Tense situation on the procurement market
Stable Supply of Materials Thanks to the BVS Purchasing Team
According to a June survey by the ifo Institute, many companies expect the material shortage in German industry to last for at least another 10 months. At the same time, 74.1 percent of companies reported shortages and problems in procuring intermediate goods and raw materials. Our colleagues in the BVS Purchasing department confirm the difficult situation, which has unfortunately become part of everyday life since the first pandemic-related lockdown. However, despite all the challenges, our team has managed to secure the materials needed for the ongoing production of customer-specific products made from sheet metal, assemblies, and end devices.
The Current Situation with Suppliers
There are many reasons for the veritable storm in global materials procurement: Supply chains are out of sync, there are shortages of many raw materials, a lack of containers, a sharp rise in demand in certain industries, production outages, and—for the past few months—a massive increase in energy costs as a result of the war in Ukraine. All of these factors are making the work of the BVS purchasing team more difficult.
“Our buyers have to order quotes for metals very promptly, as prices are sometimes limited to one hour, explains Harald Steiner, Managing Director of BVS Blechtechnik. We receive comments from suppliers such as “The market has escalated in recent weeks due to current world events. Raw material and energy supplies, as well as logistics costs, are among the main drivers of developments.” It goes on to say: “The price increases originally planned by manufacturers for Q2/22 have been overtaken several times in recent weeks….You must continue to assume very significant price increases.” Therefore, daily reassessments of customer orders are unfortunately necessary. The price increases for stainless steel peaked in April 2022, when prices for stainless steel were 180% higher than in October 2020.
Even standard items such as screws have a delivery time of approx. 40 working days. The situation in the paper industry is also extreme; we only receive delivery date commitments for our packaging two months in advance, with price mark-ups of up to 30%. The situation in the electronics sector remains difficult, as electronic components are mainly shipped from Asian suppliers to German customers. Furthermore, lathe operators or milling cutters, for example, do not produce new items. Due to very high capacity utilization, only known parts can be ordered here. In addition, the limited driver capacity for trucks means that small quantities cannot be removed, as only whole loads are shipped.
BVS Purchasing Plans with a Long-Term Perspective, but Adjustments Are Inevitable
The causes of the increased workload—particularly in purchasing—as well as various delivery delays or price adjustments, are therefore complex. Mr. Steiner recommends: “We urge our customers to plan in stages, provide us with your desired monthly quantities, and share your forecasts for the next six to twelve months with us.” In this way, our purchasing team aims to secure certain quantities of the required materials early on and place orders proactively. Thanks to the excellent communication between our buyers and many long-standing business partners, our material supply remains stable. Unfortunately, we are forced to factor the increased procurement costs into our quotes and hope for your understanding regarding these drastically changed conditions.
