Storage space instead of emergency transports

400 meters of steel were enough to stop part of the world’s trade. For almost a week, the transverse giant freighter “Ever Given” had blocked the Suez Canal, the most important trade route for Europe’s goods traffic. Ten to twelve percent of world trade passes through the Suez Canal, with 19,000 container ships, bulk carriers and tankers a year taking the waterway in Egypt. Many of them have Germany as their destination or point of departure. Car parts, chemical goods, televisions, smartphones, garden furniture: the Suez Canal is the most important freight link between Europe and Asia.

Some shipping companies decided that their ships should bypass the blockade via the Cape of Good Hope. “The route around South Africa takes six to 10 days longer, depending on the speed,” shipping association spokesman Christian Denso told Manager Magazin. “It is not necessarily more expensive, because the shipping companies save the high fee that is charged for the passage of the Suez Canal.” However, he said, this route is less likely to be an option for ships that have already been stuck in traffic because they would have to backtrack a bit to get there.

Last year, the list of factory stops was already long. The just-in-time concept has revolutionized logistics. Because the necessary parts only arrive at the factory when they are needed, hardly any storage space is needed. Meanwhile, companies are once again investing in more storage space instead of expensive emergency transports. That’s because manufacturers around the world are currently struggling to keep up with rising demand. IHS Markit’s Purchasing Managers’ Indexes (EMI) – a weighted sum of measures of new orders, production, employment, delivery times and input inventory – were above the expansion threshold of 50 points in all major countries in March. Analysts report that global output growth accelerated in March to one of the highest rates in the past decade.

Companies are receiving more orders again and despite the third corona wave, the industry is optimistic about the future. The world’s largest industrial show, the Hannover Messe is running purely digitally this year due to the ongoing tense corona situation. More than 1,800 exhibitors are taking part, and German Chancellor Angela Merkel said at the opening that further economic development depends crucially on the extent to which the spread of the virus can be quickly brought under control. Germany’s core industries of mechanical and electrical engineering are expecting renewed economic strength as early as this year. BDI President Siegfried Russwurm said that a “strong increase of eight percent over the previous year” was realistic for production. The German Electrical and Electronic Manufacturers’ Association (ZVEI) forecasts a five percent increase in production.

At the same time, some companies are worried about problems in the supply chain: There are bottlenecks in the procurement of inputs, said ZVEI President Gunther Kegel. Supply problems exist for microchips, plastics, steel and copper, among others, he said. “Scarce transport capacities are leading to significantly higher costs coupled with longer delivery times.”

Both industry and the chancellor are relying on vaccination and testing to contain Corona infections. “We have to say that this third wave is perhaps the toughest for us,” the government leader said. The business community, however, vehemently opposes mandatory testing. A government requirement runs the risk of making it more difficult for companies to engage voluntarily, according to a letter sent to the Chancellor’s Office by Germany’s top business associations. Instead, the government should provide self-tests for little money.