The latest supply chain report by reichelt elektronik provides surprising insights into supply chain issues of the past three years
Sande, Germany, 6th November 2023 – Shortages of spare parts and chaos within supply chains have long become part of everyday life for European industries. Hopes that markets and supply chains will relax have faded. Supply chain disruptions continue to keep 81 per cent of European industrial companies on their toes. And for the third year in a row, reichelt elektronik surveyed 1,250 European decision-makers from various industrial sectors for this year’s supply chain report.
Despite everything, almost half (47%) of industry decision-makers believe the state of affairs will improve in the future, while 41 per cent are convinced of the opposite. In 2021 on the other hand, almost two-thirds still had a positive outlook of the future. Looking at the resilience of their own company, survey participants are confident, even though the majority (56%) agrees that their company has suffered significant losses within the last three years. They believe that these losses have been compensated for by implementing a reliable system to overcome supply chain difficulties (70%).
It’s all in the mix – just-in-time goes hand in hand with stockpiling
When material stock is running low, deliveries are delayed or fail completely – production in Europe’s manufacturing sector comes to a standstill. The results of this year’s survey show an improvement compared previous years: While there was an average of 36 days of production downtime in 2021 and even 47 days in 2022, companies needed to halt production for only 33 days in 2023. Mind you, 17 per cent of respondents report not being affected at all despite the many challenges. This data clearly shows the success of the measures implemented within the past twelve months.
The trend of increasing inventory as one of the first countermeasures to supply chain bottlenecks continues. In 2021, 47 per cent of surveyed companies pursued this strategy, while in 2022 it was 57 per cent. Little has changed this year, with around half of all surveyed companies continuing to pursue this strategy, while an additional 38 per cent plan to further increase their stock of specific, critical components in the coming twelve months. Specifically, this includes the manufacturing industries of computer hardware components and electrical components, as well as the automotive industry, where about half of companies utilize this measure.
40 per cent of respondents are planning to return to the just-in-time concept in the coming twelve months, while almost a third has already returned to it within the last year. Nevertheless, they still stock their warehouses with the most important components. Especially the electronics, computer hardware, and textiles industries as well as the transportation, distribution and aerospace sectors rely on this combined approach. The return to just-in-time-production confirms the results of reichelt’s 2022 survey, wherein more than half of respondents could see themselves coming back to this strategy.
Suppliers should be flexible, local and reasonably priced
Despite the persistently volatile supply chain, the procurement of components and materials has improved significantly over the last two years, with only 38 per cent still having difficulties. In early 2022 however, over 82 per cent stated they had faced this problem in the previous year. Price hikes for critical components are particularly worrisome for most: While 43 per cent of companies confirmed this in 2022, it is now 70 per cent. The concerns about a shortage of skilled workers (54%) as well as concerns regarding supply shortages for critical components such as microelectronics (55%) are similarly pressing. While the fear of inflation is omnipresent – 61% of participants see it as a risk factor – as is the fear of rising or persistently high energy prices (59%).
The supply chain report highlights one novel strategy in particular, that in addition to increasing stock in 2023, is especially important in order to confront supply chain bottlenecks and build or maintain resilience: A large majority of companies (92%) see supplier diversification as a core strategy. European industry additionally favours onshoring, i.e. switching to local suppliers (84%) and switching to lower-cost suppliers (81%). These strategies consist of becoming more independent from individual suppliers as well as world and trade policy events and are intended to guarantee the security of a supply of resources and components.
In view of world events, the desire for independence is growing
While there was still hope in 2021 for the supply chain turmoil to end – at the time the perceived end of the Covid-19 pandemic – the economic and political situation in Europe and the world had come to a head: Conflicts in Europe’s East and the Middle East, economic recession and inflation as well as increased workloads due to environmental regulations and new supply chain laws posed a great potential threat for industrial companies in Europe. Particularly the war between Ukraine and Russia, with 52 per cent of respondents stating it having a major impact on global trade.
Nevertheless, the European industries do not allow themselves to be paralysed, neither by dire global events nor by new laws and regulations, continuing to work steadily within their sphere of influence. 69 per cent are already able to implement the new regulations of The Act on Corporate Due Diligence Obligations in Supply Chains or are advancing well in this endeavour. This is also illustrated by the measures planned for the coming year or the measures already implemented last year. Here, 77 per cent of companies surveyed are switching to more environmentally friendly suppliers, while 70 per cent are switching to suppliers who can demonstrate compliance to human rights.
The desire for independence seems omnipresent in 2023: The majority of companies (82%) hope for greater support from governmental bodies for research projects within the EU in areas such as semiconductor production or other essential components for remaining competitive and becoming more self-sufficient. In 2022, only 40 per cent were in favour of this, and in 2021 it was only 38 per cent. 70 per cent would like to see deeper specialisation into new branches of technology in the future, as they see better opportunities to expand technological leadership there, for example in quantum technology (62%).
Images: Adobe Stock, reichelt elektronik
