why caterpillar can\'t keep up with a boom in demand
Order mining machines and construction bulldozers at this huge Caterpillar company(CAT. N)
The factory in central Illinois has overall increased by three
Has doubled in the past year.
But the boom in meeting this demand among the world\'s largest manufacturers of heavy equipment is a challenge, in part because of Caterpillar\'s suppliers such as Steve Kirsh.
Over the years, Caterpillar and other large manufacturers have cut inventory, shut down factories and cut jobs in the last recession, making Kirsh\'s ambition to expand after a surge in orders more cautious, according to interviews with Caterpillar executives, reflecting a more fundamental shift in the perception of expansion by many industrial enterprises, more than half
More than a dozen Caterpillar suppliers and the United StatesS. economic data.
\"I\'m just not sure it\'s true,\" Kirsh said in an office with no windows in front of Kirsh Foundry Inc.
Located at the Beaver Dam in Wisconsin, make metal parts for Caterpillar and other customers.
Caterpillar CEO Jim Umpleby told investors last month that the company will not invest in factory capacity even if the company\'s product demand is excessive.
Instead, the company plans to invest more money in new technologies, expand its parts business and sell more leased and used equipment.
The company\'s large East Peoria assembly plant runs only one shift and only four days a week, while its own parts-
Manufacturing facilities work five days a week, three shifts a week, to provide enough components to assemble, according to company officials.
Similarly, external suppliers are scrambling to catch up with the surge in orders.
This expands the lead.
It\'s time to deliver the final product to the dealer.
For example, it will take more than eight months to get one model of its large engine to the customer\'s hands.
The Trump administration\'s attempt to rewrite trade relations with key partners, especially China, will only add to uncertainty.
For many domestic producers, the latest move to take a step back from the confrontation with China is good news, fearing that a trade war could quickly undermine global expansion for nine years, feeding the United States. S.
Manufacturing executives told Reuters that factories were booming.
As a result, President Trump and Republicans are hoping for a slowdown in US economic growth. S.
Corporate tax reform last year.
The idea behind Trump\'s tax reform is that companies can invest more money into expansion, hire more workers and raise wages.
Capital expenditure plans have risen, but most of them are concentrated in the technology and energy sectors.
Spending plans for industrial enterprises have only risen slightly.
For graphics, click on the tmsmrt.
For companies that do want to expand, from car companies to rail and engine manufacturers, they often can\'t find workers to expand fast enough.
In the past downturn, the contraction of their supply chain pushed many large and small participants into the \"timely delivery\" business model, resulting in a backlog of orders, this has led to a surge in raw material prices in recent increases.
For graphics, click on the tmsmrt.
Rs/2rY3iZp hesitation in expanding Caterpillar\'s supply chain stems from the last bankruptcy, the longest recession in Caterpillar\'s history --
Worse than the Great Depression.
Sales fell by more than 40% from 2012 to 2016.
Deerfield was punished for such a slump. -
S. -based companies have started a restructuring strategy aimed at squeezing more production from factories and buying more from outside suppliers that it needsin-time basis.
Caterpillar has closed or reorganized more than 25 factories
The labor force is now less than it was at the end of 2012.
Caterpillar plans to close two more plants this year and consider shutting down an engine plant, which will reduce the number of jobs by 880.
Caterpillar executives say the new strategy improves profitability by allowing it to get the best use from existing plants.
They blamed the backlog on suppliers not being able to keep up with the surge in orders.
Time is part of the problem.
Caterpillar and many other industrial companies have added orders at the same time.
\"The switch turned on a few years after it was turned off --
Meanwhile, \"said Amy Campbell, director of investor relations.
However, Campbell says the supply situation is improving.
The plant in central Illinois will return to normal.
The white class started on June.
Caterpillar investors like this approach because it helps to deliver strong profits in good times and minimize pain in bad times.
The company recently raised its profit forecast of 2018 by about 25%, and in the most recent quarter, each segment performed better than a year ago.
But when the company\'s chief financial officer warned that rising prices for raw materials such as steel would start squeezing margins, the company\'s share price was hit, even as growth continued.
At the same time, supply chain bottlenecks are impacting companies across the industrial hub.
The supply Management Association\'s order backlog index is one of the best in the United States. S.
The pace at which manufacturers meet demand is currently at its highest level in 14 years.
And many companies are still waiting.
The Ministry of Commerce recently reported that the key measure of commercial investment-capital goods orders fell in the third quarter, the third decline in four months.
These figures show that companies are suppressing spending even if the number of orders is surging.
\"We are in a period of great chaos in which everyone is scrambling --
But that\'s how the supply chain works today, \"said John Layden, an Indianapolis consultant who helped the company design and manage the supply network.
Finding employees is another drag on America. S.
Manufacturing supply chain.
When Kirsh decided early last year to increase manpower at his foundry
It melts the iron to form a rough shape, refined for Caterpillar and other companies
He can\'t find them.
The unemployment rate in Wisconsin has reached. time low of 2. 8 percent.
As a result, Kirsh tried something new and hired a Minnesota personnel Company that parachuted industrial workers into factories where they could not be found.
He ended up with about 10 workers he called \"mercenaries\" who helped control his backlog.
One came all the way from Detroit.
But this is an expensive fix.
He estimates that between paying the employee company, the hotel and the worker\'s daily allowance, they cost about three times as much as the local workforce.
Industrial enterprises are always struggling with large fluctuations in demand, but in today\'s supermarkets, the shortage problem appears faster. lean economy.
In the past, manufacturers from Kirsh to Caterpillar often put more goods on warehouse shelves, creating
In the buffer, these signals may be absorbed as a signal to the supplier that the latest improvement will continue.
This gives everyone more time to prepare.
Private president Joe Williams says it\'s a luxury that no longer exists.
Wolfe and Swickard machines
In Indiana, he bought 85-from Kirsh and more than 20 other foundries-
The worker shop will shape and polish into the final machine parts.
Earlier last year, Williams saw a 80% surge in orders from Caterpillar, a surprising increase that put him in trouble.
\"When we receive the order, we have to order from the foundry, and the foundry has to communicate with the people who supply the metal, so there is always lag,\" he said . \".
This time, however, was particularly difficult.
Some foundry rejected his business as they were overwhelmed by orders from other customers.
Like Kirsh, Williams had trouble hiring workers and said he needed at least 15 more mechanics.
Caterpillar told him it expects orders to grow another 20% this year.
Stephen Volkmann, a mechanical industry analyst at Jefferies, said Caterpillar is making slow progress in boosting production --
Frustrated dealers are clamoring for machines they can sell.
But he said it would be wise for Caterpillar and its suppliers to act cautiously.
\"They all know (business)
He said that it may fall again next year, so excessive expansion now \"will be an expensive mistake. ” (
Chart: growth in capital expendituretmsnrt. rs/2KIXJoH)(
Picture: order backlog-tmsnrt. rs/2Lpdwdw)