The interesting part about the supply chain is that the heavy-duty trucking industry is not only directly involved with delivering these goods, but also increasingly relies on the delivery of these products to ensure its own vehicles are operating, parts are delivered in a timely fashion, and their own business can keep running at maximum efficiency. This has been increasingly challenging in the wake of the pandemic.
Heavy-duty parts suppliers, in particular, have felt that strain.
The HDMA Pulse Report, a periodic survey sent to Heavy Duty Manufacturing Association members, provides regular insight on the current state of the heavy-duty parts market, including manufacturing, supply and distribution. Richard Anderson, director of market research for HDMA, shared findings from the most recent report as well as the organization’s annual outlook.
“While widely positive in direction, it is both highly variable and clouded by uncertainty,” Anderson said during a recent webcast. “We're looking at a good year. But, how good? When? Where? Why? We don't really know.”
“The three problems are the forecast accuracy, labor availability, and supply chain stability,” Anderson said, noting once there is clarity for these “big three,” the supply side might see a return to some semblance of normal operations.
For suppliers, a shortage of raw materials – namely steel and aluminum, but also wood and rubber – have created volatility with production. That impacts everything from truck components to tires. Plus, “we've also seen reports of shortages of electronic components and even complete losses of certain suppliers in that sector, which is obviously very concerning,” noted Anderson.
Add to those material shortages, like any business involving in-person operations, additional time built into the manufacturing process has been necessary to adhere to increased safety measures and plant shutdowns due to COVID-19 outbreaks.
“As we started to understand how to operate in the COVID world, we had more restrictions on how many workers we could have on the shop floor, how we had to separate the workers, how PPE [personal protective equipment] and temperature checks all had to be part of the normal entry and exit part of the process,” Mike Hawthorne, Bendix president and CEO, told FleetOwner. “You're seeing an expected and unavoidable level of efficiency loss.”
Hawthorne had also noted the unexpected uptick in demand after the onset of the COVID-19 pandemic, once stay-at-home orders for many states were eased last spring. For many suppliers, that demand has not waned.
Part of that demand may be driven because of hoarding by some supplier customers and other manufacturers vying for the same items —whether it’s raw materials or the finished product, Anderson noted. It’s the same rule of thumb as the toilet paper shortages we saw last year: while production can hypothetically keep up, increased purchases by individual customers has limited availability for everyone else.
Long-term changes
One area heavy-duty parts suppliers have continually watched, and will monitor for the foreseeable future, is the demand for original equipment supplier (OES) versus the aftermarket parts.
“Our members believe that long-term, the OES supply sector is going to continue to erode some of the independent aftermarket,” Anderson said.
It is no secret that the OE side has continually looked to further develop vertical integration. And that vertical integration will go far beyond the powertrain. That doesn’t necessarily mean that parts suppliers who have traditionally served the aftermarket will go away, but it could certainly require a reinvention of their business.
We may have some reversal of the more recent parts industry adage touted by many over the last several years to focus on “breadth versus depth.” When it comes to the next generation of parts suppliers, those businesses could certainly focus on the depth of one product category versus many. The goal will be to make themselves indispensable to the industry.
