‘Made in America’ and the aggregate industry

Hammett Gravel Co. had a screen go down this year. Getting it back up and running was an undertaking Tripp Hammett won’t soon forget.

“I had no idea that either a brand-new screen or the components of the screen we needed were being manufactured in China and had to be shipped over here,” says Hammett, the president of his family-owned business based in Lexington, Mississippi. “Due to demand and all the crazy stuff going on over there, there was a seven-week turnaround to get that component.”

Needless to say, that long lead time caused a few issues for the operation. The experience also reset Hammett’s approach to parts ordering.

“I’m not just talking about ordering a bearing for a screen,” he says. “I’m talking about other components outside of the bearings. We will have to be more prepared to order something in advance if, in fact, it’s going to come from that area.”

That downed screen is a microcosm of what can happen to aggregate producers when they rely on supplies from overseas. The coronavirus pandemic amplified the sourcing problem, providing a platform for a discussion on where industry equipment is manufactured, as well as the opportunities and challenges associated with sourcing goods domestically and abroad.

A discussion on this topic today tends to come down to the U.S. and China. Each market offers producers distinct advantages, but the long-term pitfalls of leaning on Chinese-made equipment often trump the short-term gains that producers experience.

“In light of recent events, buying American and making sure you can source materials through the pandemic, it really makes you think about the supply chain and being able to source your materials somewhat within your own country or locally,” says Ross Duff, vice president at Ohio-based Duff Quarry.

American manufacturing

The idea of “buying American” has been a topic on the 2020 campaign trail, with President Trump and former Vice President Joe Biden both embracing American manufacturing and conveying their condemnation of China.

Trump, for example, summed up his plan for American manufacturing during a Sept. 7 news conference. Says Trump: “We’ll manufacture our critical manufacturing supplies in the United States, we’ll create ‘Made in America’ tax credits and bring our jobs back to the United States, and we’ll impose tariffs on companies that desert America to create jobs in China and other countries.”

Similarly, Biden is vowing to “take on China’s abuses,” as one campaign official put it this summer. Biden is also campaigning on the notions of “Buy American” and “Make it in America,” announcing a “Made in America” tax credit in September and stating the following during a July 9 speech: “Let’s use this opportunity to take bold investments in American industry and innovation so the future is made in America, all in America.”

Manufacturers serving the aggregate industry who’ve made significant investments in the U.S. market surely support this type of rhetoric. Manufacturing’s nature changed over the years, though, and bringing some or all of it back from China and elsewhere is no simple task.

Still, manufacturers like VDG’s Alex Kanaris argue the U.S. must start somewhere.

“It’s almost like trying to put the toothpaste back in the tube,” says Kanaris, whose U.S. business is based in Shelby Township, Michigan. “But it doesn’t mean we can’t start doing it.”

Kanaris understands the temptation of transitioning a manufacturing business to China. As he describes, Chinese companies have approached VDG over the years in an effort to manufacture VDG components. In one particular instance, VDG was manufacturing a gear at a cost of about $85. According to Kanaris, a Chinese company told VDG it could produce the same gear for $12.50. Kanaris was intrigued, so he went through the motions to learn more.

“It took them six months to produce,” he says. “One hundred came back. We put them on a machine to test the quality, and only three out of 100 passed. All 100 would have worked, but they were not produced at the same noise level or [at] the strength. But they would have worked.”

VDG went a step further, doing a metallurgical study to assess the composition of the gear. VDG determined that its gear offered a lifetime of about 55,000 hours. As for the Chinese-manufactured gear?

“Their life would be somewhere between 8,000 to 10,000 hours,” Kanaris says.

Producer sentiment

That VDG experience, of course, is just one example conveying the idea that Chinese-made products are of low quality. But Pit & Quarry readers largely agree that goods coming out of China are inferior to what’s made domestically.

In fact, 63 percent of P&Q readers describe Chinese-made equipment utilized in the aggregate industry as “low quality,” with 34 percent characterizing Chinese-made equipment as “average quality.”

