Deglobalization
Such a disruption of supply chains has not been seen for a long time and it has left many feeling insecure. Illnesses have caused a wave of layoffs in some parts of the world. Factories worked reduced hours or were completely closed.
Some industries, such as the automotive, could not deliver final products due to shortages of key components. All of this encouraged many companies to think about alternatives, and we helped many with advice and knowledge of the market outside their domicile one.
Supply
In such periods of uncertainty, it is necessary to find new ways of securing the supply of key raw materials and semi-finished products. However, this is no longer as simple as just sending a request for an offer. It’s also important to have a real insight into the possibilities of potential partners, as well as their wishes for the future.
If we take the example of the region of Southeast Europe, it is an area which has been neglected for a long time, except for a few key industries that are not profitable to import. The vast majority of production has moved to Asian countries due to lower labor costs, energy costs, transport costs and other reasons. Now when that is over, one must quickly examine the possibilities and build the missing capacities.
Sometimes this will require the buyer and the supplier to enter into a cooperative rather than an opportunistic, price-driven relationship as before.
There will have to be a greater exchange of information and re-establishment of various forms of trust necessary for successful cooperation. Clients and suppliers will likely have to jointly develop new products and technologies, and at a very rapid pace, especially if they want to remain competitive in an already heated market.
New materials, applications and technologies
Manufacturers will definitely have to look for new methods and materials, and their technological applications. The luxury of cheap input materials from the East will no longer be available for some, as certain price increases amount to even 200% of the original. The current routes of hydrocarbon-based materials that traditionally came to Europe from Russia and surrounding countries, former members of the federation, have been interrupted and are under sanctions. Same thing is happening with other materials such as wood semi-products, metals and many other non-food and food products.
That is why procurement will sometimes have to be planned in a way similar to clients investing in the shares of another company to strengthen the partnership, and not in quarterly and annual cycles as before.
The importance of a reliable partner in a volatile business environment is not at all negligible. Loyalty costs money, like everything else, and trust is easy to lose, despite the fact that it takes a long time to earn it.
All parties will have to quickly learn to concentrate on most important issues in communication and maintain awareness of needs at all times. They will have to define their sales and dedicated production contracts in a more precise way. Production will be under tremendous pressure and will not tolerate mistakes and wastage.
Energy, finance and employees
Energy will be the focus of savings for everyone, not only for those companies that produce with high input amounts of energy. Many production processes will need to be revised and new ways will need to be developed to save and retain energy in the processes themselves, without releasing waste heat into the environment, as before.
Financing all of the above will be one of the priorities in the coming period. Entrepreneurs will need to resort to more conservative investment in production equipment and expansion. On the other side, they will have to increase investment in simplification of methods and processes, training of employees and new technology, as significant competitive advantages can be realized in these areas.
Employee recruitment will have to move the focus from quantitative to industry 4.0, radically prioritizing knowledge, process efficiency and continuous improvement.
In the past, it may have been possible to ignore labor productivity because of cheaper labor, but this is not the case anymore. Labor prices in the peripheral areas of the EU are still skyrocketing, fueled by inflation and insecurity, with no indication of when they will stop.
It is now evident that we are facing a challenging period that will not end so soon, but we are among the few who accurately predicted this outcome of the “new normal”. Although the process of change and adaptation is far from over and can seem very exhausting, it also opens up numerous possibilities that were not in focus before.
Strategic decisions are currently extremely important. Feel free to contact us if you have any doubts about your future direction.