Why are the supply chains from Asia disrupted?
Made in Germany has always been more than just a designation of origin. As a seal of quality, for many people it stands for quality and longevity - although when it first appeared in 1887 by a decision of the British trademark law, it did not emphasize the positive feelings among consumers worldwide today.
A recent survey by Cambridge University found that consumers in 23 countries surveyed had the most positive impression of all countries surveyed when production took place in Germany. Right? We think it depends and there are many differences in every industry.
Our pride in our products and our joy in them is of course based on the quality that we can create every day with our state-of-the-art machines using high-tech processes. Our products are all manufactured according to the high German standards. However, since we not only manufacture the end products (e.g. FFP2 masks), but also the raw materials (high-tech fleece) in the previous step, we act independently, which means that we are not dependent on imports. Therefore, we would hardly be affected by global restrictions, as we can continue to manufacture products of the highest quality independently and without a break.
We are already producing today at such a high level that far exceeds (national & international) standards, so that we are already prepared today for any demanding developments tomorrow.
We are therefore pleased to be able to provide personal protective equipment (PPE) for safe and comprehensive protection for every user, not only today but also in the future.
PPE Germany operates in Germany and independently of Asia
As a modern and globally thinking company, we are of course keen to observe world events in many aspects. The pandemic has highlighted many developments, which, among other things, also affected the supply chains due to a shift in the demand for many goods. Many companies that depended on the constant import of their own raw materials had to change. Not only Harvard Business Review reported on these strong adjustments by many companies in October 2020, but also many other publishers.
Recent reports such as that by Foreign Policy also paint a picture that predicts major changes internationally. The current situation between China and the USA is burdening world trade and leading to delays in delivery - with global effects.
The local corona outbreaks in China in particular are the result of a low vaccination rate and the spreading Delta variant, as well as Omicron. Due to the lack of workers who are infected with Corona or who cannot enter the country, production is interrupted in the affected companies.
Global impact on unprepared firms
This hits the economy even harder, because strict entry restrictions and long quarantines inhibit business initiation and the start of new projects at international level. Consumer goods are a long time coming, causing many buyers to worry about future seasonal business and supply chains. A shortage of shipping containers, which are vital to modern supply chains, is also contributing to disruptions in imports and exports from China. Normally these containers circulate all over the world, but many are now stagnating in North America. Out of every 100 containers that arrive there, only 40 are shipped back to Asia or Europe. In Los Angeles and other US ports, excess containers are piling up as Asian suppliers fight over them. From today it will be months before container manufacturers in China can meet their demand again.
But why are so many companies so dependent on Asia?
First of all, it makes sense to hand over areas of production to other locations, since the labor and materials are cheaper there, for example. Aspects such as trade taxes or insurance premiums can also be relevant for such a decision. In addition, the outsourced production sites can score with a high level of availability, as they only specialize in one area.
However, outsourcing also has general disadvantages, such as the long delivery route. In the course of the transport route, the imported goods pass through a large number of distribution facilities and transport hubs that are prone to delays.
Many ports around the world complain about backlogs that are forming. Asia is therefore the starting point of the faults and the disrupted transport routes. There are around 25 million sea freight containers in circulation worldwide and around 6,000 ships. According to a flash survey by the DIHK in August 2021, more than half of the German companies surveyed currently reported delivery problems due to import difficulties from Asia. Currently, the shortage of containers and a lack of freight capacity on ships, as well as numerous port blockades and closures of terminals and airports are causing disruptions in the supply chains.
Impact on supply chains at companies worldwide
The region around China and neighboring countries accounted for 21 percent of imports to Germany in the first half of 2021, while in 2009 the share was less than 18 percent. But with increasing imports from Asia and the development of the corona virus, it is primarily the Chinese exporters who are asking ever increasing prices for imports. As a result, buyers worldwide face more political and competitive pressures and their domestic production increases. This increases employment in their home countries, reduces or eliminates reliance on sources they perceive as risky, and reconsiders the use of lean manufacturing strategies and claims inventory minimization in their global supply chains.
The challenge for companies now is to make their supply chains more resilient without weakening their competitiveness. In order to master this challenge, weak points must first be understood and a number of measures must be taken. Understanding where the risks lie so your business can protect itself may require a different perspective. This requires going well beyond the first and second tiers and analyzing the entire supply chain, including distribution facilities and transportation hubs. Unfortunately, this is very time-consuming and expensive, which is why the large companies usually only focus on strategic direct suppliers. In the longer term, this challenge, demographic in nature, is likely to drive supply chain diversification away from China as economic reasons as well as existing security concerns and political vulnerabilities add weight to the decision.
These are all steps that PPE Germany does not even have to take. Since we already produce completely in Germany at the Berlin location. With the latest process technologies, state-of-the-art machines of the latest generations and at absolutely competitive prices on a global level.
Conclusion
In summary, the economic turbulence caused by the pandemic has revealed many weak points in the supply chains of companies worldwide and raised doubts about the globalization that has developed to date, which means that a strong turnaround can be expected within the next decade. Managers worldwide should use this crisis to analyze their supply networks and take steps to understand their vulnerabilities, thereby taking action to make the company more resilient to the next crisis from every perspective. Companies cannot and should not withdraw from globalization, because this would leave a gap that other companies that do not want to give up globalization will gladly and quickly fill. Instead, leaders must find ways to make their own organization better and give themselves an edge from these new perspectives. It is time to develop a vision that does justice to the realities of the new age. This should continue to leverage the capabilities that exist in the world, but also improve resilience and reduce the risks of future disruptions that are sure to occur. Still, some of those who will forgo necessary or desired items are the consumers.
These are all steps that PPE Germany does not even have to take. Since we already produce completely in Germany at the Berlin location. With the latest process technologies, state-of-the-art machines of the latest generations and at absolutely competitive prices on a global level.
