German Manufacturing Focuses on Diversifying Supply Chains
German manufacturers continue restructuring their supply chains even after the COVID-19 pandemic to reduce the risk of disruptions. This is the result of a new survey by the ifo Institute and EconPol Europe. Companies focus primarily on diversification. Of the companies surveyed, 58% have broadened their supply chains and found new suppliers in the past year. Moreover, one in three companies plans to expand its supplier base further. “Despite the significant decline in supply chain disruptions and material shortages last year, the transformation of German manufacturing's supply chains is still in full swing. Supply chain diversification in particular is a long-term task that requires companies to be committed for the long haul,” says ifo researcher Andreas Baur.
While 45% of manufacturing companies increased warehousing within the last 12 months, only 12% plan further increases in the future. “Many companies responded to the pandemic-related supply chain disruptions by building inventories. In many cases, this process of inventory adjustment seems to be completed,” Baur says. Moreover, 44% of companies report improved supply chain monitoring, while 17% have increased their vertical integration and reintegrated previously outsourced production steps into the company.
There are industry-specific differences in the supply chain adjustments: a particularly large number of companies in the electronics industry have increased the number of their suppliers (80%), as have manufacturers of machinery and equipment (71%). For the manufacturers of printed products, this share is only 28%, in the paper industry 37%. In the automotive industry, many companies are increasing their vertical integration: 34% have started to produce inputs themselves that they previously sourced from independent suppliers.
