Komatsu CEO talks inflation, supply chain at ConExpo

Komatsu North America’s Rod Schrader, who serves the Association of Equipment Manufacturers (AEM) as board chair, reflected on issues equipment manufacturers are facing during a ConExpo-Con/Agg press conference. Photo: P&Q Staff

Rod Schrader, chairman and CEO of Komatsu North America, participated in a press conference Monday ahead of ConExpo-Con/Agg to discuss the Association of Equipment Manufacturers’ (AEM) 2023 economic impact report.

Schrader, who also currently serves AEM as board chair, addressed factors impacting the association’s members during a Q&A with the trade press. Schrader touched on issues related to the supply chain, inflation and the workforce.

Is there a general trend for AEM members in North America to try and develop more local supply chains and move away from the globalization we’ve seen in the last couple of decades?

Schrader: I think there’s some movement toward that. Again, it’s company by company. It’s still a global supply chain, but I would say prior to COVID, we as an industry didn’t view logistics as a risk. But we learned that it is.

Now, purchasing/planning groups are evaluating that in the formula relative to where we’re choosing our suppliers around the globe. It truly is a risk to the supply chain that we hadn’t really thought of before.

Yes, I would say more are trying. But it’s almost a circular motion. We need to bring the supply chain closer, but where do you find those people to increase that capacity. It’s really a challenging time for all of us in manufacturing.

Could you touch on inflationary pressures of the last year and a half and how AEM members have treaded those waters? Has it affected the labor shortage as you see it? And what’s your outlook for the near future?

Schrader: The inflationary pressures over the last 18 to 24 months are something we haven’t seen in a long time. Most of our members – Komatsu included – have had to be fairly aggressive. I can speak from a Komatsu standpoint: By the fall of 2020, we’ve been increasing price probably every three to four months where, typically, in our industry the standard was once a year.

It’s material costs. It’s logistical costs. It’s labor costs. It’s benefits. There’s not too many things that aren’t increasing in costs.

In the environment we’re in right now, it’s pretty normal for even the normal citizen that things are going up. I would say we haven’t seen so much pushback from that. But I think the skill for a company is how do you manage your cost base and maximize your price to optimize the profitability.

We have a big burden on ourselves, our industry and our manufacturers. We have to figure out what’s the next energy source that’s going to drive our vehicles. It’s not clear. It’s not decided. We all are investing in multiple potentials. So, from an investment standpoint, we have to manage the cost and price side very, very carefully – and aggressively.

What lessons from the interruptions in the world supply chain have AEM members discussed over the last year to protect against another disaster?

Schrader: I think supply chain was a huge lesson in the fact that many of us just have had a real consistent supply chain for many years. We have to have a multi-tiered and more diverse supply chain.

Logistics is now that third pillar that has to be evaluated. And I would say the other thing is labor. We’ve had a fairly stable market and workforce across most of our [AEM] members. The pandemic kind of turned that upside down. Demand grew very quickly. The older, more senior workforce decided they were going to call it a day and head to retirement. So we learned we have to do a better job in our longer-term planning for labor. We’ve got to have some consistency there, too.

We’ve learned that the traditional 8-to-5, Monday-to-Friday [job] doesn’t have to be that way. We’ve managed the business for probably six months with our salaried folks not in the office at all. We’ve been able to use Teams, Zoom and things of that nature. It improved the quality of life and provided work-life balance. People not driving to work every day helps the environment, as well.

In our industry, it’s a little tricky because on the factory floor or [at] the parts distribution centers or with our dealer people who are out fixing machines, you can’t do [work] remotely. You’ve got to make sure you’re keeping that balance. You don’t want one section of the workforce to believe that one’s better or getting more than the other.

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