German industry seeks ladder out of supply woes

Stockpiles raw material, components to keep production running amid disruption

GERMANY:

A new warehouse with a freshly unboxed smell is the consequence of the coronavirus pandemic for the German ladder, stool and scaffold-maker Munk.

In the southern town of Guenzberg on the banks of the Danube, the group has invested €10 million ($11.3 million) into the complex to stockpile enough raw material and components to keep production running amid serious disruption to supply.

“I have not experienced anything like it in my 40 years,” CEO Ferdinand Munk said of the shortages that hampered the country’s comeback from the economic impact of the pandemic over the past year.

On Friday, the federal statistics agency Destatis published figures showing Europe’s largest economy shrank by 0.7% in the fourth quarter, curbed by supply chain woes and coronavirus restrictions.

The last three months of the year were marked by the same bottlenecks and coronavirus restrictions which saw Germany limp to 2.8% growth in 2021, according to Destatis.

At Munk, the company has had difficulties sourcing rubber feet for ladders and aluminium, the production of which was troubled by a short supply of magnesium from China.

If the company were not holding double its normal stock of aluminium, “then we would no longer be able to produce because delivery times are now extremely long”, Munk told AFP.

After a crisis meeting with the company’s biggest suppliers near the start of the pandemic, the Bavarian company now has “much shorter supply chains”, said Munk, who sees an advantage in having suppliers that are closer to home.

The newly minted hangar is part of the company’s plan to “come out of the pandemic strong and less dependent” on others, Munk said, as his intention is never to rely on just one supplier.

The ladder-maker will not be the only manufacturer making changes to their supply chains to manage deliveries and avoid disruption, said Fritzi Koehler-Geib, chief economist at the public lender KfW.

While pre-pandemic globalisation had fueled the trend of sourcing further afield in order to cut costs, the health emergency has led businesses to relook at their model of reliance on foreign suppliers.

Businesses will reevaluate “the balance between speed and cost efficiency in their supply chains and their resistance to shocks” after the pandemic, she said.

The dependence of Germany’s large manufacturing sector on supplies of raw material and components meant bottlenecks were particularly relevant for the progress of the economy, Koehler-Geib said.

The country’s flagship carmakers were hit hard by an acute shortage of semi-conductors, a key component in the computer systems integrated into conventional and electric vehicles.

Published in The Express Tribune, January 29^th, 2022.

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