The repercussions of COVID are still ringing through manufacturing facilities (really most all businesses) and people are seeing it, especially when it comes to the availability and cost of new equipment. Our equipment lot and parts counter haven’t escaped the woes of the 2021 supply chain disruptions. There are a few different reasons we’re seeing low inventories and rising prices.
While the manufacturing industry has nearly recovered from the almost 30% loss of jobs last April (Workforce Institute, 2021), the struggle to find dedicated workers still plagues the industry.
“We’re hearing from a lot of our OEMs (original equipment manufacturers) that demand for equipment is high,” said Derek Shalla, precision and equipment sales assistant manager. “But labor issues are the biggest challenge (finding workers to fill positions).”
Manufacturers added 53,000 jobs in March but filling those positions and retaining workers have created critical labor gaps. Understaffed shifts, employee burnout and overtime pay are influencing inventory totals and price increases. (Aeppel, 2021)
“Most of our equipment has seen a price increase of about 20-30%,” said Shalla. “Which is mainly due to labor and input costs driving up prices.”
Speaking of input costs, lumber prices jumped this spring as a result of lumber companies and sawmills shutting down in 2020 for health reasons and the assumption that demand was going to be lower (Horsley, 2021). Instead, the demand increased creating a shortage and driving up input prices for trailer manufacturers. As a result, we found it hard to get, let alone stock, nurse trailers in the first half of 2021. There is some hope in sight with equipment orders expected to arrive here late this fall and into winter.
“We’re trying our best to stock inventory by ordering and purchasing far in advance,” said Shalla. “We are starting to see six-to-eight month lead times being the new norm among our equipment lineup.”
Although we are trying to project demands and stay ahead of these extended lead times, planning out any equipment purchases is our best advice to ensure you get what you need.
Precision Technology Products
The same trend is becoming increasingly apparent with parts as well, especially with precision technology products.
“A good example would be Ag Leader,” said Shalla. “They normally have orders shipped within one week of an order being submitted but are currently out one-to-two months on new orders and even five-to-six months for planter and steering components.”
Moral of the story? We highly recommend letting us know what your equipment or technology needs are sooner rather than later.
“We should have a decent supply of inventory for winter,” added Shalla. “But once the inventory is sold, we most likely won’t be able to replace it until the following year.”
Aeppel, T. (2021, April 2). “US factories desperate for workers even as ranks of jobless remains high.” Reuters. Retrieved July 20, 2021, from https://www.reuters.com/article/us-usa-economy-jobs-manufacturing/u-s-factories-desperate-for-workers-even-as-ranks-of-jobless-remains-high-idUSKBN2BP0ZI
Gaskins, P. (2021, June 3). “Despite hot used-truck market, play the long game.” Retrieved July 27, 2021, from https://www.fleetowner.com/perspectives/ideaxchange/article/21165988/despite-hot-usedtruck-market-play-the-long-game
Horsley, S. (2021, July 8). “What the rise and fall of lumber prices tell us about the pandemic economy.” National Public Radio. Retrieved July 27, 2021, from https://www.npr.org/2021/07/08/1013819703/what-the-rise-and-fall-of-lumber-prices-tell-us-about-the-pandemic-economy
Workforce Institute. (2021). “The Resilience of Manufacturing.” UKG, Inc. Retrieved from: https://workforceinstitute.org/wp-content/uploads/2021/05/The-Resilience-of-Manufacturing.pdf