“It is an injustice to blame the virus only, for every loss in the construction industry, says Benjamin Duyck, director of market intelligence at the Association of Equipment Manufacturers.”
In a recent talk, Benjamin Duyck has revealed several facts about the crisis in the supply chain of heavy equipment and its parts. The Association of Equipment Management Professionals (AEMP) Triangle Talks arranged a webinar in which Benjamin Duyck, along with the other two experts, were invited to talk on the real facts. Duyck says that Covid-19 could be one of the many reasons for the decline in the supply chain of construction equipment but not the only one.
The decline in the supply chain has been happening for a long time. It was only highlighted now due to its bigger impact on the world economy. The major impact that was seen was the reduction in the workforce in early 2020 when covid first hit the ground. The reduction in supply chain, increased demands, and expansionary monetary policies were other highlighted issues.
Duyck added that 95% of Association of Equipment Manufacturers’ (AEM) members were affected by the supply chain issues. About 70% of the original equipment manufacturers (OEMs) were the most affected ones. The supply chain crisis, especially in industrial equipment supply, was highlighted in the webinar, but other insights were also discussed by the experts.
Is The Workforce Depleted?
Workforce depletion has been an issue for over a decade. Some of the increased declines in the workforce are due to Covid-19, says Duyck. He further added, “Worker hiring can be an issue in the construction industry. In the construction industry, workforce issues are mainly seen on the manufacturer’s side whereas the office side is constantly seen in progress.”
Blockage Aspects
According to Duyck, “Supply-chain depletion is affecting the construction industry along with the global economy as well.”
Equipment manufacturers are experiencing some of the following blockages:
- Inventory shortage
Duyck says the member’s survey shows that the most important factor is the shortage of inventory. It is not only the inventory shortage but also the short supply of material that has led to the bottleneck in the construction industry. In the agriculture sector, most segments have faced a decline in equipment since 2010. These factors force the manufacturers to make critical choices.
- Shipping across the world
It is obvious that a global pandemic like Covid-19 can adversely affect worldwide shipping and supply chain. This is due to the very limited communication and coordination, says Duyck. Without proper communication and coordination, bottlenecks are bound to occur.
- Demand
Duyck says that the demand for equipment manufacturing was much higher than the expectation. The numeral figures tell us that the demand in 2021 was over 10-15% more, which was 6-10% more than what was expected. However, the recovery rate was pretty good. Furthermore, the AEM member survey says that the growth will continue in the same pattern.
- Price Hike
According to Duyck, the increasing demand for equipment is influencing the price hike of raw materials. The expansionary monetary policy is another cause of price hikes. These factors are directly affecting the price of construction and leading to increased loans and mortgages. In 2021, 4.6% inflation was seen by the heavy equipment manufacturers, and this inflation got worse by the end of the year.
Loss of Production
Production of equipment had a 5-10% growth in 2021. According to survey reports, AEM members revealed that 15-20% growth was experienced despite the supply chain issue, and the same growth pattern was expected in 2022. Duyck suspects that the supply chain issue is responsible for the lack of growth in production.
Lead time is under pressure due to the increasing prices of heavy equipment. The lead time trend of the OEMs has fluctuated a few times since 2019 and is still increasing. The lead time has now stretched from three months to eight and a half months for just a single piece of equipment, Duyck added.
Confront the Challenge
Duyck has noticed some of the steps taken by OEM and manufacturers to tackle this challenge.
- For better signaling between the supply chain, communication needs to improve.
- Increasing the inventory and stock by sourcing from different areas will provide a better supplier base.
- More efficient and organized boarding of new suppliers is needed.
- Releasing more investments for supply chain analytics is required.
- By bringing the manufacturers back, some of the risks will be eliminated from the supply chain due to the increase in on-shoring and re-shoring.
Can Technology Be a Lifesaver?
Telematics can be a lifesaver for manufacturers and end users in bringing the supply chain issue down. Duyck says artificial intelligence or machine intelligence provides combined perception. This helps in the reduction of unplanned downtime and improving the durability of the equipment.
He further states that by using telematics systems, customers can figure out more easily if they need to rent or buy new equipment. By using telematics, OEMs and heavy equipment dealers will be more equipped to analyze the data, trends, and problems of industrial equipment supply and other construction material supply. They can also analyze other critical areas and construction trends.