Manufacturing

JCB sells out of products as infrastructure boom adds to supply chain strain


JCB has said that some of its products such as diggers, tractors and forklifts are sold out for as long as 12 months — roughly four times the normal wait — underlining the enormous strain on supply chains for goods vital to construction and farming.

Graeme Macdonald, chief executive of the Staffordshire-based group known for its yellow excavators, said the construction equipment maker was also grappling with the strongest inflationary pressures in decades as it sought to keep pace with record demand.

“It’s labour, raw materials and the other big factor hitting us now is inflation. It’s significant,” he told the Financial Times. “We’re honouring prices we have agreed but inflation is being passed right through. There’s always a limit because there’s a market price.”

Competitors such as John Deere and Caterpillar have flagged rising costs and supply chain bottlenecks as a threat to profitability in the months ahead, with neither showing signs of receding.

The JCB boss said that orders had risen more than 50 per cent compared with pre-pandemic levels. The company expects to produce about 110,000 machines this year.

Demand for machines has been stimulated by infrastructure spending by governments seeking to boost their economies following the pandemic and a stream of orders related to agriculture, which accounts for a quarter of JCB’s £4.2bn revenues and has benefited from higher commodity prices.

But the surge in demand has triggered supply chain chaos and a huge jump in costs for manufacturers. Macdonald said JCB was constrained as it attempted to ramp up production at sites across the world to meet demand, particularly for machines used on construction sites.

“I’ve never seen the level of order buying. Depending on the product, it will take until next April or August, September,” Macdonald said. “A two- or three-month order bank would be typical, not 10 to 12 months.”

The global shortage of semiconductors has not affected construction and agriculture equipment makers as much as the automotive sector because they produce a smaller volume of vehicles and tend to use fewer microprocessors. However, insufficient components such as tyres and tubes have held back production.

It is not only the availability of materials but also high prices that are hurting manufacturers. For example, Macdonald said the price of steel, of which JCB buys 600,000 tonnes annually, had doubled.

Labour shortages have also emerged as a bottleneck on factory floors. The company has been on a recruitment drive, announcing this week that it plans to hire 100 welders, adding to the 1,350 shop floor employees it has already taken on this year.

Macdonald said JCB was raising its workers’ wages, although he declined to specify by how much.



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