The root of the crisis is spiraling energy costs, caused by the fallout of the Russian invasion of Ukraine. Making glass requires heat to melt sand, soda ash, and limestone together, which is typically provided by natural gas. Prices of natural gas have skyrocketed as Russia has curtailed its supplies to Europe in recent months. It's done so in protest against Western sanctions and weapons supplied to Ukraine.
Volkswagen has been shoring up its supplies, increasing inventory for items like windows and windshields. It's also looking to suppliers beyond Europe, where there isn't the same threat of a sudden gas supply crisis.
It's by no means the first supply chain issue to befall the industry this year. VW, Audi, and Porsche production lines were already slowed earlier in 2022 as wiring harnesses made in Ukraine were temporarily unavailable. The chip shortage isn't over, either, with global automotive production down by over 2 million units this year so far.
Volkswagen isn't the only company affected. Many brewers are stocking up on bottles in anticipation of supply issues ahead. One beer maker, Brauerei C. & A. Veltins, purchased 50 million bottles in one order, enough to last for a full year. The move comes as the company saw its cost of glass go up by 90% amidst difficult trading conditions.
Stockpiling is rare in industry these days. Just-in-time methodologies are seen as best practice, where necessary materials arrive at the factory just as they are needed. This comes with flow-on cost benefits as time, energy, and space aren't spent moving around and maintaining large stores of raw materials.
Just-in-time or "lean" manufacturing is great when the world is working as expected. However, it quickly falls apart when supply chains break down, as we have seen so clearly during the COVID-19 pandemic. When factories are set up to receive regular deliveries of raw materials, production lines quickly stop if fresh supplies aren't coming in.
Modern factories have often been designed with little storage space, too, so stockpiling can be difficult to impossible in some cases. In the case of Brauerei C. & A. Veltins, the company has had to rent storage space so it has somewhere to keep its stockpiled bottles, per the report.
Regardless, it's clear that companies are learning from the pandemic and the ongoing war in Europe. A stopped production line costs a lot of money, so the lesson is that supplies on hand are worth their weight in gold. This time, canny businesspeople have spotted the potential glass issue well ahead of time, and they're taking measures to prepare for what's ahead.
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