A little over two years ago, it was easier and more affordable for growers to purchase the items they need. Now, not so much.
The ag irrigation industry, like the rest of the world’s industries, is experiencing a disrupted supply chain resulting in shortages and increased costs on items from electronics to cable to plastic molded parts. Mix in a depleted work force and global logistics difficulties, and the agriculture industry continues to witness a time of high stress.
For the growers at the bottom of the ag industry’s supply chain, it can be easy to question why these extended lead times and lack of products are happening. The answer isn’t tied to one component of the supply chain but is more of a culmination of problems experienced by each player, says Carlos Estrada, director of supply chain for Rivulis Irrigation-North America, San Diego.
“We go all the way down this supply chain. Suppliers are having a hard time getting components or materials on time to provide their subcomponents,” Estrada says. “Because of that, the lead times are just extended.”
On top of extended lead times, it’s become difficult for manufacturers to meet product demands, says Joe Strickland, the vice president of global irrigation operations at Valmont Industries Inc., Omaha, Nebraska.
“Since our suppliers are facing similar issues with labor shortages, global pandemic, etc., it has become a cascading challenge when it comes to meeting supply chain demands,” Strickland says.
But the ag irrigation industry is witnessing a notable supply chain shift, says Paul Simmons, the product strategy director at Senninger Irrigation, Clermont, Florida. This new trend follows one of optimistic improvement as most U.S. manufacturers are currently seeing some recovery from pandemic-induced raw material shortages, albeit with inflationary costs, to be able to produce their products.
“The ongoing effort now for the agricultural industry is to meet the robust demand from growers domestically and the strong agricultural markets globally,” Simmons says.
Due to the supply chain disruptions caused by the pandemic, as well as the recent conflict in Eastern Europe, Simmons says that globally, agricultural markets are investing in production capacity expansion in order to meet their own food security needs and are capitalizing on increased export demand for food and fiber.
“This creates challenges in availability for the growers’ inputs but also opportunities for those who are thinking strategically and adopting extended lead times in their procurement models,” Simmons says. “This is especially true of electronics but is universal for many of the products growers need in their operations.”
For companies relying on international exports for product parts and pieces, transportation has become another thorn.
Transportation prices are increasing as the need for shipping increases. There are shortages of shipping containers and drivers. Estrada says product transportation lead times have to account for congestion at ports, custom clearance and traffic of trucking companies picking up products at ports.
Estrada says that prior to the pandemic, Rivulis saw lead times from six to seven weeks. Now, lead times are anywhere from 11 to 13 weeks.
“Lead time is the biggest challenge we see, not only in the transportation area, but also the suppliers,” Estrada says.
Strickland says that global logistics will continue to be a concern and will likely exist for the next 18 to 24 months due to the pandemic and global unrest.
“We’re just following the market, and we’re all waiting for it to correct itself,” Estrada says. “But there’s always something that is influencing prices, the way we do business and the impact on the world economy that are potentially driving all these increases, and people are trying to somehow prepare for all of that. It’s never ending.”
Manufacturers and suppliers are also experiencing a shortage in labor, exacerbating the supply chain and global logistics issues.
“As with many manufacturing companies, it’s been even more of a challenge to retain and attract new talent, especially with the low unemployment rate,” Strickland says.
Estrada attributes this drop in employment to workers rethinking their lifestyles and making changes due to the pandemic.
“We’re having a lot of manpower issues, same as any industry and any company out there with this low level of unemployment and higher wages,” Estrada says. “It’s pretty hard to retain those employees after they feel they want to move.”
This has led many manufacturers and suppliers to rethink their treatment and retention of employees by offering competitive salaries and opportunities for development.
But even if a company is able to bring in new workers, the workers require proper training and adjustment.
“We also need to allow time for new employees to be trained in order to meet the significant increases in demand that have taken place over the last 18 months,” Strickland says.
There are ways growers can avoid feeling the pressure of the ag supply chain disruptions, global logistics issues and depleted work force.
Estrada encourages growers to work as far ahead as possible by predicting what they’ll need and placing an order as soon as possible.
“The more they can forecast or order in advance, the better prepared we will be, the better we will be able to partner and devise solutions to their needs,” Estrada says. “I think everything is moving in that direction of committing ahead of time and making purchases earlier.”
Similar to the toilet paper supply debacle that hit the U.S. at the beginning of the pandemic, Estrada asks for growers to buy what they need and not over-purchase out of fear of not having a product down the line. If everyone overorders, it could create a bullwhip effect within the ag supply chain.
“The bullwhip effect creates over-inventory in the entire supply chain, and that’s not good as well,” Estrada says. “We want them to buy what they need based on what they’re going to grow and need for their acreage.”
Strickland advises growers take advantage of dealer maintenance programs on their equipment, which would “reduce the likelihood of in-season repairs that could cause costly downtime if parts are not readily available.”
Strickland also urges growers assess the status of their current portfolio of equipment.
“If you have a backlog of repairs, consider investing in new equipment sooner and connect with your local dealer,” Strickland says.
If a grower is unable to secure a product they need, Strickland emphasizes the importance of communication with local dealers.
“Communicate with your local dealer; we are in close contact with them to understand their needs and are doing everything we can to support them as they look to support you,” Strickland says. “Planning ahead and being able to adjust as necessary are key to helping over the long run.”
Electronics and critical raw materials like resin vital for the production of plastic molded parts have greatly been impacted by the supply chain disruptions, says Joe Strickland, the vice president of global irrigation operations at Valmont Industries Inc., Omaha, Nebraska.
“Shortages with silicon manufacturing (microchips) are a problem since it impacts every aspect of the machine manufacturing arena,” Strickland says. “New silicon capacity takes four years to come online so it will continue to be a concern.”
Resin and other polymers have experienced significant price hikes per the low supply and high demand. To avoid these price increases, ag professionals have started putting in a greater number of orders.
“The more orders you get with the capacity and the inventory that you have, if the influx is a lot and they all come at the same time, our lead times are going to be longer and longer as orders come in,” says Carlos Estrada, director of supply chain for Rivulis Irrigation-North America, Kibbutz Gvat, Israel.
But for those customers purchasing more items and expecting them to be shipped right away with a four-to-five-week lead time, there will just be another price increase.
“We’re really try to mitigate some of those cost increases for our customers so that they don’t feel the pain, but in some cases, you just are not able to do that,” Estrada says.
