pactuell: Mr. Pfalz­graf, we are hearing from many sources that compo­nents are in short supply. What is the reason for this?

Torsten Pfalz­graf: We are living in a glob­ally connected world; may I suggest you check out VUCA World on Google. Coro­n­avirus has made this inter­de­pen­dence more than clear. And it all came together: We saw uncon­trol­lable economic lock­downs all over the world. And suddenly, suppliers were unable to deliver. Add to that the effect of the US-China trade dispute in 2019: all Western coun­tries stopped ordering their elec­tronic chips from China and started sourcing them exclu­sively from TSMC in Taiwan. This caused the market to over­heat due to demand outstrip­ping supply. Then came the Suez Canal ship blockage and the COVID-related closure of major ports in China in June and August 2021. On top of that, we saw demand spike in many sectors after the lock­downs.

Never­the­less, for us, the coro­n­avirus situ­a­tion also opens up a window of oppor­tu­nity as it will lead to the region­al­iza­tion of procure­ment markets in Europe as well. Supply chain laws and consumer-driven demand for sustain­ability will support this trend.

pactuell: Does all this also affect our own assembly oper­a­tions and hence our delivery times?

Pfalz­graf: Yes, unfor­tu­nately it does, and I know how all our colleagues in assembly, the control stations and the SCM BU are strug­gling to get all the parts together we need to build our prod­ucts. We have a great team spirit, here, that goes beyond divi­sional bound­aries. This is the only way we can meet this chal­lenge together, even if it does some­times push us to our limits.

pactuell: How is Purchasing dealing with this volatile situ­a­tion?

Pfalz­graf: We already responded to the fore­see­able impact of coro­n­avirus on the procure­ment market back in early spring of 2020, and estab­lished a kind of preven­tion system. In the SCM BU, daily shop floor meet­ings to discuss ways of resolving issues in the value creation process have been common prac­tice for years now. Trans­parency and listening closely to suppliers as well as comparing notes with our Excel­lence-United colleagues, purchasing colleagues from networks, or the German Asso­ci­a­tion for Supply Chain Manage­ment, Procure­ment and Logis­tics, are all very impor­tant. It is crucial to constantly provide new momentum –- be it through a supplier day like the one held in July 2021, to which we person­ally invited the managers of specific suppliers, thank-you letters to selected suppliers, or an event like the “After summer vaca­tion” campaign launched by the strategic buyers during which we visited more than 20 suppliers on site.

pactuell: That sounds like a very inten­sive supplier manage­ment policy …

Pfalz­graf: The part­ner­ship with our suppliers is very impor­tant to me. This sets us apart from many of our competi­tors. Rather than “hammering” our suppliers, we have to look at things on a case-by-case basis. The fact is that for many high-tech compa­nies, we are not their biggest customer. In cases such as these, we also act in concert with our manage­ment board. Appealing to a supplier’s sense of social respon­si­bility at manage­ment level is another aspect; because by supplying their prod­ucts, they are playing a signif­i­cant role in supporting the vacci­na­tion campaign or the produc­tion of vital medi­cines in devel­oping and emerging coun­tries.

pactuell: Are there any signs that the situ­a­tion will improve?

Pfalz­graf: According to talks with suppliers, purchasing colleagues from other compa­nies, and the rele­vant trade jour­nals, the volatile situ­a­tion looks set to continue until summer of next year. In the news­pa­pers, we read about week-long assembly line stop­pages at Opel or Daimler. Wher­ever possible, mate­rials are already being stocked up in advance, like at Axito Germany, for example, where we already started to build up suffi­cient stocks of raw mate­rials back in spring, so we haven’t encoun­tered any raw mate­rial prob­lems to date. We are still moving ahead cautiously and must continue to react flex­ibly, keep calm, and work well together to master this crisis. And we will!