Weathering the changes

Tariffs, manufacturing trends and trade disputes are global market forces that affect all types of industry but are nothing new. Remaining profitable, competitive and able to deliver products to customers requires consistent focus and attention. Irrigation industry experts say a key part of their business operations includes constantly assessing and adjusting purchasing and manufacturing strategies to remain competitive in an ever-changing global market while continuing to provide clients with the products and value they expect.

While the supply chain issues of the COVID-19 pandemic have faded and attention on tariffs has increased in recent years, R. Tyler Fields says the irrigation industry is already very familiar with the global market forces influencing manufacturing and sourcing.

“Tariffs aren’t new; we’ve adapted to them for years,” says Fields, senior global director of water solutions for Valley Irrigation, a Valmont Company, headquartered in Omaha, Nebraska. “There are more, and they are greater, but we have learned to deal with tariffs for many years at this point.”

Adjusting to market forces

While Valley Irrigation has employed several strategies to adapt to changing tariffs, Fields says that adjusting manufacturing strategies to account for tariffs while keeping farmers and growers in mind is an ever-changing process that demands constant assessment and readjustment.

“No one can predict market forces with complete certainty,” Fields says. “We do our best to forecast and keep an eye on every metric we can follow, and (we) watch the trends.”

As a U.S.-based company with its largest manufacturing footprint in Valley, Nebraska, Fields says Valmont does business in more than 100 countries, and the company constantly assesses the tariff impact for each of its factories. The company’s global footprint provides a means to diversify operations, but the ultimate solution depends on many factors.

“The rise in all of these raw materials (prices) puts pressure on Valley to continually improve our processes and efficiencies on the factory floor to ensure our customers don’t take the brunt of these rising prices,” Fields says. “While we pass the cost increases and tariffs along to the customer, we try to minimize that impact as much as possible through strategic buying and greater efficiency.”

Recent years highlight exactly why companies like Valley Irrigation must constantly assess operations and adjust internal processes.

“In the past 18 to 24 months, there have been big changes nobody could predict, like the war [in Iran],” Fields says. “Diesel goes up, it affects delivery and shipping, incoming freight. That kind of thing you can’t plan on, but we try to adjust.”

Much like the everyday consumer purchasing gas and groceries, Fields says Valley Irrigation keeps an eye on commodity pricing and makes purchases at times that are most advantageous. As the price of steel, plastics, tires, wire and semiconductors constantly fluctuates, Valley Irrigation’s internal processes around purchasing adapt. “We have developed some ideology around being able to have what we need when we need it,” he says. “If we look at those commodities and keep an eye on those, it helps us prepare for the future.”

Anticipating change

Ian Yarian, CLIA, national irrigation category manager for Ewing Outdoor Supply, says that planning for price increases is an ongoing strategy, and Ewing has focused on improved and increased communication about pricing.

“We ask for 30 days’ notification about price increases, and with the exception of the copper industry, we do get some advance warning so we can make a strategic buy,” Yarian says. “That information on price increases is given out to the field, and if one of our contractors has a big job, they might go ahead and buy materials ahead of time.”

To soften the impact of copper price increases that happen with little to no warning, and in anticipation of additional tariffs, Yarian says Ewing implemented standard procedures for advance buying so the company can be certain it has enough inventory that’s priced right.

“Whenever we have price increases — and we’ve had quite a few this year — we do an analysis where we can look at the price increase, the inventory value we have now and how much additional inventory we want to bring in,” Yarian says. “If you buy too much, your inventory carrying costs eliminate savings, but we stretch it a bit. We are making sure we take advantage of strategic buys ahead of price increases so we are competitive. If there is a 5% price increase and our competitor is buying three months of supply and we buy one, there is a point where we are at a price disadvantage.”

In addition to strategic purchasing decisions, Yarian says Ewing also consistently evaluates manufacturing sources. “For the most part, vendors are doing the same thing we’re doing, trying to do the best they can to mitigate changes in price,” Yarian says. “But we are looking at alternative sources. If we are buying from a manufacturer who primarily does business in China, and there’s another one who does business in the Dominican Republic or Mexico, we will consider adding that additional manufacturer to help with prices. You don’t want to dump your vendor partners, but you have your bottom line to think about.”

While important, pricing is not the only consideration in choosing vendors. Yarian says rebate programs based on purchase volume are another consideration. “You need to look at your programs with vendors, because maybe one of their rebate programs is better,” he says. “A good number of our vendors have offered us a modified program, which gives us a reason to buy from them.”

“We can’t control the cost of the product we’re supplying, but we can show customers how to use it more efficiently to reduce their total overall cost of ownership.”
— Jim Lauria, vice president of business development, Mazzei Injector Company

A holistic approach to saving

While the irrigation industry, like all industries, feels the impact of cost fluctuations, Mazzei Injector Company in Bakersfield, California, is taking a different approach to rising manufacturing and importation costs — educating customers on the long-term value its product offers.

“There’s always going to be ups and downs in terms of costs,” says Jim Lauria, Mazzei’s vice president of business development. “You have to manage your costs, but you have to show the value of your technologies to the end user so they understand that even if they’re spending more, they’re reducing their inputs. All those things contribute to their overall expense.”

With a large quantity of fertilizer coming through the Strait of Hormuz, and deliveries slowed by both tariffs and ongoing issues with Iran, Lauria says it’s even more important for farmers and growers to use fertilizer efficiently.

“Irrigation systems are becoming a good way to inject fertilizer into irrigation water, and if you do it properly, you can deliver the fertilizer at the right time,” Lauria says. “More efficient precision agriculture can help reduce cost and get the inputs to the root zone more effectively.”

While Lauria says Mazzei is always communicating with suppliers on pricing and evaluating strategies to control expenses, he says it is impossible to completely mitigate the impact of global market forces like tariffs.

“We can’t control the cost of the product we’re supplying, but we can show customers how to use it more efficiently to reduce their total overall cost of ownership,” Lauria says. “We can show them what it costs if they own our equipment for 20 years and how that is benefiting them with less energy, less nutrient input, less labor and maintenance cost, and less downtime. We can’t control costs to the end user, but if we can help show them how it will help them be more efficient, their overall costs are reduced.”

Lauren Sable Freiman is a freelance writer based in Cleveland and can be reached at laurensable@gmail.com.