Sourcing in transition: How rising labor costs in Germany are realigning costing and procurement

In times of growing global uncertainty and economic upheaval, companies are faced with ever-increasing labor costs - especially in Germany. For cost engineering labor costs, this means a fundamental reorientation. The traditional cost framework is being shaken and procurement processes are coming under pressure. But what exactly is changing? And how can cost engineers respond effectively?

Wage increases as a strategic turning point

The recent sharp rise in collectively agreed wages, higher minimum wages and an increasing shortage of skilled workers have caused labor costs in Germany to rise considerably. This applies in particular to sectors with a high proportion of manufacturing, such as mechanical engineering or the automotive industry. For cost engineering labor costs, this makes it necessary to fundamentally rethink existing calculation models.

Simply updating historical data is no longer sufficient. Instead, the calculation must be made more dynamic and flexible - including scenario analyses, wage forecasts and sensitivity analyses.

Make-or-buy from a new perspective

Rising labor costs are bringing classic make-or-buy decisions back into focus. Where in-house production used to be a competitive advantage, external manufacturing partners can now operate more economically - especially in Eastern European or Asian markets with lower wage levels.

Modern cost engineering therefore not only examines pure price aspects, but also quality risks, supply chain stability, currency risks and regulatory requirements. In German industry in particular, this means a return to strategic sourcing - supplemented by nearshoring strategies and digitally supported supplier evaluations.

New markets, new calculation logic

Cost engineers are now faced with the challenge of systematically evaluating alternative markets. In addition to labor costs, ESG criteria (environmental, social, governance) are increasingly playing a role here. The total cost of ownership must be viewed from a holistic perspective.

The cost factor "working time per unit" is increasingly being replaced by "value contribution per working hour". This change requires a profound rethink of procurement logic. Intelligent automation, AI-supported production processes and digital calculation platforms can help to counter this complexity.

A paradigm shift in cost engineering

Labor cost engineering is currently undergoing a profound change. Higher wages in Germany are forcing companies to find new approaches to procurement. Traditional models are no longer sufficient. Instead, they need strategically-minded cost engineers who understand global developments, use technological solutions and make decisions based not only on the lowest price, but also on sustainable value added.

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