CNH Industrial Supply Chain Issue Leader: “Like a mole”
When it comes to the shortages that plague the global supply chain, CNH Industrial CEO Scott Wine has fewer concerns about semiconductors than about pipes and tires.
Like many manufacturers, as the global economy recovers to meet demand, CNH, the Italian manufacturer of tractors, trucks and construction equipment controlled by the Agnelli family, is also struggling to source parts.
However, while the company was able to buy most of the chips it needed from brokers, Wine stated that shipping costs had risen, and there were other shortages “worse for us.”
“Tires and inner tubes are one size fits all. We have 63 suppliers preventing our factories from producing,” he told the Financial Times. “It’s like whacking moles. The good news is that my team is very, very good at whacking moles.”
“This is the worst supply chain I have ever seen in my career,” he added.
Leo Tolstoy wrote: “Happy families are similar; Don Jones, vice president of the Chicago RCF Economic and Financial Consulting Company, said that every unhappy family has its own misfortune”—— The same principle applies to manufacturing supply chain issues.
“Each industry’s tragic story about its supply chain will be unique to that industry, depending on where they source from and how to get there,” he said.
Manufacturers had to spend more money to purchase raw materials last month. The Supply Management Association’s price payment index tracks the costs that manufacturers pay for inputs, which jumped from 88.0 in May to 92.1, the highest level since the 1970s.
Capital Economics senior economist Michael Pierce said in a report that the report shows that “the’temporary’ price spikes that have occurred in the past few months are still for some time.”
CNH Industrial was founded in 2012. After several years of corporate reorganization, the late Fiat CEO Sergio Marchionne (Sergio Marchionne) Move to separate Fiat’s automotive and agricultural equipment business.
CNH sold US$26 billion worth of products under brands such as New Holland and Iveco in 2020. This is its truck business spin off As part of the profit doubling plan.
Some of these heavy-duty trucks were manufactured without gearboxes, because the shortage of chips did not leave the company completely unscathed. Wine said CNH will consider holding a larger inventory of chips to ensure that its suppliers have all the semiconductors needed to assemble parts into the manufacturer’s factory.
CNH has been able to obtain higher prices for tractors and combine harvesters in the first half of this year, thus offsetting the difficulties in its supply chain. Wine stated that in North America, CNH products are priced at a premium of 6% because high commodity prices have stimulated farmers’ demand.
The question of whether pricing will remain strong in the second half of the year connects CNH’s experience with the macroeconomic issues that Wall Street and the Fed are debating: whether the widespread price increase is “temporary” or more permanent, as central bank officials predict.
Mary Lovely, a senior researcher and economist at the Peterson Institute for International Economics, said that supply chain restrictions have led to a surge in consumer demand for goods such as cars and trucks, washing machines and dryers, and furniture.
“People who haven’t shopped in a year are looking for new cars outside, or farmers are looking for new equipment,” she said. “When the actual supply is short, everything is driving the demand side… So this is natural. The question is, will this continue?”
Wine said that he expects material costs to continue to rise in the second half of the year, but the company’s pricing power is unlikely to keep up.