gave its customers a car key, which is also with them these days Chips fitted. Other manufacturers install analog displays instead of digital displays in an emergency or save the automatic headlight system.
Right now, it’s better to bring a stripped-down, but drivable car to the customer than to produce unfinished cars on a dump into which you can later tinker chips. Because the situation will not improve that soon, even if the automobile association VDA is calling for more European chip production and Infineon has just started a chip factory in Villach. “Material bottlenecks and supply chains will keep the industry busy until well into 2022,” says car analyst Peter Fuß from the EY consultancy. Incidentally, the situation has not hurt the company’s finances so much so far: Sales may decline, but profit is still decent – because the manufacturers are building the rare chips into the high-priced models with good margins: You can get an Audi A8 faster than an A3.
aluminum
Distribution wars and price rises, as with semiconductors, are also threatening aluminum, warns Lars-Peter Häfele from the Inverto purchasing consultancy, a subsidiary of the Boston Consulting Group. He justifies this with emerging bottlenecks in magnesium, an indispensable raw material for aluminum production. As with semiconductors, German industry is also heavily dependent on China: 87 percent of the magnesium produced worldwide comes from there. Extracting it from rock consumes a lot of energy. Due to problems in the power supply, the Chinese authorities are currently taking important production facilities out of operation. The first supply bottlenecks could arise from mid-November. “A problem is emerging here that many German companies are only now perceiving,” says Häfele, “how strong the effect will be depends solely on China.” There are also larger magnesium deposits outside of China, for example in Russia, but magnesium is mainly produced in China.
There is still no shortage, nor are stocks available. But supply problems could not only hit the German auto industry, but also manufacturers of packaging, electronics, windows and doors and mechanical engineering. And: no other industry needs as much aluminum as car manufacturers. In a global comparison, according to Häfele, Germany has the highest aluminum consumption per inhabitant – due to the high number of vehicles produced.
computer
The Playstation 5 has been on the market since the end of 2020, but what does the market mean here? As soon as they were available anywhere, whoosh, they were sold out again. It was even speculated that VW, Mercedes and Co. could build fewer cars because of the new game consoles. Such a car is just a kind of rolling computer these days, and they just need chips. But the shortage of semiconductors is now so great that it has also hit the computer industry. Those who are unlucky don’t just wait for a Playstation, they wait a long time for a new laptop. Sony boss Jim Ryan is pleased that ten million of the new game consoles have already been sold – a new record. But there could be a lot more, he is annoyed on the other hand. Microsoft’s competing product, the Xbox Series X, is also in short supply and not always available. Like the Playstation, it uses a main chip from AMD. It is quite possible that there are long faces in some families at Christmas.
Books
Christmas without books, that would not be good either. In many families – regardless of the Playstation or iPhone – this is still unimaginable. The shock was correspondingly deep when printers and publishers recently warned: Paper is getting scarce! The delivery dates of individual books were delayed.
According to the industry association, the main reason for this is digitalization, which is leading to structural change: Many factories upgraded or replaced their machines in order to produce packaging paper such as shipping boxes instead of printing, for example. In the meantime, there is no longer a factory in this country that still produces so-called factory printing paper, i.e. the material for the pages in the vast majority of books.
In addition, there is a lack of raw materials, especially waste paper. In the corona pandemic last year, significantly fewer newspapers, magazines and advertising brochures were printed. But this material is important in order to manufacture new goods. Recovered paper prices increased accordingly enormous.
Going abroad is also not an alternative for printing companies and publishers, according to the Federal Association of Printing and Media. Paper is “a predominantly European market – so everyone in Europe is facing the same problem,” says a spokeswoman. And to have it printed in Asia, for example, is also risky because of the long delivery routes and possible quality problems. All of this leads to one thing above all for printing companies when they get paper: higher costs.
But the prices in the bookstores have not risen so far. Will books be scarce at Christmas? Nobody expects that. The bestseller as a last-minute gift should also go this year.
sneakers
880 million pairs of sports shoes were produced in Vietnam in the year before the pandemic. Shoes are produced there for all the big brands, such as Nike, Adidas and Puma, but also for smaller brands such as Asics and New Balance. The European industry leader Adidas sources 42 percent of its sneakers, running shoes and trainers from Vietnam, US competitor Nike half and Puma around 15 percent.
But not much is possible this year. Some of the Vietnamese shoe factories have been closed for many weeks. Puma boss Björn Gulden refers to the rigid anti-corona policy of the government in Hanoi as the reason. In the fight against the coronavirus, she doesn’t know what to do other than to close a plant immediately as soon as even one Covid-19 case is registered there. The employees are then immediately quarantined. However, not home, but in a specially set up corona quarantine warehouse. Less than ten percent of the Vietnamese population is double vaccinated.
“We’ve already lost ten weeks of production,” complains Matt Friend, chief financial officer of industry leader Nike. At Adidas in Herzogenaurach, sales are expected to fall by half a billion euros in the second half of the year. And Puma boss Gulden warns: “That will have a full impact in the fourth quarter if the goods are missing in the shops because they are currently not being produced.” So, of all things, during Christmas business. The brand companies are increasingly having textiles tailored in Vietnam. Even smaller businesses, such as outdoor retailers such as Globetrotter, warn customers about delivery problems with one or the other product before Christmas.
Cycles
If you want to give away a particular bike, you might have a problem. The gears come mostly from Japan, the frame and batteries for e-bikes often from China, the brakes from Malaysia and the saddles from Taiwan. Difficult at the moment, all of that just in time to screw together to a bike in Germany. Because in one part, says Rose Bike founder Diekmann, there is a shortage of raw materials, in some places there are not enough containers available, in other places the borders are closed, and then transports are overbooked.
In Asia there was no production for up to three months. As a result, there is currently a lack of material for an estimated one million wheels. At the same time, the demand for some bikes has increased by up to 50 percent. The mixed situation has led the industry to a “collapse”, said Diekmann. Prospective buyers sometimes have to wait a long time, the dealers are unable to explain. It is difficult to say whether and when the situation will relax, also because there is apparently little information from Asia.
For warehouse logistics in Germany, the situation is pure stress: while some parts are missing, others are stacked up. Meanwhile, the sales rooms are emptying. But if you look, you will find it, and there are still used bikes.
Coconut bar
The American food company Mars has a special kind of mobility problem. An important raw material is just not moving: coconuts for bounty bars. The chocolate bar manufacturer has informed supermarkets and discounters that they are currently unable to deliver the quantities of coconut bars ordered, says a spokeswoman. And that can last. Because it takes a lot of raw coconuts for the bars, which consist of little chocolate but a lot of coconut.
The delivery bottleneck is an “unprecedented problem,” said Mars. The causes are complex: typhoons hindered the harvest in the Philippines, deliveries were delayed, which caused bottlenecks in production. In addition, there were limited freight capacities due to the corona pandemic. Last but not least: “We are still feeling the effects of the blockade of the Suez Canal,” said a spokeswoman. Mars counteracts this with many measures. Even so, bounties could remain in short supply on the shelves.