Oct. 20, 2021

3 min read

When should your business look into improved equipment?
Author: Jesse Maga
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Hyodong HBP Series Multi-Station Cold Header

Hyodong HBP Series Multi-Station Cold Header

Just over a year ago, thinking about investing in new capital equipment might have seemed like an obvious answer. Most of the covid-19 lockdowns were still in place and the lingering effects of a global economic shutdown were still quite apparent. With businesses being forced to cut hours, stagger their shifts, or close their doors all together, the prudent decision was for a company to tighten their belt and weather the ongoing storm.

Of course, with the reopening of many businesses this spring, consumer spending increased to levels not seen before; and with it a new problem facing global manufacturing, the proli c supply chain shortage that is still plaguing us today. With many of America’s ports operating at max capacity, sights of ships lining up outside terminals and stories of trucks sometimes waiting days to on-load or offload cargo has become common place. Just this past week President Biden announced on Oct. 13th that the Port of Los Angeles will finally begin operating 24 hours a day, a standard which most other global ports have operated. This should alleviate some of the pain points in the system, but in the short to medium term this is more likely to move much of the supply chain bottle necks only further downstream to trucking companies, rail yards, and warehouses. This is a problem that will take time to solve unfortunately.

Even further complicating these logistical issues, has been the national labor shortage. The most recent job report for September showed only 194,000 jobs were added. Anemic numbers like those in September will not do much to alleviate the already 11 million job openings and 7.7 million unemployed. Much of the decline in the current 4.8% unemployment rate has been from many employees completely leaving the job market.

Naturally, this all begs the question, why would I even bother asking if now was a time to invest in new capital machinery? The obvious answer would be an emphatic, “of course not!” However, that is not nearly the full story. Each of these issues has a much larger silver lining than might appear at rst blush. The backup in supply chains is largely from an increase in spending, which means that many factories are running at max capacity, and even turning business away, and the employment numbers mean that automation is filling the gaps where employees cannot be found. Much of this automation can only be found in large investments in R&D and investment. A fact that is not lost any many large manufacturers. Many are already betting on improvements in automation and investing heavily to beat the competition. Economists with Morgan Stanley predict that U.S. capital spending will increased by 116 percent from 2020 by 2024. The amount of money American manufacturers are pouring into new equipment to increase capacity and stay ahead of their competition has been staggering. So, my question above restated in a more accurate way should be, in today’s market can you a afford not to invest in new Capital equipment?

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