The current Supply Chain Pulse Check by Deloitte and the Federation of German Industries (BDI) has been published and shows clear pessimism.
The vast majority of companies surveyed expect margins to fall permanently and more than 40 percent are planning to relocate higher-value areas of production. According to the current study, the industry, which is heavily dependent on imports for raw materials and intermediate products, is finding it increasingly difficult or only possible to secure its global supply chains at great expense.
“More than ever, companies need to develop alternative scenarios for their production and raw material supply. In addition to China, countries such as India, Vietnam and Indonesia need to be given greater consideration," says Dr. Jürgen Sandau, partner and supply chain expert at Deloitte.
From the perspective of 64 and 58 percent of respondents, geopolitical risks such as an escalating China-Taiwan conflict and increasing trade conflicts pose the greatest risk to their supply chain strategy.
Increased relocations
There are also other challenges waiting for Germany: Above all, the regulatory requirements in this country are causing problems for companies. For 75 percent of respondents, they are the greatest risk to their supply chain strategy (2023: 59%). "We need to reduce bureaucracy both in the country and in the companies," says supply chain expert Sandau.
Energy policy (72%; 2023: 67%) and the shortage of skilled workers (71%; 2023: 65%) in Germany as well as raw material prices (68%; 2023: 73%) will be similarly viewed critically. Concern about cyberattacks has now reached the top of the agenda of supply chain managers. In the most recent survey in autumn 2023, the issue was only critical for 31 percent of companies. Today, it represents a risk to the supply chain strategy for 67 percent.
The trend towards further relocations is correspondingly large. Almost every second company (49%) has already relocated parts of its value creation and intends to continue doing so. 42 percent plan to relocate higher-value areas of production in the future.
“In this country, we often only see maintenance investments, but no more expansion investments. If this development continues, the prosperity of the future will no longer be created in Germany," explains Sandau.
Companies expect little support on the issue of deindustrialization. Just under a third (31%) of them believe that politicians have recognized the danger of deindustrialization or will even enable the turnaround. A large proportion of companies (86%) would like to see more investment and innovation in this country so that the location can keep up with global competition.
Hope in new technologies and sustainable economies
But the report also contains good news: The current Supply Chain Pulse Check shows that companies are making efforts to attract the location. 72 percent say that they are digitizing their production in order to continue to be successful in Germany. According to 63 percent, new technologies, especially artificial intelligence, have the potential to increase productivity and offset additional costs in this country.
69 percent of respondents see circular economy as a promising means of reducing their dependence on critical raw materials. Two thirds (66%) say that this can reduce costs along the supply chain.
"There is still potential for savings in many industrial companies," says Oliver Bendig, partner and head of the industrial business at Deloitte. "Here, a comprehensive analysis is often more worthwhile than a hasty relocation."
For the third edition of the Supply Chain Pulse Check, Deloitte and BDI, together with the service association ISLA, surveyed more than 120 supply chain managers. They mainly work in large companies in the mechanical engineering/industrial goods, automotive, chemical, construction, and transport and logistics sectors. The survey took place in April and May 2024.
