We’re all looking forward to the IFPE show next month, but the show’s operator, the Association of Equipment Manufacturers (AEM), has also been busy with other matters. This past October, the association surveyed 179 equipment manufacturing executives to find out their thoughts on supply chain disruptions and bottlenecks — and the impact it has had on production, lead times, and profits. The survey also asked about component availability and optimal inventory levels, as well as potential solutions.
AEM said that 98% of respondents still face supply chain issues, with 58% experiencing continuously worsening supply chain conditions. The two driving factors of current supply chain disruptions are workforce shortages and access to intermediate components for production.
“Far too many equipment manufacturers still feel the impact of the COVID-19 pandemic and supply chain disruptions on operations, lead times on components, labor force participation, and financial performance,” said Kip Eideberg, AEM’s SVP of government and industry relations. “The impact of this supply chain crunch is only worsened by nationwide workforce shortages seen across the country, which is particularly noticeable on our shop floors.”
“AEM continues to survey our member company executives to better understand how they are impacted by continued high inflation, strained supply chains, and global instability, and to provide elected officials with the data points they need to move legislation that will revitalize U.S. manufacturing and bolster U.S. global competitiveness,” said Eideberg. “Republicans and Democrats can take immediate action by extending R&D expensing, enacting meaningful permitting reform, removing tariffs on a range of critical components, and reaching a bipartisan agreement on the debt ceiling.”
Other findings include:
- Roughly 60% of equipment manufacturers are still having issues with workforce recruitment and retention.
- Year to date, equipment manufacturers were seeing an average of 12% production loss and were forecasting a slightly lower, but still significant, production loss of 8.2% in 2023. This production loss is especially critical when many manufacturers are fully sold out for 2023.
- Year to date, equipment manufacturers were seeing an average of 8.6% profit margin loss and were forecasting a 6.4% profit margin loss in 2023.
- Lead times continue to be an obstacle. While they understandably increased during the pandemic, lead times have only continued to grow as things stabilized, jumping from an average of 2.42 months in 2019 to 6.92 months in 2022.
- Certain parts remain difficult to acquire. In the agriculture sector, the most sought-after components are tracks (and their included components). Only 27% of inventory is available for components that manufacturers deem most optimal for their operations. In both agriculture and construction sectors, that means semiconductors and chips, with an average of 44% optimal inventory available across both sectors.
- There is no single solution to the ongoing supply chain disruptions.
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