Supply Chain Chaos: How Disruptions Can Paralyze Your Production – and What You Can Do About It!

A shortage of raw materials, components, or semi-finished products can halt production lines or force companies to slow down operations. A prominent example is the automotive industry during the COVID-19 pandemic. The sudden shortage of semiconductors forced many automakers to reduce or temporarily shut down production. Complex global supply chains and just-in-time manufacturing strategies made it difficult for companies to react swiftly to these bottlenecks.

Supply chain disruptions often lead to significant cost increases. Companies are forced to explore more expensive alternatives, such as express shipments, air freight, or sourcing materials from alternative, often pricier suppliers. A clear example is the metal industry, which experienced steep price hikes during the pandemic. In 2021, the price of hot-rolled steel rose from €661 per ton at the beginning of the year to around €1,200 per ton in the summer, driven by supplier production outages and transportation issues.

Production delays and outages inevitably result in losses in revenue and profits. If businesses cannot deliver products on time, they lose market share and customer trust. During the COVID-19 pandemic, numerous companies reported significant revenue losses due to supply chain disruptions. A survey by the Association of German Chambers of Industry and Commerce (DIHK) found that 36% of companies in Germany were severely impacted by supply chain issues at the beginning of 2022, directly affecting their revenues.

Delayed deliveries and product shortages can severely impact customer satisfaction. In today’s fast-paced consumer market, customers expect reliability and timely delivery. A relevant example is the electronics industry, where delays in product launches have led to negative customer feedback and reputational damage. During the pandemic, shortages of electronic components prevented many products from hitting the market on time, frustrating end consumers.

Irregular deliveries can lead to either overstocking or shortages. Some companies stockpile large amounts of inventory to buffer against future shortages, while others struggle with empty warehouses and inability to meet demand. The construction industry in Germany, for example, faced significant supply shortages, resulting in construction halts and project delays. A 2023 study by the Federal Institute for Research on Building, Urban Affairs, and Spatial Development (BBSR) revealed that supply chain disruptions in 2021/22 were unprecedented for the construction sector, leading to severe inventory management issues.