Ongoing supply chain woes threaten economic recovery 

The ongoing supply chain problems facing America’s equipment manufacturers is a crisis that the 118th Congress cannot ignore. COVID-19 has disrupted the global economy in ways not seen since WWII, and unlike the global economic resurgence seen after the war, our modern economy has yet to fully recover.

A recent survey by the Association of Equipment Manufacturers (AEM) found that almost all respondents – 98 percent – are still suffering from supply chain problems. More troubling, 58 percent stated that they are experiencing worsening conditions.

Equipment manufacturers are struggling to recruit and retain skilled workers to support production levels as they seek to source intermediate components. In both the agriculture and construction sectors, semiconductors and chips remain in short supply, with average optimal inventory falling below 50 percent. In the agriculture sector, trains and included components are particularly scarce, with only 27 percent of the optimal inventory available.

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These supply chain stores have a significant impact on equipment manufacturers. Year to date, manufacturers see an average production loss of 12 percent and are expected to continue production losses exceeding 8 percent in 2023. This is especially critical because many manufacturers are already completely sold out for 2023. Adding to the pain of manufacturers are reduced. margin of 8.6 percent and predicts little improvement for next year. Lead times have more than tripled since 2019.

Equipment manufacturers cannot overcome these persistent supply chain issues alone. Congress must take swift action to reduce supply chain stress to ensure that American businesses are better prepared to deal with future disruptions.

One way for policymakers to achieve this is by investing in technology and data analytics to improve visibility and predictability in the supply chain. With advanced tools and techniques, companies can better anticipate and prepare for potential disruptions and make more informed decisions. The Supply Chain Act was a step in the right direction, but more action is needed.

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The United States must also diversify its supply chain and reduce dependence on China, which has been the “factory of the world” for decades. We should be realistic about our short-term ability to re-shore manufacturing to strengthen our supply chain. Technologically advanced, research-intensive production, such as semiconductor and battery manufacturing, is a prime candidate for re-shoring, as the United States cannot as easily compete in more labor-intensive manufacturing due to higher costs. Therefore, lawmakers must build on the legislative success of the CHIPS and Science Act to further invest in domestic production capacity and support research into new materials and manufacturing techniques.

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In addition, the 118th Congress should enact much-needed reforms to streamline the authorization process and remove tariffs on critical components. Both will remove unnecessary red tape and ensure manufacturers receive the critical inputs they need more quickly and cost-effectively.

Supply chain disruption is a crisis that requires immediate action. We need our elected officials to advocate for policies that will strengthen and diversify our supply chains, support domestic manufacturing, and create stability and predictability for businesses. If they do not act now, we risk further damaging our economy and our global competitiveness.

Kip Eideberg is the Senior Vice President of Government and Industry Relations at the Association of Equipment Manufacturers (AEM).

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