Supply Chains and Order Shortages

As we approach the end of this year, it is evident that the global landscape, and Germany in particular, has undergone a significant transformation. Supply chains have been optimized and streamlined to a considerable extent. The global flow of goods is once again operating at optimal efficiency. Many warehouses are at full capacity. There is a notable decline in consumer spending.

The latest economic survey from ifo (a German institute for financial research) from the beginning of November 2024 reveals a concerning trend: the lack of orders continues to worsen. The German economy is experiencing a growing shortage of orders. In October, 41.5 percent of companies reported a lack of orders, compared to 39.4 percent in July. This represents the highest figure since the global financial crisis of 2009. Klaus Wohlrabe, head of ifo Surveys, states that the lack of orders is continuing to impede economic growth in Germany. "No sector is immune."

A significant number of CIOs have already been impacted by the reduction in company spending. The economic downturn has had a significant impact on IT budget negotiations this fall. The SAP community will be monitoring the release of the annual investment survey by the DSAG (German-speaking SAP User Group) at the beginning of next year with great interest. The outcome of this year's negotiations will then become evident. A brief survey of select CIOs conducted by E3 magazine indicates a negative outlook for current customer’s SAP budgets.

In the midst of the S/4 conversion, which encompasses a multitude of construction sites, including clean core, Abap modifications, the BTP (Business Technology Platform), and the Hana database platform, there is a clear need for additional resources. However, this is not the only challenge. At this year's DSAG Annual Congress in Leipzig, Germany, DSAG CEO Jens Hungershausen and SAP Executive Board member Thomas Saueressig both highlighted the slow and sluggish pace of "digital transformation" in their respective keynotes. "Waiting is not a viable solution," stated both speakers. In many cases, however, CIOs are not provided with the necessary resources to advance S/4 conversion and transformation to the required extent.

The latest ifo economic survey reveals that almost every second company in the industry is experiencing a shortage of orders. The core sectors of mechanical engineering, metal, and electrical engineering are particularly concerned. The increase in order backlogs in September may be an indication of a potential improvement in the market. "However, there is still a significant amount of work to be done before we reach full capacity again," states Klaus Wohlrabe.

There was a slight increase in the proportion of service providers, from 31.2 percent to 32.1 percent. The transportation sector has been particularly affected by the challenging industrial economy. Due to the weak demand for labor, approximately two-thirds of recruitment agencies are reporting a lack of orders. "In the current situation, there is less demand for temporary workers," states Klaus Wohlrabe. Just over a third of catering businesses are experiencing a decline in customer attendance. In the events industry, 48.5 percent of companies are experiencing a decline in orders, compared to 38.5 percent in July. "Major events have undoubtedly impacted the purchasing power of smaller concerts and events," says Klaus Wohlrabe. Legal and tax consultants, as well as auditors, are less concerned about their order situation at the moment. High levels of bureaucracy and regulation are creating a high demand for advice.