The Perfect Storm

Rod Sutton, Editor in Chief | September 28, 2010

Rod Sutton, Editor in Chief
Rod Sutton, Editor in Chief

A year-long swell of construction activity has caught manufacturers off-guard a bit, and another soon-to-be-released surge threatens the efficiency of equipment managers.

Equipment buyers face serious delays as manufacturers scramble to meet escalating demand. Lean inventory management has created a backlog in orders that, in some instances, stretch into 2007. Additional capacity, in some cases, won't be online for months, and shortages in supplies such as tires are sidelining machines in manufacturing holding areas.

Driving the demand is continued growth in all construction markets, led by year-over-year first-quarter increases of 31 percent in manufacturing construction, 26 percent in communication, and 13 percent in residential. But there's some piling on, too. Mining is re-energized, managers are targeting previously delayed fleet replacements, and overseas demand is drawing machines from the North American market.

Equipment orders and shipments dipped in the winter as the depreciation incentives ended, but this will be brief. And with the eventual and long-overdue passage of a Federal transportation funding bill, a new influx of spending will be unleashed. It's a heady time, with work waiting to be done and money to be made. But the machines may not be there when needed if the demand continues and manufacturing capacity can't catch up.

Equipment managers must figure out how to have the machines available when their organizations need them. Obviously, those who have maintained excellent relationships with distributors and other suppliers will have some access. And the used equipment market has become viable, although demand will likely drive up those prices, too.

But managers need to keep their eyes on the marketplace. Some monitor fuel markets, picking up contracts for diesel fuel that allow them to lock in costs for extended periods. One manager savvy enough to identify the tire shortage stocked up on the specialized rubber he'll need this summer.

When increased highway spending hits the market, the demand for efficient machines will spike. Don't let your organization down by not being able to field the fleet.