Shorten transport routes
According to a DIHK survey, many German companies are increasingly sceptical about cooperation with suppliers from China, are looking for alternatives to the “workbench of the world” and are relying on shorter transport routes. This creates special opportunities for suppliers from Eastern Europe. . by Dirk Mewis
According to German industry, material shortages are hitting world trade harder and harder, and with it export-oriented companies from Germany. According to a survey, more than half of them report problems in supply chains and logistics, said the Association of German Chambers of Industry and Commerce (DIHK) about the current study among 3200 German companies abroad. This is much more than in the spring. “Rising global demand is currently encountering insufficient production capacities and transport problems,” explained DIHK foreign trade director Volker Treier. That is why many companies are reacting by looking for new suppliers or want to relocate production.
This is more difficult for small and medium-sized enterprises than for large corporations. About 30 per cent of the companies complain about a lack of goods and services, every fifth company suffers from its own production losses, for example due to sick leave. Reasons for the problems are, for example, the lack of containers and freight capacities on ships as well as production downtimes. “But the supply chain disruptions are also due to serious trade policy distortions, such as regulations forcing local production,” Treier adds. This applies to China, for example, where German companies are trying to increase the value-added share of their goods with local products. This is becoming increasingly difficult for small and medium-sized enterprises, but the country and the market are too big for them to give up China lightly. For the time being, small and medium-sized enterprises would therefore mainly look for other Asian suppliers.
Eastern Europe is becoming more attractive again
Eastern Europe is now also benefiting from the trend towards diversifying supply chains or shortening transport routes. According to Treier, locations like Ukraine and Serbia are becoming more attractive. This also applies to Turkey, where the currency decline and the issue of legal security are causing problems. Around 54 per cent of the companies are therefore planning to adapt supply chains or have already done so. Of these companies, almost three-quarters are looking for new or additional suppliers, one-third are planning to shorten or change supply routes and around 15 per cent intend to relocate their own production. The situation after Brexit is particularly serious for German companies in the UK. “Here, a total of 77 per cent of companies will have to adjust their supply chains.” Translated with www.DeepL.com/Translator (free version)
At the same time, Gabriel Felbermayr, President of the Kiel Institute for the World Economy (IfW), warns that a “rather peculiar discussion” is underway in Germany. More and more politicians are demanding that the Federal Republic become more independent of foreign countries and achieve a higher degree of self-sufficiency, Felbermayr notes. But if “the whole world starts acting according to that logic, Germany will be the biggest loser.” In the medium term, the Germans are thus laying the axe to their own prosperity, the economist warns. There is no other country in the world that achieves a trade surplus as high as Germany’s year after year. The growing scepticism is in part “reminiscent of the Euroscepticism in the United Kingdom before Brexit”. The British had been told for years that everything bad came from Brussels, Felbermayr said. “At some point, support for Europe actually eroded. The globalisation debate in Germany is similar, it is conducted in a very sweeping manner and with inaccurate arguments,” Felbermayr criticises. Translated with www.DeepL.com/Translator (free version)
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