Supply chain problems and opportunities
Pandemic, war, staff shortages: problems in the supply chain
“Supply chains in the German furniture industry have come under pressure over the course of the pandemic. The various effects of the first coronavirus lockdown in March 2020 included interruptions to production at suppliers and restrictions to the movement of goods across borders. The delivery delays for supplied parts caused by the recent coronavirus lockdowns in China and the resulting congestion at ports are also putting the industry under strain,” says Jan Kurth, Managing Director of the Association of the German Furniture Industry (VDM), describing the current situation.
Furthermore, trade is being severely impacted by Russia’s war against Ukraine. Kurth continues: “This comes on top of the effects of the sanctions imposed by the EU against Russia and Belarus. The import and export bans. For some of the companies in our association, imports from those countries are vital. Especially when it comes to the production of slatted frames and input materials for manufacturing upholstered furniture, a significant share of the specialist wood materials used often comes from Russia and Belarus. There are also problems in logistics because of the serious shortage of truck drivers.”
The coronavirus pandemic meant many ports weren’t fully operational – some still aren’t. (Photo: Mika Baumeister, Unsplash
Problems and their effects
When the supply chain is disrupted or even brought to a halt, that’s when the problems really begin for suppliers and manufacturers as well as for retailers and customers. “The furniture retail trade is still experiencing delays to deliveries from some parts of the furniture industry because of the supply chain disruptions that I’ve just outlined,” explains Kurth. And, as if long delivery times were not enough of a concern, other factors are also pushing prices higher and higher. “Due to increased material and energy prices, the German furniture industry’s production costs have risen massively. Our manufacturers are forced to pass these cost increases along the chain,” acknowledges Kurth.
The shortage of raw materials, supply bottlenecks and the coronavirus pandemic have also been named as the greatest threats to frictionless global trade by many respondents to a recent study by the TÜV Association.
So far, there is no sign of these problems being resolved or the situation improving. It seems inevitable that companies will have to rethink their supply chains and how they source their materials.
It’s impossible to predict when the various crises will end. That leaves two options: wait and see or pursue new supply chain strategies. (Photo: Sid Suratia, Unsplash)
Problems create opportunities
At the same time, however, Kurth has also recently noted an encouraging trend, and he reports a return to shorter delivery times. Focusing on domestic markets and trade within the EU could be one way to achieve this. “Almost 60 per cent of the furniture manufacturers who responded to our latest survey of VDM members said they were increasing their efforts to diversify their procurement chains because of supply problems. In particular, they aim to refocus their purchasing activities on the domestic market and the European Union. According to the companies surveyed, Asia and Eastern Europe are the regions that are currently proving to be especially problematic when it comes to sourcing primary and intermediate products and components. This can be attributed to the consequences of the coronavirus lockdowns in China on the one hand and the war in Ukraine on the other.”
At the same time, shifting to local and European production can also help to solve another problem: climate change. Especially in view of the biggest megatrend of the decade – neo-ecology – a rethink of supply chain processes in favour of local and recycled materials is more important and critical to success than ever before. There’s even evidence from the TÜV study that the majority of the companies surveyed would support legislation requiring supply chains to be more sustainable. The study also shows that 67 per cent of companies are already realigning their supply chains as a result of the coronavirus pandemic. Respondents indicated that they would pay particular attention to social factors (74 per cent) and environmental factors (58 per cent) when making adjustments. No fewer than 47 per cent of respondents said they had actually set sustainability criteria for selecting suppliers.
Realignment vs “business as usual”
Supply chain problems and material shortages are currently posing enormous challenges for many companies in the interior design industry. When and if these problems will subside remains to be seen – but there are ways to solve them or mitigate their effects. As difficult as the situation is, now is the time to cast outdated structures aside and embrace the opportunity to move towards more socially responsible and environmentally friendly supply chains.
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