Key challenges of the manufacturing industry

A secure and sustainable energy supply is an existential task for the German economy. The energy-intensive manufacturing industry is particularly affected by this.

A sustainable energy supply is based on resources that are sufficiently available and, as far as possible, do not contribute to the destruction of the environment. This means an ideally complete renunciation of fossil fuels in favour of the use of renewable energies. Conventional energy sources such as coal, natural gas or oil must be extracted or mined at great expense and are finite. Even the uranium ore needed for nuclear energy will eventually be consumed.

Diversify energy sources, accelerate energy transition

The move away from fossil fuels is generally referred to as the energy transition. For manufacturing companies, the energy transition consists of the major challenge that energy must undergo a new form of production and use. In the process, the benefits should be significantly higher than the effort required to produce the energy. Long-term security of energy supply for manufacturing companies will only be possible through diversification of sustainable energy sources and an accelerated energy transition. 

Securing energy supply

Recent geopolitical events such as the Russia-Ukraine war and its impact on the global economy have triggered an energy crisis in many countries. With Germany sourcing a large part of its oil and gas needs from Russia and - like other EU countries - seeking a complete shift away from Russian energy imports, there is currently a high price increase for all energy sources. Manufacturing companies are aware of the importance of securing energy supplies for the German economy, but are facing a completely different market situation in the face of high energy prices and shortages of raw materials.

The plan for the future is clear: the entire energy demand is to be covered by sustainable energy sources such as wind, sun or geothermal energy. To realise this, a lot of money must be invested in the development of new technologies so that renewable energies can be better stored.

To limit global warming, Germany aims to reduce its CO2 emissions by 2030 and to be climate neutral by 2045. The energy sector is one of the key industries to achieve the so-called 1.5 degree target as an essential marker on the way to climate neutrality. As an equipment supplier to the energy sector, the manufacturing industry has a responsibility to develop the appropriate and technologically necessary solutions.

Goals of the European Green Deal

The postulate for climate-neutral energy production is inevitably accompanied by a change in the processes of all sectors of the economy, since at least the source of the required energy is subject to sustainable change. With the package of measures known as the European Green Deal, the EU Commission aims to combine economic growth with ecologically sustainable economic activity. The most important goals are to develop a modern, resource-efficient and competitive economy, to stop releasing net greenhouse emissions by 2050 and to decouple growth from resource consumption. With this plan, the EU is the only major economy in the world that is in line with the Paris climate agreement.

In December 2019, EU leaders committed to the European Green Deal and the goal of climate neutrality by 2050. By 2050, all greenhouse gas emissions in the European Union are to be avoided as far as possible. In April 2021, an adaptation to this target definition took place: the EU Parliament and the Council of the European Union agreed to raise the EU climate target for 2030 from at least 40 percent to at least 55 percent less greenhouse gas emissions compared to 1990.

Reducing pollutant emissions through the circular economy

The manufacture of products by industry and commerce always uses environmental resources such as raw materials or land and also releases pollutants into the soil, air and water. The aim is to avoid pollutant emissions as far as possible through production-integrated measures, to reduce unavoidable pollutant emissions and to minimise the use of resources. This is to be achieved, among other things, through advanced approaches of the circular economy. 

Transport transition and decarbonisation

In addition to investing in new, environmentally friendly technologies and supporting industry in innovations, the introduction of climate-friendly and cost-effective forms of private and public transport is also essential. In addition, decarbonisation of the energy sector and increasing the energy efficiency of buildings plays an essential role. In order to push cooperation with international partners and achieve an improvement in global environmental standards, it is necessary to act beyond the borders of the EU.

Here, too, the manufacturing industry plays a decisive role, as it significantly supports the implementation of the set goals with technologies, product solutions and innovations - for example, by providing mobility solutions, sustainable building materials and innovative manufacturing processes.

The field of tension of global supply chains is increasingly intensifying. The reasons for this are geopolitical events and stricter legal requirements and regulations in environmental protection and human rights compliance (Supply Chain Due Diligence Act). 

Both the Corona pandemic and the war in Ukraine have shown the West the impact that single-supplier dependency and unstable supply chains can have. Manufacturing companies in particular are aware of the need to strengthen supply chain resilience. Accordingly, resilient supply chains are a top priority in strategic decision-making. Companies want and need to be more agile and capable of quick decisions in the future.

The development of a transparent and sustainable supply chain network is becoming a decisive factor for future competitiveness. A comprehensive risk management of involved partners helps to identify internal and external risks and warns in case of deviations, anomalies as well as changed framework conditions. In this way, resilience and competitiveness of the company can be ensured as well as compliance with due diligence obligations. 

Advantages of the transparent supply chain

Digitalisation makes a decisive contribution to achieving full supply chain transparency in terms of the data basis for decision-making processes. For example, digital tools can be used to set up an automated and networked supplier risk management system that makes it possible to also integrate third parties into one's own network and to identify, assess and manage the associated risks. This can be supported, for example, by tracking tools that map the entire supply chain in real time and enable the localisation of components. The intelligent networking of tracking tools with incoming orders and production planning also leads to an increase in flexibility and efficiency.

Due to regulatory requirements, but above all due to increasing demands from investors, stakeholders and financial institutions, sustainability and transparency in the supply chain have increasingly established themselves as a decisive factor for the continued existence of companies. The success of managers and board members is also often measured by their contribution to the fulfilment of sustainability goals. 

While the term "labour shortage" assumes a permanent shortage of labour without taking into account the skill structure, the term "skills shortage" takes into account the skill requirements of employers and employees and looks at a longer period of time. There cannot be a permanent shortage of skilled workers in adaptable markets, as employers would otherwise meet their needs in other ways (e.g. by increasing working hours) or reducing production. This is why we often speak of a skills shortage or a skills gap. This is understood as the temporary qualitative mismatch of regional and/or skill-specific labour demand with the available labour supply.

The noticeable shortage of skilled workers in Germany does not stop at companies in the manufacturing industry: in almost all sectors, occupations and regions there are serious bottlenecks in filling skilled worker positions. Companies are under increasing pressure to recruit qualified skilled workers for vacant positions.

Causes and consequences of the shortage of skilled workers:

• Demographic change
• Global competition
• Lack of attractiveness of training
• Technological advances and digitalisation