• 04/13/2021
  • Corona-Krise

Polishing the store front, but what about the workshop?

Dear journalists and editors,

Many of you were curious about our quarterly report with its relatively good figures. What do these numbers actually mean? What does it look like behind the scenes and in our everyday life?
I would like to answer these questions immediately and off the cuff, without using the words coronavirus, pandemic fails, federal crisis management mess-ups or indecisive politicians even once.
I hear enough excuses every day. Unfortunately, more and more from our suppliers. This brings us to the first millstone hanging around our necks: A shortage of raw materials up and down the country. Our storage tanks are empty. We are living from “hand to mouth” and wringing every drop of oil out of our pipes, in order to remain able to deliver at all. Force majeure – events beyond our control – this is what our purchasing department hears when we ask for delivery dates. While we normally move 5,000 t ship loads from the North Sea to our factory in the port of Saarlouis-Dillingen, today we are trucking over country roads and motorways 30 t at a time. Unprofitable, expensive and not at all environmentally friendly. Base stock, packaging materials, canisters and drums, closures, cartons and films. All these are sorely lacking. For some, the lockdown was obviously a knockdown … We are postponing plant expansions and repairs, because artisan businesses and assembly companies are also only complaining about deficiencies in spare parts and materials. 
What’s going on? This kink in the supply hose simply cannot be due to the few ships stuck in the Suez Canal over a few days. I think the people in some companies still prefer hanging around on the sofa, working from home and taking short-time allowances to save costs, instead of rolling up their sleeves. So much for the procurement tragedy we are suffering at the moment. 
And what we are getting has become really expensive. A price explosion has shaken our profitability – between 10% and 20% price increases by our upstream suppliers “effective tomorrow” are not uncommon … We expect a whopping 20 million euro in additional expenses, seen over the current year, for our material purchases in the factory alone. Of course, we are trying to pass on these cost increases to the markets through price hikes. But try doing that in countries whose economies are at rock bottom and where inflation is skyrocketing. 
Speaking of exports: we do two thirds of our business abroad. With around 150 countries.
Do you know what is currently missing? Ordinary containers. Everyone is thinking about a crisis and then there are no sea containers and there are not enough freight options either. Everything is fully booked. All occupied, all on the high seas between Asia and Europe. Crisis? Shop until you drop. That’s more like how it works. Sometimes we wait for weeks and even months until we are allocated freight opportunities again for our overseas export business – regardless of the direction. Not much fun. 
To sum up: There’s little coming in at the front and it’s slow going out the back. In the middle of this supply chain, we work in 3 shifts in order to achieve our goals despite adverse circumstances, to stay on the road to success and to not let ourselves get down. I often say: “Our opponent’s weakness is our strength.” Not only in sport, but also in business, you are only as good as your opponent, the competition, allows you to be. But at the moment, we are only as good as our upstream suppliers allow through reliable supply of goods … I didn’t think something like this could happen again either. Kind of dumb when you call for a sales offensive and your supply lines are clogged. But as long as we don’t discover any oil wells in Ulm or Saarlouis, we’ll just have to deal with the circumstances and get on with it.
We call this “incompetence compensation competence”. Nice word. I recently read about it somewhere. By the way, the situation in the construction industry is supposed to be similar – so I’ve heard.
I hope you all have a great day. Stay healthy and happy!

Best regards,

Ernst Prost
Managing Director