If you are in the construction industry or work in any industrial setting, you have probably heard about the looming issue of Heavy Equipment Supply Shortages. However, do you really know what this problem is all about? What are the causes? How is it affecting consumers and businesses? What is being done to mitigate these effects? And what are the long-term solutions for this problem? Continue reading to learn more. After reading this article, you should be prepared to tackle the issue head-on!
What Are The Possible Causes of The Shortage?
What are the possible causes of heavy equipment supply deficits? The industry’s insiders, who wish to remain anonymous, agree that the shortages have put pressure on the available equipment. In the winter of 2022-23, it is expected that the surplus of heavy equipment will be sold off or leased. However, this surplus is rarely used during the winter snow ops. Ultimately, a supply shortage will affect the rental market, resulting in lower equipment availability.
Several factors contribute to the current supply shortages. The recent infrastructure bill has caused increased demand across many industries, including the construction industry. The resulting shortage of equipment, parts, and labor has made resupply issues even more evident. Despite these issues, the heavy equipment industry has not faced any major challenges similar to these since the Great Recession in 2008-2009. While these circumstances are a source of concern, there are a few steps manufacturers can take to increase availability of heavy equipment.
One of the reasons for the supply shortages is the lack of new heavy equipment. There is a high demand for new heavy equipment, and OEMs are not producing enough to meet the demand. Suppliers are selling out their inventory as soon as they receive it. This has resulted in a prolonged wait period for equipment, causing projects to slow down and waiting lists to get a piece of equipment.
How Does This Impact Businesses And Consumers?
The bipartisan infrastructure package will result in increased demand for construction and heavy equipment across many industries. But this increase will also lead to shortages of equipment, parts, and labor. The shortages of these supplies were already putting pressure on the industry, so the new bipartisan infrastructure bill will only add to the pressure. This legislation will also fund major construction projects across the country, which will drive additional demand for heavy equipment dealers.
In addition to the labor shortages, supply chain constraints have affected the supply chain. For example, in November 2021, the American Truckers Association reported a shortage of 80,000 drivers – a record number and more than thirty percent more than before the recession. This shortage is largely the result of an aging driver population and low wages and benefits. Similar problems are present in ports, warehousing, and rail.
With shortages of these materials, it is difficult for companies to get the products they need. The problem is that companies ordered earlier than they needed, causing surges of goods to be sent to ports and warehouses. The resulting shortages have affected all types of companies, including those that produce consumer products. In addition to these supply-chain issues, consumers are also feeling the impact. These shortages impact many industries, ranging from large to small, including automakers and truck makers.
What Is Being Done To Mitigate The Effects?
The recent passing of the infrastructure bill will increase demand in many industries, including construction, heavy equipment, and truck drivers. But with the shortage of labor, the industry will be faced with a labor crunch that will make resupply difficult. In fact, the federal government has already taken steps to address this problem. But there’s still no solution that can solve the underlying problem of labor shortages, which has long been a source of concern for the industry.
In the short term, hospitals must break down departmental barriers and optimize inventory within a single hospital. This will be made easier if inventories are shared within health systems. And because competing hospitals are competing for patients, a lack of heavy equipment and labor could lead to a shortage in many different industries. However, companies cannot just preemptively procure material for the next project without considering the effects of the shortage on the rest of their supply chains.
What Are The Long Term Plans To This Problem?
The bipartisan infrastructure package passed by Congress this week will result in an increase in demand for heavy equipment, which has already been suffering from material shortages. Moreover, the new legislation includes a $110 billion investment in major infrastructure projects. These new projects will boost demand for heavy equipment and dealers. However, there are several challenges that the industry must deal with. The first is that raw materials are becoming scarce, which in turn is increasing their prices. In turn, these increases are passed on to heavy equipment buyers and consumers.
Another impact of the supply shortage is that rental companies have to hold on to their equipment longer, which will increase their maintenance costs and reduce their profitability. To alleviate this issue, rental houses should prioritize longer rental contracts. This will reduce transport costs and avoid equipment sitting on rental lots for long periods. Having more inventory on the rental lot during high demand is better than being unable to meet demand. But, while these challenges pose a short term challenge, rental companies must continue to invest in fleet maintenance and inventory retention.
How Long Is This Shortage Expected To Be?
As the construction industry grows, so too will the demand for heavy equipment. The infrastructure bill, which requires heavy equipment to build and maintain roads, bridges, and other buildings, is set to increase demand, which means limited supplies of the equipment, parts, and labor needed to complete projects. This shortage has already started, and supplies have been selling out fast. It has also exposed supply-chain issues that the industry hasn’t faced since the Great Recession in 2008.
Because of the shortage, suppliers and fleet owners are putting off new construction projects. As a result, many are holding onto their inventory for longer than expected. This means fewer machines are coming onto the rental market, which decreases availability. Rental companies are also holding onto their inventory for longer periods of time and investing in fleet maintenance. However, this shortfall won’t affect the industry as much as it did at the beginning of the shortage.
What Equipment Is Effected The Most?
Heavy equipment supply shortages can affect several types of machineries. Demand has increased in recent years as development in North America has normalized, and in some parts of the country, it has accelerated. 95% of manufacturers in the Association of Equipment Manufacturers (AEM) report experiencing supply chain problems. When more machines are available, many suppliers could sell more. But shortages of equipment can also affect specialized and niche markets.
A supply shortage may result in a backlog of orders for heavy equipment, which manufacturers can’t fill. With heavy equipment demand is continuing to increase, the supply will not keep up. This may cause a depletion of the equipment market. Many heavy-equipment manufacturers have large inventories of unfinished equipment waiting for final parts. These shortages can affect construction, demolition, mining, and other industries. It’s imperative that equipment owners and suppliers work with each other to avoid supply problems.
Inland, a construction equipment distributor based in Saskatchewan has experienced a shortage of heavy equipment in the region. This shortage has caused prices for new equipment to spike, and dealers are scrambling to fill the void created by the new equipment shortage. Brad Wright, the branch manager of Westcon’s Saskatoon location, is taking orders for new equipment until 2023. The company’s prices for popular brands have gone up substantially in the U.S. and Canada.
Conclusion
After years of material shortages, the heavy equipment industry is likely to see a surge in sales and demand, thanks to the infrastructure bill passed by Congress. The infrastructure bill will increase demand for heavy equipment and parts and will likely increase demand for the next five to 10 years. Already, material shortages have created supply chain instabilities. In addition to raw materials being in short supply, the cost of manufacturing and resupplying heavy equipment is already rising. The increased cost is passed onto consumers and heavy equipment buyers.