In response to the challenges faced during the COVID-19 pandemic, agricultural machinery companies worldwide are taking proactive measures to fortify their supply chains. The lessons learned from disruptions in parts and inventory availability have prompted manufacturers to diversify suppliers for key components and relocate certain manufacturing processes back to their home countries.
The Agrievolution Alliance, a coalition of 13 agricultural machinery trade associations, shared insights into these industry trends during Agritechnica, the global farm machinery show held in Hannover, Germany.
Charlie O’Brien, the secretary-general of the Alliance, highlighted that 83% of respondents to a recent survey emphasized the importance of sourcing from multiple suppliers, particularly for critical components. This strategic shift aims to mitigate the risk associated with relying on a single supplier for key elements, reducing vulnerabilities in the global supply chain.
The trend towards securing more supply is influencing the inventory management practices of equipment makers. Traditionally following a just-in-time manufacturing model, where parts were delivered shortly before needed, companies are now adopting a just-in-case approach. This involves maintaining larger in-house inventories, providing a buffer against potential disruptions.
In addition to securing the supply chain, agricultural equipment manufacturers are actively bringing some manufacturing operations back to their home countries. According to an Agrievolution survey, 67% of companies are involved in the process of relocating certain operations, reflecting a response to the challenges posed by the pandemic and supply chain uncertainties.
While these adaptations enhance the resilience of the supply chain, they come with increased costs for manufacturers. These additional costs are expected to be passed downstream to retailers and farmers. On a positive note, O’Brien suggests that these changes should result in less downtime for manufacturers, contributing to a more reliable supply for farmers.
Global demand for agricultural machinery remains variable, driven by local geopolitical challenges and weather conditions. The ongoing Russian invasion of Ukraine, involving significant commodity exporters, is impacting global food and equipment flows. Region-specific challenges, such as low water levels in the Mississippi River due to drought in the United States, add complexity to the global agricultural machinery market.
As the industry continues to adapt to evolving circumstances, the International Centre for Trade and Transparency and Monitoring closely monitors these trends to provide insights into the changing landscape of international trade.