Agricultural equipment manufacturers face some unusual challenges compared to other types of equipment manufacturers. Sure, they face similar issues of complexity, continuous change, price pressures, and innovation demands. Likewise, their customers also demand equipment lifecycle management, whereby all the activities involving the product must be managed from cradle to grave.
However, there are a few twists that make the agricultural equipment market a unique environment.
Demand for agricultural food products is steadily rising around the globe, particularly in the remote undeveloped regions of the world. The major driver for this demand lies in population growth. Within time, this demand for food imports becomes replaced with a need to produce food products locally. This local need creates new demands for agricultural equipment, and subsequently mandates that sales, service and support networks be created to nurture those markets. Call centers, spare parts, effective warranties and support documentation must all be available to support equipment sold into the new markets. Additionally, strong CRM software systems are required to build the fledgling dealers into long-term growing partners.
The agricultural equipment industry is a highly capital intensive endeavor. From sophisticated machinery on the shop floor, to expansive buildings, to expensive inventories of finished goods; the AG equipment business requires large reservoirs of capital. The AG equipment market is also subject to rapidly changing peaks and valleys of demand, caused by changes in farm income, commodity prices, the strength of the dollar, changing interest rates and the strength of the farming balance sheet. In combination, these factors can cause wide swings in profitability.
To combat these challenges, an AG equipment manufacturer needs to be as agile as possible. They need to produce more with less, and to switch operations on a dime. More capacity can be gained from higher uptimes, better quality, less queue time and precisely scheduled work. Switching operations on a dime can be done with effective systems that re-plan in minutes, and give managers immediate insights into the details.
For some, configuring the product to hold the variety (options, features, colors, etc.) until the end of the production process, can significantly improve deliverability. Variety is expensive when stored in finished goods, (and subject to write-offs and discounting), rather than in stocking the less expensive lower level components.
For some AG equipment manufacturers, the product unit sales do not support full time assembly lines for each product. To maximize utilization of operations and capacity, changeovers are required for the various different products. It therefore becomes imperative to use shop floor systems to minimize the impact of these changes, and to maximize the efficiencies on the plant floor. ERP software ools such as MES, visual scheduling, mobile data collection, and real time dispatching are essential.
Manufacturers operations also must control costs by maximizing uptime, quality, and throughput with use of such tools as CMMS, TQM, and MES.
Products of AG equipment manufacturers tend to have high dollar price tags, with an additional requirement for stocking of finished goods at both the manufacturers and in the dealer network. Forecasting of customer needs can be difficult, with many variants. Poor forecasting can result in expensive discounting or significant write-offs of obsolete finished goods. The answer to this problem lies in designing flexibility into both the product and the production process, along with refining the forecast within a sophisticated ERP tool.
Purchasing can be a key value driver for AG equipment manufacturers. Material costs remain a large factor of product cost for AG equipment manufacturers. Added to this, late deliveries or poor quality can stop a production line for days, causing high costs, and even higher inventories. Managing supplier performance can have a big impact on all three factors – price, quality and timely delivery.
Because of the huge impact, there is a constant pressure to build dependable relationships with suppliers. These relationships can provide reliable delivery of expensive components, and warn of shortages and price variations. Supply chain collaboration can make the difference between profitable or non-profitable product lines, and high or low levels of inventory.
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