3 Supply Chain Trends to Look Out for in 2023, According To AEM

Kip Heidelberg, senior vice president of government and industry relations at the Association of Equipment Manufacturers (AEM) joined Chip Flory, "AgriTalk" host, on Monday to break down AEM’s latest priorities.

1.    New Ag Policy

The CHIPS and Science Act, signed into action by President Joe Biden on Aug. 9, aims to open new microchip processor facilities in the U.S. 

Heidelberg says his team has been focused on the “historic” bill, as it will strengthen the U.S. long-term economic competitiveness and national security. And he says AEM isn’t alone in that thinking.

“We surveyed 100 CEOs of small, midsized and large companies a few months ago. Seven out of 10 of those CEO’s said they would create more jobs as a result of the increased domestic semiconductor production,” he says. “It’s good news for our industry.”

With the $10 billion CHIPS and Science funding secured, Heidelberg hopes new manufacturing sites will start breaking ground soon. However, he says it will take time to get production up and running.

“I think, starting toward the end of next year, we’ll start seeing more American-made semiconductors coming into the market,” he says. 

Supply chain bottlenecks and lack of component inventory will still be at play, but Heidelberg predicts the industry will start addressing some of these issues in late 2023.

2.     International Ag Trade

Chips aren’t the only product constraint at hand when it comes to equipment, according to Heidelberg. 

From his frequent travel schedule, he’s found that a lack of tires, windshield wipers, wiring harnesses are also holding up production, but chips are getting the bulk of attention because they are in the shortest supply.

Flory says his time on Pro Farmer Crop Tour last week broke the tire story wide open, with some locations opting to ship ag equipment without tires in order to get the farmer up and running with his own tires.

The answer to these bottlenecks, in Heidelberg’s view, is on the Hill in Washington, D.C. He says bringing jobs back to U.S. soil through trade policy and tax code investment in workforce could be the remedy, along with “friend shoring.”

“Friend shoring means that, rather than just bringing everything [manufacturing] back to the U.S., which is feasible, let’s make sure our supply chains are with countries that are friendly to us,” Heidelberg says.

Heidelberg says friend shoring has become a buzzword on Capitol Hill that he feels will be heard more at the trade table as negotiations progress.

3.     Tech Trends Change to Move Away from Supply Chain Reliance

As the world works to solder the broken supply chain back together, Heidelberg says various industries, including ag equipment, has taken note. He says the resourcing issues the industry is dealing with will permanently change production in more ways than one:

a.    U.S.-based manufacturing that is closer to the customer.

“I’m not sure we’re going to return to the halcyon days of the '70s and '80s, but I think what we’ve learned is that we have to rely more on ourselves,” Heidelberg says, “which will help in terms of providing customers, dealers, farmers, rancher with more equipment on time.”

b.     Innovative, efficient equipment production.

“It’s always a fear that more automation leads to fewer jobs, but it doesn’t. It leads to better — and sometimes more — jobs,” Heidelberg says. “You’re going to start seeing our industry adapt to the technology that’s out there to be more efficient in making equipment.”

c.     Made-to-order uptick.

“In some cases, it’s important that dealers have new equipment sitting on their lots,” he says, “but we’ve learned from the pandemic that if you make equipment as orders come in, provided that you have the capability to do so, it mitigates supply chain issues.”

Heidelberg says tech trends will rely on policy and government funding. With that in mind, he feels the CHIPS and Science Act will prove more pivotal to future markets as time goes on.

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