Four top executives from AEM member companies shared their vision of the equipment manufacturing industry for 2023 and beyond at a recent event. AEM Annual Conference in Napa, California.
Tadano Chief Marketing Officer Ingo Schiller, The Toro Company Group Vice President Rick Rodier, Parker Hannifin Vice President of Sales and Mobile Solutions Doug Gilbert, and LBX Company President and CEO Eric Sauvage joined moderator Kristie Stern, president of AEM service member company Green Mountain Lion , for a panel discussion on industry disruptors, barriers to growth and more.
Below are some excerpts from the discussion. Be sure to check out more insights from AEM member leaders in the second part of this panel discussion recap, scheduled to run later this month.
Stern: Apart from the supply chain, which we know is an issue, what will be the major new disruptors in your plan for 2023-2024?
rodier: You mentioned the supply chain, and I’m sure none of us would think we’ve been through the challenges of that. I think for our company, we probably look at interest rates as one of the biggest challenges. There is no doubt that regulatory issues or executive orders can change your direction and cause you disruption, but we look at interest rates as one that has a domino effect to affect. in many different areas of our company.
We are a fairly broad company; we serve many different markets. We do all types of financing, including inventory and leasing, but also a lot of retail financing. Rising interest rates could leave a lot of volatility out there, and the fact that it’s so closely tied to a potential recession worries us as well. So, I would probably say interest rates.
Schiller: Potential executive orders, to me, that’s the wild card. This is something that happens quickly and has a big impact. But there is no way to manage that kind of unknown.
Stern: Can you point to one issue that will be one of the biggest obstacles to growth in 2023-2024?
Gilbert: From our standpoint, labor will continue to be a challenge in the future. Unfortunately, I don’t think there is any kind of cavalry of people charging up the hills to get into manufacturing jobs. We have seen many skilled machines retire during the COVID-19 pandemic, and this not only creates a void in the people to run the machines that make the products, but also the ability to train those new person to enter, which affects the overall production efficiency and throughput.
Previously, you would see a separate level of skilled workers and warehouse workers as two different levels. And we’re seeing more consistency in that based on the Amazons and others that operate similarly and offer a relatively competitive salary, which really narrows the gap between the two. In fact, I think some people would rather work for Amazon, where you get paid the next day. And then if it’s not for you after a few weeks, you can move on.
So, I think that’s where automation, whether it’s full automation, lighting manufacturing, cobots or robots, in automating your appliances becomes more critical just to overcome the labor gap.
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Stern: When do you think the supply chain will meet your company’s needs?
Sauvage: I look at that not so much about what the company needs, but what the customer needs. In the last two years, the dealer’s inventory has been decreasing abnormally. In our industry, a particular product that we produce and sell, it will be less than four months of supply compared to eight months of supply in 2020. The norm, we know, is probably about six and a half months. That’s the challenge: how much time do we need to rebuild that inventory?
One of the saviors will be a reduction in pushing the supply chain to where it needs to be and addressing the lack of inventory that we have discovered in our industry. The real question is “when.” In our industry, I don’t believe it’s going to happen before 2024 or 2025, maybe early 2025, before we see inventory levels that are sufficient to support the dealers — if it’s a fleet of rent or the retail side of the equation.
Schiller: I think the end of 2024 is probably where the lines will cross again. It will take the best part of two years for the supply chain to catch up and build in a post-COVID environment. And it also takes less time to work with supply chain control; we have seen our engineers become more creative and simplify designs and consider componentry more robust. When you operate without constraints, you can choose anything and make things very interesting. So, we are seeing a change in culture, and people are simplifying and simplifying our efforts.
rodier: One of the things we think about is how to come out of the recession 12 years ago, and how many companies have changed in terms of processes, how we do our business, whether how we manage our assets, our resources and so on. To some degree we are trying to do the same thing now, although supply chains remain an issue. However, a lot of the things we’re doing are tactical to try to get through, even if it’s as late as 2024 or 2023.
We are also looking at ways of how we can exit differently because of the supply chain; how we design our products differently, how we approach our products, our relationship with our suppliers and how the plants are set up. So, we’re trying to take a tactical approach to ‘fight through it’ and open up the supply chain as much as possible, but also strategically to ‘how can we be different?’ Because we are different, like many of you, out of the supply chain issue.
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