Relocation of production in times of Corona
Stabilising supply chains and reducing costs while bringing back production in times of Corona
Key points at a glance:
How has the coronavirus pandemic impacted the supply chains?
The pandemic impeded transport and delivery of supplies due to extensive lockdowns in some countries (e.g. India). Supply chains that at other times functioned perfectly became unstable or even collapsed. This meant that important components for further processing were missing in some cases, severely jeopardising production in Germany. There was also a shortage of much-needed products, especially in the medical sector. Masks, medicines and other pharmaceutical products are mainly manufactured in China and India and were lacking in Germany. This led to increased discussions about whether to relocate production back to Germany to a greater extent in order to reduce our dependence on other countries and boost supply security.
How can supply chains and production be secured?
The coronavirus crisis and Brexit have shown that global supply chains are very vulnerable. If important consumables or parts required for further processing are missing due to delivery delays, this can have severe turnover and production consequences. Various measures could conceivably mitigate these problems:
Increasing stock levels in Germany
Securing transport routes
Relocation of production back to Germany or to Europe
To avoid increased storage costs or high transport costs for emergencies due to air freight in the long term, it might make sense to relocate the production of certain components, parts or products back to Germany or the EU. This would reduce transport costs and routes as well as dependence on foreign countries.
Although as an export nation Germany is unlikely to bring back all its overseas production, there is reason to believe that at least a part of the production of critical or very important products may be relocated back to Germany.
German industry is currently giving this more thought.
How can relocation of production back to Germany succeed?
State-funded subsidies for locations in Germany
There are increasing calls for the state to promote production in Germany. This can be done through either direct investments or municipal subsidies (e.g. reduced trade tax or similar). From an overall societal perspective, such measures especially make sense for strategically important goods (such as medical products). The coronavirus exposed the need for this – especially in the first phase of the pandemic when there was a shortage of masks. Many medical products are manufactured in China or India and were suddenly no longer available in sufficient quantities at the beginning of the pandemic.
Cost reduction through increased use of machines in production
Due to lower labour costs, many production steps can still be carried out abroad manually, which would not be possible in Germany. Labour-intensive work would have to be carried out by machines in Germany. Thanks to the high level of machine-building expertise in Germany, there are already a large number of serial production machines that could be customised to take over various production processes.
The importance of special machines
If there are no suitable serial production machines, custom-built special machines can be used. Designed and built to meet the specific need, they can ensure the production of high quantities in reliable quality and thus enable efficient production in Germany.
Further increases in production efficiency thanks to Industry 4.0 and AI
Major technological developments are underway that will change work processes – including in production – in the long term. Above all the buzzwords “Industry 4.0” and “AI” (artificial intelligence) come up time and again in this context. Industry 4.0 and AI can boost new machine-building developments and adaptations as well as the digitalisation process and thus increase the efficiency of production in Germany. Relocating production (back) to Germany would thus be more cost-efficient.
The coronavirus pandemic has revealed just how deeply production depends on reliably functioning supply chains. There can be sudden shortages in important medical goods, and just-in-time production works only if deliveries arrive right on schedule – otherwise, production stops. Although the solution will certainly not be a complete relocation of all production back to Germany, this could definitely be a strategy for certain core and vital products. To make production in Germany more efficient and cost-effective, it makes sense to increase the use of serial production and special machines. As a special machine construction and serial machine customisation specialist, GEYSSEL is happy to assist you with experience & competence.
Although lockdowns and limited transport capacities in some countries resulted in delivery delays during the pandemic, Brexit or the global shortage of containers also lead to delivery bottlenecks and delays.