Transportation problems, the rise in the price of raw materials and energy or the lack of essential components such as microchips: the industry tries to weather a “perfect storm” that has disrupted companies’ plans, has skyrocketed costs production and, far from abating, threatens to continue disrupting markets well into 2022 .
Businessmen and experts assure that it is an “extremely complex” situation that “goes on for a long time” and that it is a direct consequence of the covid-19 pandemic, which in 2020 paralyzed world activity, causing a real convulsion in the chains of production.
After the worst of the epidemic, demand has recovered, but many companies are having serious difficulties in meeting their commitments to customers, either because some components and raw materials, such as wood, steel or cardboard, are in short supply. because supplies arrive late due to transportation problems or because they have skyrocketed in price in recent months.
“What is happening is a real outrage. Every two or four years there is an imbalance between supply and demand, but this time the breakdown of the chain is absolute. This is war, a real drama,” he explains to EFE David Ortega, Director of Operations of the Montronic Vic company, dedicated to the manufacture of electronic boards for sectors such as industrial, medical or telecommunications.
Chips, the most precious commodity
Montronic manufactures those green plates that integrate electronic devices and that require microchips for their operation, one of the most demanded -and scarce- components worldwide, the purchase of which has become a real headache for companies. .
In its 24 years of activity, Montronic does not remember the same situation: there is a huge demand and few semiconductor manufacturers , so companies must pay much higher prices to get them, and meet delivery times that can reach 60 or 70 weeks, if they are respected.
This company has had to go to “parallel channels”, outside of the official distribution, to obtain microchips, with the economic extra cost that this entails, and once the batches arrive, it checks, manually and with X-rays, that the parts are original and in good condition.
“Everyone breaks the commercial rules, there is a level of disloyalty never seen before,” laments David Ortega, who acknowledges that this situation “creates a lot of anguish and anxiety” and there will be companies that “will not hold out.” “Only the best ones will remain.”
Growth, despite everything
The Mespack company, dedicated to the manufacture of machinery to make flexible packaging, is also suffering the consequences of this global and multifactorial crisis, although this has not prevented it from growing at double digits compared to last year and fulfilling its commercial commitments.
Mespack is part of the American group Duravant and its clients include multinationals such as Nestlé, Unilever, Hero, L’Oréal or Procter & Gamble.
In his case, he has had to cope with a general increase in raw materials, such as plastic, aluminum, steel or wood, with inflations of almost 100% in some products , as well as a shortage of semiconductors already supply problems arising from maritime transport, which is collapsed.
The general director of Mespack, Guillem Clofent, tells EFE that the company, which is part of an international group with activity in multiple sectors, “has seen this situation coming for months,” so that in March it started some actions to alleviate its consequences.
The company, with more than 400 employees around the world, reorganized itself by projects, allied with its large customers to have easier access to semiconductors and increased its inventory to have “a parachute” in the face of the aggravation of the situation.
“Anticipating and managing the day-to-day has been key to weathering the storm,” says the executive, who assures that the company has assumed all the increased costs, since it operates with framework contracts that are valid for several years and cannot be modified. .
To minimize this price increase, the firm has promoted various measures, such as renegotiating with suppliers , applying greater labor flexibility or redesigning the machines, replacing some components with others, simplifying their design and reducing material and assembly hours.
Difficult rebalancing of supply and demand
Joan Tristany, Secretary General of Amec, the community of internationalized industrial companies, acknowledges, in statements to EFE , that the current situation is very complex and it will be difficult to rebalance supply and demand.
And it is that the current demand, reactivated after the stop of the pandemic, is now added accumulated, as well as the policy of companies to increase their inventories and the implementation of economic incentives such as the Next Generation European funds, which will shoot even more global demand , especially for products related to technology and sustainability.
All this will make supply problems persist and prices continue to rise: “It is a crisis of supply , not demand. There is money and the desire to consume, the most serious problem we face is inflation,” warns the director of Amec, an entity that brings together some 350 industrial companies from all over Spain, mainly medium-sized ones.
The pandemic, the origin of everything
For the logistics expert and UPC professor Ernest Benedito, the current situation is somewhat more complex than a mere imbalance between supply and demand, since all the problems have a common denominator: the Covid-19 crisis, which paralyzed the world economy and caused a never-before-seen supply chain crash.
All had to stop, even industrial sectors that face serious difficulties if they do so, and now that demand has grown exponentially we are witnessing a collapse of the chain on a global scale.
In the case of maritime transport, there is also another problem: the repositioning of empty containers , since companies, overwhelmed by the demand for shipping, do not prioritize their relocation to ports where they are needed.
Although the situation is temporary, “going for months, it’s not a matter of weeks , ” he said to EFE Benedito, part of the research group Supply Chain and Operations Management (SCOM) and Professor of the Department of Organization Companies at the Barcelona School of Industrial Engineering (ETSEIB).
No short-term improvement
Entrepreneurs agree that the situation will not change for the better in the short term. “At first we estimated that at the end of the year the situation would return to normal, but now we see the end of the tunnel far away, which is getting longer than expected. (…) At least until spring we will be in an anomalous situation”, says Joan Tristany.
David Ortega, of Montronic, is somewhat less optimistic, who believes that the problems will persist, at least, until mid-2022, since “there are no signs that nothing is going to improve.”
In the same vein, the general director of Mespack, Guillem Clofent, expresses himself, who foresees that the situation will remain the same “until well into 2022 or even all of next year” , since “there are no signs of change in the short term”.
Professor Ernest Benedito estimates that in 2022 it is possible that problems will normalize and that even months later we will return to an inverse situation in which supply, again, is higher than demand.