Consequences of the Natural Gas Embargo According to BME for Supply Chains Unforeseeable

A recent survey by the Federal Association of Materials Management, Purchasing and Logistics e.V. (BME) regarding the Ukraine war revealed that a potential energy stop would pose a significant threat to the German economy, but could also present an opportunity for more sustainable energy in the long term. In any case, the uncertainty among respondents is high.

(Eschborn) The war in Ukraine is hitting the German economy hard. “There is almost no company that is not affected,” said Gundula Ullah, Chairwoman of the Federal Association of Materials Management, Purchasing and Logistics e.V. (BME), on Tuesday in Eschborn during the presentation of the BME survey “Purchasing in the ‘NOW’ – Crisis Manager, Supply Designer, Future Maker.”

“According to the current results, 98 percent of the surveyed companies expect negative economic impacts on their businesses. More than a quarter of them even consider their own development to be critical. In companies, purchasing in particular faces significant challenges,” added BME Managing Director Dr. Helena Melnikov. Almost 50 percent of raw material and energy supply, as well as over 20 percent of logistics and production, are negatively affected by the impacts of the Ukraine war. More than two-thirds of respondents felt increasing pressure on their supply chains; some companies have already reported massive disruptions.

Feeling the Western Sanctions Against Russia

81 percent of survey participants stated that they directly feel the Western sanctions against Russia. “The situation in Ukraine is leading to an exodus of German companies from Russia. Only seven percent of participating companies see Russia as a procurement market. As a sales market, it is still significant for 21 percent,” explained Ms. Ullah.

“The uncertainty regarding future energy supply and the high, increasingly tightening inflationary pressure severely dampen the outlook for the German economy. Moreover, the impending natural gas embargo hangs over it like a sword of Damocles,” emphasized Ms. Ullah. The resulting consequences are unforeseeable. Over 75 percent of the companies surveyed by BME expect production stoppages for themselves or their suppliers in this case. The finely tuned system of the division of labor in the German economy is in serious danger.

Shortage of Raw Materials and Production Materials Intensifies

Purchasing bears a significant burden, especially regarding energy supply. Alternatives and short-term solutions are very limited. However, this situation is intensifying a rethink regarding alternative energies among companies and could provide a boost for the climate-neutral transition away from fossil fuels.

The military conflict is also exacerbating the shortage of raw materials and production materials. 70 percent of companies currently have difficulties replacing goods and raw materials previously sourced from the region with supplies from other markets. Currently, there is a particular shortage of steel and steel products, energy, logistics services, as well as food and agricultural raw materials.

The BME Federal Chairwoman mentioned further insightful survey results. Price increases across the board and growing competition for increasingly scarce resources are exacerbating the already strained economic situation due to the Corona pandemic.

Regional Procurement Markets Come into Focus

According to the current BME survey, regional procurement markets are coming into focus as serious alternatives after decades of globalization. In the search for replacement suppliers, many of the surveyed companies are now increasingly focusing on the EU internal market. Germany ranks second. The following places are occupied by Central, Eastern, and Southeastern Europe as well as Turkey.

“The high degree of uncertainty about future developments makes it clear that German companies must also prepare for extreme events such as an energy embargo. The purchasing department, as the guardian of the external value chain, thus has a central and important task within the framework of business continuity management,” said Ms. Ullah in conclusion.
Profile of the BME Survey Purchasing in the ‘NOW’ – Crisis Manager | Supply Designer | Future Maker:

• Survey period: April 9 to 15, 2022
• Participants: 96 purchasers from various sectors including mechanical engineering, energy, automotive, chemicals, and pharmaceuticals.

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