As the truck industry struggles to meet the demands of a growing population, many new equipment orders will not be filled until the year 2024. This year alone, the number of heavy-duty trucks being built has shifted from 18,000 to 29,000 a month. As a result, OEMs are holding inventories of partially-built equipment awaiting final parts. Those stocks are not likely to be filled for years to come, so how can OEMs meet demand without sacrificing quality?
A lack of supplies of steel, copper and lumber is causing price increases for construction projects across North America. This is especially problematic for roofing contractors, as a year’s supply can be a year’s worth of material. Furthermore, contractors can’t be sure when they will have the next big project, as many steel subcontractors are walking away from projects bought earlier in the year or early this year. In such situations, contractors should consider ways to mitigate price increase risk.
As a result, manufacturers have raised prices for their products in recent months. While many industries have experienced a rise in prices, the construction equipment industry is particularly vulnerable to these increases. In January, the Institute for Supply Management (ISM) released a report estimating that prices would rise for the next six years. These increases would cascade through the supply chain until they reached the end consumer. In the meantime, a lack of new equipment would lead to increased prices for older models.
Construction workers are in demand. But there’s a potential labor shortage in the near future. A recent survey by ABC found that the industry is likely to face a shortage of workers by 2022. The Associated Builders and Contractors’ proprietary model estimates the need for construction workers based on several factors, including projected construction spending growth and the number of workers needed for each specific type of job. This means that a shortage of skilled labor in the construction industry will cause project costs to rise and project time to extend beyond anticipated deadlines.
The shortage of workers can lead to increased insurance costs. Injuries and professional liabilities are likely to rise as workers are overworked. Damage to heavy equipment is another issue that may arise. Construction companies cannot depend on the government for the solution. To address their workforce shortages, they need to work with brokers. The AGC supports over 89 chapters in the United States, which help them supply resources to help construction companies with the issue.
One of the leading indicators of the economy is the heavy equipment industry, and supplier fires have disrupted operations in some markets. A major fire at a critical supplier in Texas resulted in power outages and a 50% production setback for Ford Motor Company in the second quarter. The automaker has been forced to switch from a traditional dealer model to an online one and reduced dealer inventory levels. But supply chain problems are not the only reason why the industry is facing a supply crunch.
In an industry reliant on microchips, chip shortages can have a devastating impact on production and profitability. The automotive industry has been hit the hardest, with production cuts and factory closures. The automotive industry isn’t the only industry affected by the chip shortage. Manufacturing companies in other industries are also experiencing long lead times and reduced production. Microchip shortages can also cause serious disruptions in other industries, including heavy equipment.
Chip makers are struggling to meet the rising demand. While the U.S. and China dominate the chip manufacturing market, the European Commission is attempting to build its own chip-making capacity to become more self-sufficient in this critical technology. While Europe accounts for less than 10% of the global chip market, the European Union is looking at expanding its chip manufacturing capacity to as much as 20 percent. The European Union recently proposed a $17.1 billion initiative called Chips for Europe.
Impact of COVID-19 pandemic
The Covid-19 pandemic has already caused a ripple effect in the heavy equipment industry. With more than 550m confirmed cases worldwide, the impact on China’s heavy equipment production facilities is not limited to that nation. In addition to China, cases in the United States may slow heavy equipment production and parts manufacturing. This is especially concerning as the fears for the global economy and stock market are already having an impact on the construction industry. With supply and demand both in high demand, bids for heavy equipment and construction projects will be fiercer than ever. Until then, the industry can expect the same thing – more competition for heavy machinery and construction projects.
The effects of the COVID-19 pandemic on the construction industry were also studied. Surveys were conducted with construction professionals from two countries on three separate occasions six months apart. The study collected 567 responses and performed statistical tests to assess the COVID-19 impact on the industry. Because the impact of the pandemic varied over time, the results of the survey showed a marked change in perception.