C2 Background
Supply chains stretched to breaking point

08.10.2021 The German supply industry is under severe pressure. The shortage of semiconductors is leading to significant production losses in the automotive industry and other important customer sectors. The short-term announcements of plant closures are putting enormous pressure on the supplier companies in Germany, while at the same time they themselves are experiencing massive problems with the supply of raw materials.

German suppliers are sounding the alarm: the semiconductor shortage is affecting the entire industry.
© Photo: @pexels – pixabay.com
German suppliers are sounding the alarm: the semiconductor shortage is affecting the entire industry.

After the Corona shock and the sudden drop in orders in the first quarter of 2020, the assembly lines are once again at a standstill after a short recovery. The background to this is the supply interruptions for semiconductors, which are built into almost every product. For the many suppliers in Germany, the situation is coming to a head. Binding orders are cancelled at short notice, sometimes with one day's notice, and trucks have to turn back. The suppliers' delivery warehouses are overflowing, resulting in enormous additional costs for logistics and storage. At the same time, the customers, such as car manufacturers, refuse to accept the ordered goods and reject justified payment claims from their suppliers with reference to the chip shortage. Suppliers are deprived of the necessary liquidity and the basis for planning.

Unprecedented pressure

Stable and mutually appreciative relations between the automotive industry and suppliers would be particularly important at present. Suppliers, for their part, are under unprecedented pressure – due to the considerable distortions in global supply chains, in which comparatively small disruptions repeatedly have enormous and long-lasting effects: They themselves have to buy in difficult markets. Many raw material prices, such as for steel, metals and plastics, are at historic highs. In some cases, the required quantities are simply not available. And at the same time, energy prices are rising sharply. This puts additional strain on suppliers' liquidity. For many small and medium-sized enterprises, this could mean the end.

Confidence is waning

Christian Vietmeyer, spokesman for the German Suppliers Association Arbeitsgemeinschaft Zulieferindustrie (ArGeZ), says: "An important asset is disappearing, namely trust in the reliability of customers and their call-off notices. Things cannot go on like this. Those who still want strong value chains tomorrow must not unilaterally pass on risks and ignore contracts now. We need transparent communication, more honesty and fair dealings with each other in the supply chains immediately. In any case, the technological change in mobility will only be manageable with the suppliers."