Supply problems mount as the holiday season approaches

Supply problems are increasingly weighing on Swiss companies. The demand is there, but because semi-finished products or raw materials remain scarce, production does not follow. More than four in five companies surveyed currently report problems purchasing semi-finished products. Compared to the last survey, a month ago, the situation has deteriorated.

Bottlenecks multiply

The mechanical and electrical equipment industry has been struggling with a shortage of components and semiconductors for quite some time now. The scarcity of materials such as aluminum, wood or plastic has been causing production delays for months, which also affects the construction sector. Wholesale and retail trade is also increasingly affected. Foreign manufacturers of electronic devices such as smartphones are struggling to meet the demand. Supply problems among merchants have increased further with the approach of the holiday season, when this period is so important to them. The difficulties are particularly noticeable with regard to skis, bicycles, certain toys, but also electronic devices. Shortages are therefore now general.

The difficulties relate to products and raw materials, but not only. It is also difficult to hire skilled workers. More than a third of the companies surveyed cannot find enough skilled workers. That’s five times more than a year ago. In other words, the shortage of skilled labor is clearly increasing in Switzerland. It is especially pronounced in the industrial, IT, health, hotels and restaurants sectors. If supply problems persist, some sectors expect an easing in the short term, but in the medium and long term, the need for skilled labor will continue to increase.

New restrictions

Businesses generally have more problems than in October. This is mainly due to the increase in the number of covid infections. Just over one branch representative in five reports absenteeism and revenue declines related to the pandemic. The production and value chains are again more directly affected. About 55% of the companies surveyed say that problems are caused by government measures taken to contain the pandemic in the country of production. This is significantly more than in the last survey.

Businesses most often blame transportation and logistics problems. Insufficient number of containers and lack of loading capacity on ships affect value chains. As for the manufacturing processes, they suffer from disruptions at the production level, at the suppliers. Even if some issues could be resolved, more than half of operators still see this as a reason for the delay. In addition, a comparable number of manufacturers still do not have sufficient production capacity to meet demand. The trade therefore does not expect to be able to meet all consumer wishes in time during the holidays.

More and more companies are responding

Given the increase in demand as well as purchase and energy costs, price increases are inevitable. Nearly 60% of the companies surveyed plan to adjust their prices. In most cases, the advertised price increase is between 2% and 5%. However, these adjustments always take time, so that the price increases will not reach the consumer until 2022.

There is also good news. The flows have certainly slowed down or, at times, even come to a halt, but we are not talking paralysis for the time being. Swiss companies have done everything they can to solve the problems as best they can. More and more of them are increasing their stocks and looking for new suppliers. Nearly 58% of respondents are looking for new suppliers in a country other than the country where they currently work. This is an increase of 10 points compared to October. Thus, companies are striving to diversify their value chains and reduce their dependence on suppliers, especially those from abroad. With this they want to improve the resistance of the value chains.

Most companies currently focus on value chains. They rarely prefer the possibility of integrating the manufacturing processes of semi-finished products. Similarly, only 12% of companies have decided to relocate production to get closer to the end market. Reducing the workforce or increasing partial unemployment is also not currently planned in most sectors.

Uncertainty gains ground

Despite their remarkable adaptability, the affected industries do not expect the supply problems to disappear until 2022. The situation has certainly stabilized, but the appearance of the ommicron variant is a source of uncertainty. In our current economic forecasts, we have extensively analyzed what these different developments mean for the economic recovery in Switzerland.

The economysuisse survey was conducted from November 15 to 29, 2021. A total of 190 organizations participated in this survey, which covers all regions of Switzerland. Twenty-five industry associations participated in a consolidated form on behalf of their own industry. The analysis reflects the current mood of the Swiss economy. The answers have not been weighted and the results are not intended to be representative.

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