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The pandemic has caused blockages not only in companies’ finances, but also in the supply of materials, parts and components from foreign contractors. The latest survey of the National Debt Register (Krajowy Rejestr Długów) of the Economic Information Bureau “KoronaBilans SME” indicates that difficulties with supplying components are already reported by more than one third of SME companies (36.5%). The same number of entrepreneurs forecast that supply problems will persist over the next three months. Importers are in the worst situation – difficulties in obtaining ordered goods from abroad are reported by one in two of them.
Poland is a leading exporter of many services and products, such as furniture, cosmetics and foodstuffs. Foreign sales are one of the engines of the domestic economy, last year their value amounted to over one trillion PLN (1051,9 billion PLN) according to the Central Statistical Office. After temporary problems at the beginning of the pandemic, exports have managed to make up for the losses. According to the CSO, at the end of the first quarter its value increased by as much as 14.6% in comparison with the previous year. Meanwhile, as shown by the results of the latest, eighth edition of the “KoronaBilans SME” survey, 40% of exporters participating in the survey had in the last three months problems with realizing or delivering orders or services to foreign buyers. However, difficulties in fulfilling their contracts were most frequently reported by the largest entities from the SME sector – i.e. medium-sized companies. In their case it was more than half of the companies (58%).
However, difficulties in deliveries and rising production costs had the strongest impact on importers, who also recorded a high turnover growth in March (by 12.3% y/y). Problems with receipt of ordered goods or services from foreign counterparties as a result of the pandemic are already reported by every second importer from the SME sector (52%). This is more than at the very beginning of the pandemic. As in the case of exports, medium-sized enterprises employing between 50 and 249 people have the biggest problems (70%) in this respect.
– Polish exports and imports, as well as the entire economy, have clearly accelerated in recent months. This is a sign that business is back on track and gives hope for rapid development. For companies that have overcome the difficulties of the pandemic, it is an opportunity to gain new footholds and fill the gaps that have been created in the international market after supply chains were broken. However, flexibility and maintaining business momentum and continuity will be key in further expansion and growth. The lack of components and materials may therefore currently be a bigger challenge for companies trading abroad than the lack of orders – emphasizes Adam Łącki, President of the Management Board of Krajowy Rejestr Długów.
The problem concerns everyone
Lack of components and parts indispensable for production or provision of services is a brake on the entire economy and comes back like a boomerang. Analysing data from “KoronaBilansu SME” in historical terms, the biggest problems with material supplies were reported by companies in the first wave of the survey, in April 2020. (42 per cent). After the temporary shock of the sudden lockdown, the problem became much less acute for companies. In July, only one in five companies had difficulties in obtaining components or materials from suppliers. However, the problem began to intensify with the arrival of the second wave of the pandemic and persists today. In the latest, eighth edition of the survey, it is reported by 36.5% of the surveyed SME companies.
– Both micro, small and medium-sized enterprises face difficulties in getting the materials they need for production or services from suppliers. This shows that the problem is widespread and does not depend on the scale of operations. Our survey also shows that it concerns many branches of the economy. The manufacturing sector, which is gaining momentum, complains about the biggest problems with deliveries, as almost every second company has such a problem. Trade and construction also report significant difficulties. The best situation is in the services sector, where every fourth company is worried about deliveries – points out Adam Łącki.
Broken supply chains
– Companies’ difficulties in obtaining components for production are the result of several factors, most of which are linked to the pandemic. The outbreak has threatened not only people but entire economies. Supply chains have been disrupted, demand has changed in many sectors, some factories were not operating at full capacity due to worker infections, and transport has also been affected. As a result, we now have a major problem with the availability of materials and raw materials from abroad. Many entrepreneurs stress that if this situation lasts longer it will make it difficult for them to return to normal activity – indicates Andrzej Kulik, an expert from Rzetelna Firma, a partner of KRD.
Indeed, problems with supplies go hand in hand with rising prices of raw materials, which further deepens the problems of entrepreneurs. For example, steel ore has gone up in price by nearly 100 percent over the year. It is the basic raw material for the industry and construction sector. The same goes for components for production of other goods, e.g. white goods or vehicles. The chemical industry and manufacturers of furniture and plastics, who are also huge exporters, are also complaining about price jumps. In the furniture business, the price of wood has gone up by half, while wood-based products have become even more expensive. Prices of upholstery foams have increased by 130 per cent annually, according to the Association of Polish Windows and Doors.
In addition, along with the economic recovery, the price of crude oil, and therefore transport, is also iancreasing. During the pandemic, maritime transport has clearly become more expensive, the price of freight in 2021 was even 4 times higher than the year before. It is worth mentioning that it is mainly through this route that components and cheap goods from China flow to Europe. As KRD and Rzetelna Firma experts point out, such a widespread and high increase in costs for companies may translate into higher prices of products and services and thus hit consumers in the pocket. It also increases the risk of inflation acceleration in Poland.
Future in doubt
Unfortunately, problems with the availability of components or supplies for companies do not seem to be temporary. As the “KoronaBilans SME” survey shows, one third of enterprises have been struggling with them since autumn and there is nothing to indicate that this situation will improve in the next quarter. Nearly 35.5% of enterprises expect that due to the pandemic the problems with obtaining materials necessary for production or providing services from suppliers will persist in the next three months.
Small companies (39.5%), employing between 10 and 49 people, are most worried about future supplies. They are least likely to be worried by the largest entities in the SME sector (30%), with 50-249 employees. Similar to the current problem with receiving ordered components, about half of the manufacturing sector companies expect this phenomenon to continue in the future. An almost equally high level of anxiety about deliveries is also declared by trade (45.7%).
Source: Krajowy Rejestr Długów