Logistics chain: Fragile logistics supply chains – Supply chain under pressure

Global supply chains have come under severe pressure in the past two years. This is shown in the graphic based on data from the Federal Reserve Bank of New York. According to the data, the index shows particularly sharp fluctuations during the pandemic. Between October and December 2021, the index exceeded the 4-point mark. Reports indicate that disruptions caused by Russia's war of aggression against Ukraine will intensify, particularly in Europe. According to the German Transport Forum, the war and the sanctions imposed by the West will have far-reaching consequences for the transport of aid supplies, the movement of refugees, and the processing of foreign trade in Europe. The processing of foreign trade in Europe is currently extremely complicated: there are massive disruptions in supply chains, overloaded border crossings, blocked transport routes, and a looming energy shortage.

Global supply chains are still strained by the pandemic. Many countries have implemented numerous anti-pandemic measures, triggering significant delays in value and supply chains. For example, control and quarantine zones at logistics hubs have led to supply bottlenecks. As a result, many suppliers have been hampered in their production and have been unable to fully meet their delivery obligations. A lack of components can quickly and severely disrupt production processes. Added to this are the shortages of workers due to illness or travel restrictions.

According to the DVF – German Transport Forum, there is a need for action regarding sustainable changes in logistics supply chains:

Changes in logistics chains and hubs

The handling of foreign trade in Europe is currently extremely complicated: there are massive disruptions in supply chains, overloaded border crossings, blocked transport routes and a looming energy shortage.

The lack of deliveries of intermediate goods from Ukraine is leading to reduced production capacity in other European countries, including Germany, and is thus also affecting export and import volumes. The Russian market is currently not being served by almost all major shipping companies, freight forwarders, and courier and express service providers. Furthermore, transport costs in Europe are rising considerably: high oil and gas prices, extended waiting times due to embargo controls, difficulties in scheduling personnel, and detours, for example, due to the closure of Russian airspace, are the main causes.

Action required

• A Europe-wide coordinated political approach and uniform rules as well as facilitations for transport are necessary to maintain supplies and supply chains and to minimize uncertainties about sanctions regulations and their controls.
• The industry needs EU-wide uniform and transparent rules regarding transshipment, embargo requirements, bans on Russian ships and border crossing regimes.
• Similar to the aid deliveries, any simplifications must be implemented to facilitate cross-border traffic. Important measures include the increased digitalization of reporting procedures, simplified COVID testing requirements, and the introduction of green lanes.
• Sunday and public holiday restrictions, as well as relaxations of driving and rest time regulations, are necessary to keep traffic flowing smoothly. To fully exploit existing potential, cabotage rules need to be simplified. The lack of CEMT authorization for Ukrainian trucks is also a critical issue.
• Infrastructure under the responsibility of the federal and state governments must be subject to the same regimes and regulations, which is particularly evident in the case of federal waterways and state-owned port infrastructure.
• In light of current energy price trends, caps or subsidies should be considered.

The Infection Protection Act needs improvement:

Berlin, November 22, 2021 – The amendments to the Infection Protection Act regarding 3G regulations in the workplace and the 3G mandate in public transport will come into force on November 24, 2021. For the mobility and logistics sector, the regulations are not practical to implement. Dr. Florian Eck, Managing Director of the DVF, comments:

"The new 3G regulation for workplaces, mandated by the Infection Protection Act, makes sense for stationary workplaces. However, in the mobile sector, it threatens a lockdown of supply chains. This is particularly problematic for cross-border deliveries. Often, personnel are immunized with vaccines not approved in Germany, making pre-delivery testing impossible. The previously justified exemption of transport personnel from mandatory testing is thus effectively nullified. As a result, company premises and logistics centers cannot be accessed, and supply chains are paralyzed."

“Pragmatic exemptions for transport personnel are now crucial. Since March 2020, companies have successfully implemented entry control systems and developed their own hygiene standards. These must be built upon. Similar to the entry regulations, transport employees must be exempt from mandatory testing, provided their stay at the respective company premises is only temporary and hygiene and protective measures are in place. These entry control systems typically also include separate restrooms for external transport personnel. This solution is also jeopardized by the new law. Likewise, testing capacities at the borders must be expanded.”

Starting Wednesday, due to federal law, only vaccinated individuals, those who have recovered from COVID-19, and those with a negative COVID-19 test will be permitted to travel on public transport. Eck commented: “The mandatory 3G mask requirement for passengers on buses and trains comes into effect without the federal government committing to actively supporting these measures. Transport companies are left to cope with the new regulations of the Infection Protection Act on their own. They lack the resources for the necessary checks, insofar as these are even possible in an open system. The federal government must intervene here, for example, by transferring control duties on public transport to the Federal Police. This also makes it clear that, in light of the ongoing fourth wave, an extension of the financial aid package beyond 2022 will be necessary.”

"It is now the responsibility of the caretaker government, and in particular of Federal Labor Minister Hubertus Heil and Federal Health Minister Jens Spahn, to act quickly and pragmatically. Time is of the essence; the new rules will apply from November 24, 2021. If no exceptions are made, this time the threat will not be at the borders, but at the gates of logistics centers. Regarding public transport, the involvement of the Federal Police in control strategies is crucial; this too must be decided as quickly as possible."

• From a press release by the DVF – German Transport Forum

Fully automated buffer storage – Image: Xpert.Digital / Chesky|Shutterstock.com

• Increase in safety stocks – buffer stocks
• Regional decentralized warehouses/logistics centers
• Regional logistics distribution centers (microhubs)
• Use of high-bay warehouses or automated pallet high-bay warehouses (HBW)
• Suppliers in different regions, avoiding single-sourcing
• Development/expansion of supply chain management with relevant skills
• Expanding Supply Chain Visibility – Supply chain visibility (SCV) is the ability to track the delivery on its way from the supplier through the manufacturer to the consumer

Another important point for the supply chain is increasing flexibility:

• Ensuring security of supply
• End-to-end planning processes
• Flexible manufacturing and assembly network
• Product launch management
• Customer focus through supply chain segmentation
• Unified supply chain structures
• Lean processes
• Human Resources and Talent Management

Flexibility in the supply chain:

• Better manage supplier risk
• Holistic planning
• Make the structure more flexible
• Adapt product strategies faster

Related to this:

• The impact on key industries: What you need to do now
• 7 points and one chance: That force us to rethink our approach
• Supply chain optimization: New logistics strategies, including digital twins