Criticality of component supplies!
During one of my discussions with a friend who is CEO of one of the engineering and equipment firms in India, I vividly recall the distress expressed over the shortage of good quality component supplies, and its cascading effect on the entire supply chain and customer deliverables. Pent-up demand and shortages of critical components like chips, critical sensors, have resulted in business losses.
The global shortage of semiconductors (which have stalled the assembly lines of some of the major global automakers in EU and the USA), rising prices of steel, and spiraling up shipment costs due to the shortage of shipping containers has just added to the woes of the already struggling equipment and automobile industry post-Covid 19 recovery phase.
With more and more digitalisation in the power trains due to the implementation of stricter emissions norms and push for electrification of the vehicles and equipment, such times are just proving to be a litmus test for the supply side of semiconductor chips and myriads of items like fuel pressure sensors, digital displays, Human Machine interfaces, navigation systems just to name a few.
Few reasons why the semiconductor crisis arose and the supply chain’s frailty resulted in unprecedented issues in meeting customer commitments
1. High reliance on Asia as the manufacturing hub of the semiconductor chip
2. Covid-19 impact of a huge slump in demand for equipment and automobiles resulting in lower orders by OEMs for semiconductors
3. WFH resulted in heavy demand for computing devices, PCs, communication devices needing increased usage of semiconductors
4. Geopolitical tensions made some of the suppliers of electronic goods and appliances pile up the stocks of semiconductor chips. This stocking resulted in an increase in demand by around 8- 10 per cent, which is approximately one-third of the sales to automobiles industries.
Today some of the high-tech equipment deliveries are shot up to 15-18 months (which otherwise used to be 15-18 weeks) resulting in major deviation in the cost management for customers. This of course is the result of extended lead times of major aggregates like engines, axles, transmission, display units, etc.
From a reliable source, it is learned that one of the biggest engines and axle manufacturers in the world specialising in their supplies to off-high-way equipment are taking orders for production slots from July 2023 onwards, which would probably be shipped in the last quarter of 2023.
The result of such changes is seen in the secondary equipment market with rental of equipment going up or prices of pre-owned equipment going up by 25-30 per cent. While this could not be completely avoidable, the lessons from this tough phase have a long-lasting impact on our industry catering to the manufacture of components locally.
While many equipment manufacturers are working out policies in developing strong, consistent, and quality vendors at reasonable cost levels by working together, we still have some organisations who see small-time vendors supplying components just as one of the costs and probably “easily replaceable”.
Determined localisation efforts are essential to overcome such a situation and in this regard, the news about the Tata group foraying into the semiconductor business and exploring its manufacturing in India is solace in distress.
At Equipment India, our endeavour is to offer a platform for more vendors to come forefront and create access so that Industry can have a strong pool of vendors creating a mutually symbiotic win-win situation. We would like to have this be more inclusive participation and working on ways to improve on this.
We hope to create a positive contribution to the industry by having this focus.
Focus: Undercarriage Parts opportunities galore
The construction industry across the globe is anticipated to present significant opportunities for construction equipment. This in turn is expected to propel the usage of undercarriage components.
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