Corona pandemic: "Crisis in procurement is worsening".
by David Fleschen
The global coronavirus crisis is putting increasing pressure on purchasing, logistics and supply chain management. This is shown by a current survey conducted by the German Association of Materials Management, Purchasing and Logistics (Bundesverband Materialwirtschaft, Einkauf und Logistik e.V.). BME (Bundesverband Materialwirtschaft, Einkauf und Logistik e.V. - German Association of Materials Management, Purchasing and Logistics) has carried out a survey among its member companies for the third time within a few weeks.
"To maintain industrial production, many companies are applying different shutdown strategies and measures," emphasizes Olaf Holzgrefe, International Director of the BME. This does not make the work of purchasing in particular any easier. It is "increasingly difficult for them to coordinate value-added and supply chains," Holzgrefe continues. Although the purchasing managers interviewed by the BME are not yet aware of any insolvencies on the supplier side, many of them believe that this situation could soon change. The longer the Corona crisis continues, the more likely this scenario becomes. Currently, only two percent of the companies surveyed in purchasing are not affected by the crisis, 45 percent feel slight negative effects and over 50 percent of the companies feel strong to critical impairment of their business activities.
The Covid 19 pandemic is characterized by growing uncertainty among executives. "Most companies continue to report short-term planning horizons of four to six weeks maximum. So the journey through the crisis on sight is continuing," says Holzgrefe.
Since the beginning of April, Europe's largest buyers' association has been accompanying its members through the Corona crisis. The first two surveys have shown that the measures taken by buyers, logistics experts and supply chain managers are now having an effect. "This shows that the strategic orientation of purchasing is enormously important, especially in times of crisis," says Judith Richard, speaker for the BME specialist group on supplier management. But the longer the crisis lasts, the greater the challenges and the associated pressure on companies.
The current BME survey also revealed that the liquidity of the companies - and above all of the suppliers - is currently suffering extremely. In order to remedy the situation, the survey participants said that they are taking various measures. For example, they are trying to reduce their indirect costs. At the same time, they choose second-source options or activate backup suppliers. Here, however, differences are apparent: While some of the companies surveyed by the BME are reducing stocks of stock materials, others report that they are replenishing their inventories.
The current situation also shows that the longer the corona crisis lasts, the greater the tendency to push back deliveries. 18 (previously seven) percent of those surveyed stated that materials ordered due to postponed customer orders were no longer called off. It is therefore not surprising that the cancellation rate rose from seven percent to 18 percent. In this context, the BME recommends that purchasers regularly exchange information with their suppliers - even if this is not easy in the Corona crisis due to the decentralised working methods.
"Only 22 percent of the companies surveyed have taken a pandemic scenario into account in their risk management activities and only half of them have developed action plans," explains Carsten Knauer, Head of the Logistics Section at the BME. This means that 89 percent of the companies were not prepared for such a crisis. It is therefore more necessary than ever to focus on supply chain risk management.
"In the future, digital risk management will become increasingly important in order to be able to obtain a transparent overview of the entire supply chain. This has been confirmed by her discussions with buyers, logistics experts and supply chain managers," adds Judith Richard.
At an online specialist group meeting, the BME and the participating buyers decided to launch a fourth survey on the effects of the Corona crisis on their business activities. The results will be presented at a digital specialist conference in early June.
Source: BME, Photo: Fotolia