Dusseldorf Long delivery times, high prices – Frank Spaleck has had enough of the tense situation in the supply chains. That’s why his company manufactures more of the preliminary products itself. He says he doesn’t want to and can’t completely replace suppliers. “But because quality and availability have declined, we want to take over larger parts of the added value ourselves in the long term,” says Spaleck, owner of the plant manufacturer of the same name from Bocholt.
The company produces machines mainly for the recycling industry and generates sales of 65 million euros. Spaleck has expanded the painting capacities at its headquarters, which is why it hired more employees and rented a new hall. He is also expanding his plant in Romania. More machine components are now manufactured there in-house and no longer bought in. “The delivery bottlenecks have accelerated this investment.”
Like the company from Westmünsterland, 61 percent of German industrial companies want to expand their internal value creation, and a further four percent are currently planning to increase their insourcing activities. This is the result of a study by the market researcher Kantar on behalf of the consulting firm FTI-Andersch, which is available exclusively to the Handelsblatt. For this purpose, 100 companies from medium-sized industry were surveyed.
Germany’s industry is driving de-globalization because of incomplete supply chains. In China, Covid restrictions are still causing delays, containers are still in short supply and there is a shortage of truck drivers due to the war in Ukraine. After decades of outsourcing, two-thirds of machine and plant manufacturers are now aligning their procurement more regionally again.
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“Many companies are completely reassessing the risk-opportunity ratio of insourcing,” says Karsten Schulze, board member and partner at FTI-Andersch. At the moment, companies do not want to save money, but to reduce risks. In order to force insourcing, 72 percent create new machines, 59 percent hire more employees – if they can find them.
“Every era has its overreaction”
Advisor Schulze warns, however, that companies should not swing from one extreme to the other: “Insourcing must be very targeted and not action-oriented.” In the long run, it could be better to have parts of the production outsourced because you may not be able to fully utilize your own capacities.
The Austrian children’s bicycle manufacturer Woom also made this experience. The management wanted to shift production completely back from Asia to Europe. This decision was recently revised. According to CFO Paul Fattinger, you can’t just plan your business on the basis of container costs: “Every era has its overreaction.”
>> Read more: Bicycle manufacturer Woom wants to produce in Europe again – but encounters problems
The rapidly rising energy prices could slow down the trend towards regionalization again. “As a result, industry in Europe has massive locational disadvantages,” says Schulze. A certain correction of the outsourcing of the past few years makes sense, but a balanced mix is important.
Industry reviews supply chains
The study also shows that the industry is reviewing its supply chains. 85 percent are looking for new suppliers in order to position themselves more broadly, 77 percent are increasing their inventories in order to better arm themselves against fluctuations. Seven percent even have to stop their production due to missing parts.
So also the engine factory Hatz. Because parts are missing, the assembly lines stand still at times, and customers are sometimes supplied late. “We don’t always get the right material in the right quantity – and not at the right time either,” says technical director Simon Thierfelder.
The medium-sized company from near Passau builds diesel engines for the construction industry, but the required cast parts, control units or wiring harnesses are scarce. “We had problems with regional suppliers as well as with South American ones.”
That is why Hatz fundamentally reassessed its 400 suppliers, looked for second and third suppliers for individual materials or parted with unreliable partners. “We have made enormous relocation efforts,” says Thierfelder.
Intense competition for suppliers
In practice it is difficult to find new suppliers because almost all companies are looking for them. “In the short term, it can help to increase the number of suppliers,” says consultant Schulze. “In the long run, depending on the situation, it may be more promising to conclude long-term supply contracts or form purchasing alliances with other companies in order to become more relevant for suppliers.”
That also encourages Hatz. The family company has concluded long-term contracts with some suppliers – as did 72 percent of the companies surveyed. According to Thierfelder, Hatz is also working on purchasing partnerships with customers or competitors, but it is a complex task. “For example, we have to check whether the number of items and the products really match.”
In order to gain time, a third of the companies in mechanical and plant engineering are willing to accept price surcharges for missing products at short notice. If, for example, a screw is missing, companies pay several euros instead of a few cents – the main thing is that the order, which costs tens of thousands of euros, is completed. Schulze says: “Mechanical and plant engineering is often dependent on individual sub-suppliers. It can therefore make sense for companies to accept price surcharges on a situational and transitional basis.”
Higher stock levels in the fight against long delivery times
The Edelmann Group from Heidenheim has found a different strategy. The company with its 3,000 employees produces high-quality cardboard packaging for perfumes and medicines. However, cardboard is in short supply, also because more and more consumers are ordering online as a result of the experiences of the pandemic and cardboard is also needed for packages. The family business struggles with long delivery times, CEO Frank Hornung waits two to three months instead of two to three weeks.
The manager has not only strengthened the cooperation with the regular suppliers, but also expanded the storage capacity by a quarter. “We delivered every free centimeter that could be found with our boxes. That was difficult.” And expensive: Because the price of cardboard has risen and the warehouses are larger, the product value is now 1.5 times higher than before.
In one case, the medium-sized company, which has a turnover of 300 million euros, even transported cardboard from China to Germany at its own expense because a customer would otherwise have had to postpone a market launch. “At least emergencies can be solved with such absurd delivery routes.”
Where possible, Hornung uses thinner cardboard to alleviate bottlenecks. For the rest of the year, the manager expects a slight relaxation. “The situation is stabilizing at an unfavorable level.”
More: “60 percent additional costs” – the first companies are canceling their orders or rejecting them