Farm Sprayer Firm Feels Supply Chain Bottleneck
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Mooresville-based Equipment Technologies LLC is a farm equipment manufacturer that is feeling the effects of the supply chain disruption. The company produces Apache brand self-propelled sprayers, which are used by farmers to apply chemicals to control weeds, insects, and diseases. Just like many manufacturers, ET has had to adjust its assembly line when essential parts do not arrive on time.
In an interview with Inside INdiana Business, Vice President of Marketing Mike Flatt said very few of the parts needed for the equipment are manufactured in-house, making the company heavily reliant on numerous parts suppliers.
“It depends on the day what the exact problem is. But yes, that we have a subset of components that are on our shortlist of troublemakers, every single week. And we monitor it every single week. Because we know we have the majority of the components,” said Flatt.
They may have the majority of parts, but not always the necessary parts to complete the assembly of the massive, four wheeled field sprayers. When that is the case, the production team assembles what it can to a point. Then parks it, much like automakers.
“That’s exactly what we do. It’s not nearly as efficient to as if you can build something start to finish,” said Flatt. “[We] allow for those components to come in. And then you come back and do a full QC (quality control assessment) but it’s less efficient. But if that’s the only way you can operate, that’s the way you’re going to operate.”
Flatt says the company, which is now celebrating its 25th anniversary, is not producing at a pace that it is capable of doing, which is several hundred units a year. Unlike the major equipment makers, like Deere and Co. (NYSE: DE) or Case IH (NYSE: CNHI) or AGCO Corp. (NYSE: AGCO) that have a wide-ranging portfolio of farm equipment, Apache focuses on just the one product. He says nearly every sprayer the company is assembling is already spoken for.
“There’s very little unsold equipment sitting on a lot, or even on-order with a manufacturing. Much of what we have on order with us currently is already got a retail commitment. A lot of a major manufacturers are in similar situation to us.”
Flatt says agriculture equipment sales are a cyclical business and it is a high demand cycle right now. They have orders and labor, but not the parts and plenty of frustration.
“We want to be able to fulfill that demand, but the supply chain is not allowing us,” said Flatt. “And it’s immensely frustrating because ag is such a cyclical business. And we are in a high demand cycle right now.”
Flatt says the parts challenge is not limited to microchips. A big problem is the lack of plastic clips used on wiring harnesses, they are what Flatt calls “oddball” components.
“Electrical connectors, the actual plastic pieces, the little pins that go on the end of your wires that go in your electrical connectors. There is a massive shortage on those types of things,” Flatt said.
He says Apache is sometimes forced to purchase those small, plastic, but integral, parts online and above the retail price. Then give them to partner suppliers so they can finish assembling electric devices.
“But again, what choice do we have? When those components stop coming in, the factory stops,” added Flatt.
The company has also taken the drastic step to use air freight due to the backlog and extended time frame of using shipping containers.
“We’re not talking about little bitty parts here. We’re talking about big heavy parts that we need. And when you have to airfreight those, they’re tremendously expensive to get over here. But again, they’re critical to the need to get the completed part out.”
The equipment industry as a whole is dealing with market uncertainty, stemming from supply chain disruption. The recent Purdue University/CME Group Ag Economy Barometer shows the Farm Capital Investment Index drifted lower in February, down three points from January.
Tight machinery inventories continue to be a problem. In February, over 40% of producers stated that low farm machinery inventories are holding back their investment plans.
While commodity prices have improved, the costs associated with planting the spring crop have skyrocketed. Plus, the challenges associated with the supply chain and global trade are added insults.
“There is uncertainty related to policy. There’s uncertainty related to output prices and there’s uncertainty related input costs and so that’s a lot of uncertainties and so I think that’s compounding that the pessimism or relative pessimism, “ said Purdue agricultural economist Mike Langellier.
