These topics affect procurement and supply chain in 2020
Both the forthcoming US election campaign and the Brexit will create new uncertainties on world markets in 2020. In addition, the effects of economic fluctuations can be felt in the top management levels of the economy. This story will not end without consequences for procurement and the supply chain. In the following, we present topics that will move you in the coming twelve months:
Increasing the minimum wage in Germany
From 1 January 2020, the minimum wage in Germany has risen to € 9.35 per hour, and a minimum salary for trainees has been set for the first time. This applies to trainees who start training in the new year. 515 Euro will be the minimum remuneration in the first year of apprenticeship. This payment is to increase further in the coming years: 2021 to 550 euros, 2022 to 585 euros and 2023 to 620 euros. In addition, the remuneration per apprenticeship year will be increased: In the second year it will be 18 percent higher, in the third 35 percent and in the fourth 40 percent.
In order to counter the shortage of skilled workers, the Federal Government is trying to make training places more attractive and to do something good for the economy. The year will show to what extent the rising costs for companies due to trainees, their own employees in the low-wage sector and rising costs for external service providers or subcontractors will have an impact.
Immigration of skilled workers law enters into force
For many companies, as mentioned earlier, it is difficult to find qualified personnel. Employees from third countries will be able to work in Germany more easily as of March thanks to the new law on the immigration of skilled workers. The law stipulates that professionally qualified skilled workers may work in Germany if they have a job and speak adequate German. Even with a vocational qualification only partially recognized in Germany, it is possible to enter the country under certain conditions, but this only applies if there is a concrete job offer and an already existing regulation on post-qualification. The possibility of finding a job or training place in Germany for six months will also be created for persons with vocational qualifications and potential trainees with appropriate school-leaving qualifications and knowledge of German who are able to finance their own living.
Reintroduction of the obligation to be a master craftsman
Procurement departments and supply chains that make use of non-master crafts enterprises should check to what extent they are affected by the reintroduction of the master craftsman obligation. This was decided for 12 professions and already passed in the Federal Cabinet with the aim of coming into force at the beginning of the year.
Political uncertainties and changing purchasing behavior require agile action
The economic slowdown and the resulting increased competitive pressure, the political uncertainties caused by the Brexit in March and the US election campaign in November demand more flexibility and shorter reaction times from companies. International customs disputes and the growing uncertainty caused by geopolitical factors also call for more agile action. According to the Hackett Group’s „Building next generation capabilities“ study, companies increasingly see a need for improvement and catching up in terms of agility.
Shorter product lifecycles require changes
As product lifecycles and cycle rates become shorter and shorter, companies need to evolve their supply chains to operate faster and more efficiently. Today, a single supply chain is often used for all a company’s products, despite the different life cycles of these products. In order to meet these different lifecycles and remain profitable in the future, companies need to start developing different supply chains. This requires a rethinking and rationalization of processes.
Linear supply chains become a cycle
The linear „in and out“ method – taking, producing, throwing away – used to be sufficient to keep the economy running. Today, this is no longer the case; for companies dependent on commodity costs and volatility, it has become an economic impasse. Circular supply chains are a desirable objective, i.e. the reuse of waste in the context of closed-loop recycling for the manufacture of new products.
However, recycling requires investment first. This is the point at which it often fails and causes the company not to make full use of the possibilities of recycling materials. However, once the conversion of processes is complete, companies spend less money on raw materials. Costs are saved and at the same time the environment is helped, which in turn can lead to government incentives. In addition, companies are less affected by price volatility and – perhaps most important – increase the customer relations and esteem.
Plastic bags are banned
For environmental reasons, plastic bags are already no longer sold for free in shops today. If necessary, they have to be paid by the customer. Now the Federal Cabinet is going one step further with a bill to ban plastic bags, which has already been passed. The ban on plastic bags is expected to come into force in the first half of the year, affecting lightweight plastic carrier bags. Excluded from the ban are bags for fruit and vegetables and more stable carrier bags with a wall thickness of 50 micrometers or more.
CO² – The evergreen
Where we are already on the subject of environmental protection and sustainability, there will be new transport reforms this year for this purpose. EU members have set a limit of 95g CO²/km for all newly registered passenger cars from 2020. The objective is to reduce CO² emissions by 37.5% by 2030 compared with 2021. Discussions in the government will continue in 2020 with regard to a CO² tax and the concrete design of the climate protection package.
Transparent supply chains
There is movement in the debate about a supply chain law. The Federal Development Ministry and the Federal Social Ministry see a need for action on the part of German companies that produce abroad and are to be held accountable for the working conditions there. Within the grand coalition, support for such a law is growing all the time. This will pose new challenges for purchasing, especially in companies in the consumer goods industry, since transparency beyond direct suppliers is rarely available at the push of a button today.
Effects of eSolutions on employees
We are currently experiencing a quantum leap in the quantity (and hopefully quality) of digitally available information in companies. The networking of this data with customers and third parties on the supplier side becomes interesting. Both in combination can sustainably strengthen the efficiency of companies and their supply chains. The creation of new collaborative business models and ecosystems holds great potential for our economy. Of course, this also entails new risks for buyers and supply chain managers, such as cybercrime.
From the point of view of procurement, this is no longer primarily about the electronic mapping and improvement of existing processes such as eProcurement, eRFX, eAuctions or purchase-to-pay. The digitalization of procurement is significantly changing the roles and thus the working methods of strategic and operative buyers. In the future, they will increasingly become knowledge workers who manage their supply chains based on real-time information from the systems. Accordingly, the well-known slogan „If you don’t go with the times, you go with the times“ applies. Are you already investing in knowledge capital?
You see: The world continues to turn and 2020 promises to be an exciting year as well. We are looking forward to the new challenges and to shaping the future together with you.
Rainer den Ouden
Partner, ADCONIA GmbH
Consultant, ADCONIA GmbH