One Google search for “agricultural industry” aggregates thousands of results. Some links relay users to different organizations while others try to define it as a whole. If you click on the “news” section of this search, you’re bound to bring up dozens of conflicting reports on how the industry is doing. It seems no one can agree on the current state (or future) of agriculture, but at Production Materials, part of our business revolves around supplying parts for this industry, so we can confidently say we’ve noticed an uptick in a few areas: aftermarket, consolidation, and parts rationalization.
The agricultural industry in the United States functions as an intricately weaved web. Take, for example, a family-owned farm, which in many cases, simply cannot shell out thousands of dollars for a new tractor if it breaks down—especially when fixing the machinery might be a more viable solution, including the ordering of small parts from a local dealer. Since Production Materials is part of the supply chain for repair depots, we’ve been able to track an increase in the parts resale aftermarket.
As the industry changes to accommodate shifts in demand and technology, the number of manufacturers actually is getting smaller through consolidation. However, in the past four years, the number of “Big” North American farm equipment dealers has grown from 151 to 184, according to Ag Equipment Intelligence. While some might worry about consolidation of the manufacturing base growth, downstream, in the supply chain, has improved distribution efficiency.
Much like consolidation, parts rationalization aims to lower costs by eliminative redundant parts and operations. In this instance, we’ve worked with engineers to restrategize and standardize parts, which means instead of purchasing three similar components, one common part may fulfill the need. This allows companies to purchase large orders of one part to take advantage of price/quantity breaks.