– At Prodio, we talk to our customers every day – micro and medium-sized companies using our innovative production management and control software, from industries such as machining, rubber and plastic product manufacturing, carpentry shops, printing houses, companies offering printing and advertising services, cardboard and paperboard packaging manufacturers, machinery and plant manufacturers, etc. The vast majority of them signaled to us right away their fear of the problems they already see and can expect during the further escalation of the war. That’s why we decided to research the market more extensively, to verify which areas of production companies’ activity suffer the most, so that we could work out conclusions which might help to maintain business stability in the current situation’, comments Marek Mrowiec, CEO of Prodio.
Almost 75% of companies strongly or definitely feel the cost pressure due to rising energy prices. Even 25% of those surveyed see a risk of “business upheaval”. The industries most at risk are metal fabrication, automotive related companies and carpentry companies, as well as companies producing complex products with extensive logistics, complex supply chains, etc.
Most disturbing is the difficult access to steel, semi-finished products and furniture boards purchased in the East. It was pointed out that, for example, Russia was one of the main suppliers of nickel – which in the future may affect the price and availability of hinges. Additionally, in the metalworking or plastics industry, we have an accumulation of supply shortages and high energy absorption; not only energy, but also pellet prices are linked to oil prices. – For the past two weeks, there has been no place to buy metallurgical products from; prices have gone up about 300%. We have stopped producing one of the key retailers because we don’t have any more. Increases in electricity have been noted for some time, while we ordered a bottle of gas and we’ve been waiting for two weeks – usually we paid 55 PLN, and now we pay 90 PLN – comments one of the survey participants.
Horrendous prices are not the only problem. Transport prices have also gone up, as well as the prices of construction materials – which in turn affects investment and development. Many companies freeze their financial resources for the purchase of raw materials, and use their spare funds for purchases. And so a proverbial “vicious circle” is created.
Among the surveyed companies, as many as 54% hold off on their investments (company expansion / purchase of machinery / purchase of software / hardware) for a few months (13%) or indefinitely (24%). It comes as no surprise that the greatest hold-ups relate to industries that suffer most severely from supply problems and are burdened by rising energy prices.
For 42% of companies the current situation is of no importance. It can be said that everything is going according to the previous plan, with no major changes. This is probably due to the fact that the activities being implemented now are the result of planning earlier (mid/last quarter of 2021) or investments are made within the framework of expenses planned for the first three months of 2022.
This category can also include companies that are in the process of implementing large-scale projects (construction of a new hall, thorough modernization) – here the proverbial “machine” has already gone into motion and it is difficult to simply stop it in the middle of changes when specific costs have already been incurred.
Thus, although the end of the year ended with a slight optimism in the industry, it was quickly forgotten along with increases in energy and raw material prices.
Despite the problems with raw materials for the majority of companies – 55% of those surveyed – sales remained at the same level, i.e. they did not actually see much change. Only 25% of respondents stated that sales decreased slightly, and 10% of the surveyed companies recorded a large decrease in sales.
The loss of the Ukrainian market and the closure of the Russian market had very similar effects in terms of sales – for about 60% of the companies they had no effect, and only 35-38% have negative effects.
Contrary to media reports about Ukrainian citizens leaving en masse for the war and leaving their existing jobs, it turned out that only for 16% of companies this was a problem, and only 4% of respondents were significantly affected by the outflow of such workers. The vast majority of manufacturing companies were not directly affected by the outflow of workers from Ukraine (69.5%). The most affected industries were those related to carpentry and complex products/serial production, where most people from the East worked on small production lines in more standardized work.
In turn, only about 10% of companies see a very good chance of employing women coming from Ukraine. For 43.8% of respondents it is not a real possibility. This is probably due to the specificity of the industry and working conditions in production – this is a difficult environment and often requires physical strength, hence the preferential employment for male workers. At the same time, in industries where such work is possible, there have been offers addressed to women from Ukraine, and 20% of companies see significant opportunities for their employment. These are industries far from the male-dominated simple metalworking and its derivatives. Women could find work in advertising, sewing and other industries related to mass production / production-related services. – We have not hired any workers of Ukrainian origin so far. I think that if they know the job, we will hire them, but certainly not for lower wages – comments a representative of one of the surveyed companies.
Nearly half of the respondents (44.8%) were unable to determine whether the final cost of hiring an employee will increase or decrease. There were comments that this is “fortune telling”, because the situation is dynamic and unpredictable.
The chances for employment increase with the size of the company: if the company has more than 25 employees, more often declared willingness to hire workers from Ukraine.
The open question about the government program to support companies in connection with the situation in Ukraine aroused a lot of emotion. And although opinions were divided, about half of the respondents would expect some kind of action on the part of those in power. When asked about the suggested form of support, most respondents indicated financial aid, tax allowances and deductions, EU subsidies, and factual support.
Additionally, as many as 30% of companies showed frustration with the so-called “New Deal”.
A surprising result is that 58% of companies did not directly participate in aid activities for Ukraine, although 48% of them declare involvement up to 20% of their resources, and only 2% devoted more than 50% of resources. At the same time it was noted that privately the involvement in aid was much higher. They mainly provided in-kind help (collections/donations of equipment) – 43.6%, financial help (money transfers) – 29.8%, logistical help (transport) – 25.5% and providing accommodation – 16% or providing their own products/services free of charge – 13.8% of respondents. They also mentioned employee vacations for those most involved in helping, active support of office workers or job offers.
If the company employed workers from Ukraine before the war then the involvement was very high – more than 51% of resources. Families of employees were helped, people were brought to Poland, transports to the border were organized, accommodation and dedicated workplaces were prepared. The larger the company, the greater the involvement in helping Ukraine.
There is a “longing for normality” among most respondents: “may it be over as soon as possible and may we return to reality even before the pandemic”, that we “grind the market” and just work, do our jobs. During the pandemic, the effects of lockdowns and shutdowns of particular service industries, entertainment industries, and finally the food service industry were felt almost immediately. Eating out at restaurants had to be replaced by phone orders and/or “eating out,” and a visit to the hairdresser’s had to be postponed significantly. Work on construction sites slowed down, the time spent waiting for orders from the online store or, later after the opening, for service in restaurants increased. We sympathized massively with hoteliers, fitness and beauty companies. The effects of the war in Ukraine and the situation in the East may not be so immediately felt, although they have a huge impact on production. The average person will feel them much later – when they will not be able to buy a set of furniture or a new car, or will be able to buy them, but at an exorbitant price, far exceeding the planned purchase budget and financial capabilities.
The report is available free of charge: https://bit.ly/35k35Xl