German Manufacturing Focused on Supply Chain Diversification

Even after the coronavirus pandemic, German manufacturing is continuing to restructure its supply chains in order to reduce the risk of production losses, finds an ifo Institute survey. Companies are focused primarily on diversification. Of the companies surveyed, 58 percent have broadened their supply chains and found new suppliers in the past year. One in three companies is also planning to expand its supplier base further. “Despite the significant decline in supply chain disruptions and material shortages last year, the supply chain transformation in German manufacturing is still in full swing. Supply chain diversification in particular is a long-term task that companies really have to commit to,” says ifo researcher Andreas Baur.

Last year, 45 percent of manufacturing companies also made increased use of warehousing. However, only 12 percent are planning such increases in the future. “Many companies have responded to the supply chain disruptions caused by the pandemic by expanding their inventory. In many cases, this adjustment process now seems to be complete,” Baur says. Moreover, 44 percent of companies report improved monitoring of their supply chains, while 17 percent have increased their vertical integration and reintegrated previously outsourced production steps into the company.

There are industry-specific differences in the supply chain adjustments: a particularly large number of companies in the electronics industry have increased the number of their suppliers and sources of supply (80 percent), as have manufacturers of machinery and equipment (71 percent). In contrast, this figure is only 28 percent for printing companies and 37 percent in the paper industry. In the automotive industry, many companies are increasing their vertical integration: 34 percent have started to produce inputs themselves that they previously sourced from independent suppliers.  

Questions can be directed to: Andreas Baur, 0049 89 9224 1280, Baur@ifo.de