Dutch industry relies on inventories again

In June 2021, more than sixty per cent of industrial companies surveyed were still optimistic about an improvement in the next 12 months. Meanwhile, less than half are confident about the future, according to the current survey. 85 per cent of respondents say supply bottlenecks have had a major impact on their business over the past year, even resulting in complete production stoppages.

Companies are experiencing an average of 47 days of production downtime compared to 38 days in June 2021. This increase means that many companies will have to rethink their strategy. In the past, the just-in-time principle was still common. This allowed keeping inventories to a minimum. This appears to be out of date due to the current supply problems.

To escape this dilemma, companies are currently increasing inventories. Sixty-four per cent of all respondents confirmed that they are significantly increasing their inventories. In comparison, only 49 per cent did so in June last year.

Raw material scarcity was a slight concern in June 2021 (38%). Surprisingly, the situation has improved in a few months. Only 27% still see it as a significant risk for the company. It seems that companies in the Netherlands are not very worried about any problems in the next two years.

The biggest concern for companies is that bottlenecks in the supply of critical components such as microelectronics will be a problem (34%). They also slightly fear rising energy prices (30%) and inflation (28%). Concern about a shortage of skilled labour is only shared by 25% of respondents, so it is certainly no longer the biggest concern of companies.

This underlines that Dutch industry is quite independent from the ability to supply certain resources. To remain independent in the future as well, more than half say they are currently re-manufacturing certain products that were previously purchased. 43 per cent plan to start producing certain products themselves again. Only 6 per cent say they have no plans in this direction yet.

However, not all products can be easily produced in-house, such as semiconductors. For Dutch companies, European plants could therefore be an attractive alternative to improve the supply situation. For this, Europe would need more of its own factories, although even then it remains to be seen whether European semiconductors can keep pace with those from East Asia in terms of price.

The survey asked what criteria European semiconductor producers should meet for companies to buy the same product despite higher prices. For respondents, the most important is that security of supply should be guaranteed and met. Also decisive are a minimal price difference (50%), longer-term price stability (36%) and a better environmental balance than competitors (32%).

It is important not to lose touch with the global market in future technologies, such as semiconductor production. Companies want politicians to give more support to local research on future technologies and the production of essential components (36 per cent). In June 2021, only 27% were in favour of this. This shows that a rethink on independence has taken place among companies in this short period.

For all the innovative alternatives, it remains to be seen whether the changes will continue after the pandemic. Seventy per cent think companies will return to just-in-time after the crisis ends - at least for most components. 19 per cent think this is true for all parts, while only 9 per cent say just-in-time is a thing of the past. Whether the changes are permanent or currently just a sticking plaster on the sore remains to be seen.

The survey was conducted by international research institute OnePoll on behalf of reichelt elektronik. The survey involved 1550 respondents, including 250 from the Netherlands.

Source: reichelt elektronik, Photo: Pixabay / Michal Jarmoluk