P&Q readers have a much higher regard for American-made equipment, with 71 percent generally characterizing equipment made in the U.S. as “high quality” and 29 percent calling it “average quality.”

“We have purchased equipment and parts from China,” says Jon Hart, vice president of Washington Rock Quarries, which is located just outside of Puyallup, Washington. “Our experience depends on whether the items have the backing of a reputable company. Large companies such as Cat source parts from China, and our experience is usually positive.”

Not every Chinese-parts experience of Hart’s has been a good one, though.

“Our experience with independent parts suppliers based in China has been mixed,” Hart says. “The feeling is that if there is no industry-wide experience with a manufacturer based in China, [then] it is a gamble whether the parts are quality or not. Wear parts seem to be a mixed bag. Sometimes they are good quality, and sometimes they definitely are not.”

The reality of the parts business today, however, is that many critical ones derive from China. Dan Johnson, vice president of The Concrete Company, offers some perspective.

“Crusher liners almost have to come from out of country – China, Malaysia, South Africa – because almost nobody in the U.S. can make them cost-effectively due to environmental restrictions and labor costs,” says Johnson, whose company is based in Columbus, Georgia. “Purchases are usually made in container loads, so lower prices have more of an effect. There are still a couple of U.S. manufacturers for some liners, but they seem to be shrinking in their volumes [and] offerings.”

Aggregate processing equipment such as crushers, screens, screws and drives are all available from China, Johnson adds. Some producers purchase these from overseas because they’re cheaper, he says, but the quality, support and parts are almost always inferior.

Producers learned as much about Chinese manufacturers through experience. Also, the U.S. and Chinese economies have undergone significant change since Chinese companies initially targeted this market, McLanahan’s Mark Krause argues. That change, which includes the establishment of a middle class in China, ultimately favors U.S. manufacturing.

“When China first came out and when India got started, it was cheap,” says Krause, managing director of North America at McLanahan. “The cost was low, but you kind of knew what you were getting. It wasn’t going to last as long, but you were getting a [heck] of a deal.

“Through sources and efficiencies, our (U.S. manufacturing) costing has come down to where we can compete pretty head-to-head with the Chinese and other manufacturers,” Krause adds. “The attractiveness of being cheap and not quality kind of went away, as well.”

Kristen Randall, marketing manager at Haver & Boecker Niagara, offers a similar perspective. At one time there was much more interest in Chinese equipment, she says, but that fascination has waned.

“When we are competing against another manufacturer, we find that they are almost always based here in North America,” says Randall, who works out of Haver & Boecker Niagara’s office in St. Catharines, Ontario, Canada. “Our customers aren’t looking at Chinese equipment like they once were. Cheaper equipment seemed to be more attractive 10 years ago during the economic crisis, but the quality suffered, not to mention the service that comes with your OEM being located here in your backyard.”

Supporting producers

Support is undoubtedly a huge differentiator for a number of producers. If they can’t get it from one vendor, they’ll likely turn to another.

A lack of support from Chinese manufacturers is a big reason why U.S. producers haven’t fully accepted Chinese offerings.

“You can give me a great price and all the bells and whistles you want, but I need parts when a breakdown happens,” says Kevin Baker, CEO of The Frazier Quarry based in Harrisonburg, Virginia.

To have confidence in a manufacturer, Baker needs to know The Frazier Quarry can access parts stateside when inevitable breakdowns occur. If a manufacturer cannot readily provide parts, then that manufacturer is not going to win his business.

“Vendors stocking parts for us speaks volumes because I know they’re invested,” Baker says. “No one wants to carry any inventory on anything. It all comes down to uptime on equipment. That’s really what I look for when evaluating equipment.”

Duff echoes Baker’s sentiment.

“I’m definitely not tempted to buy Chinese-made equipment in light of recent events,” he says. “It’s about support.”

Hart, too, is in lockstep with Duff and Baker when it comes to support.

“When purchasing a new piece of equipment, we need the reassurance that if we need parts quickly, the delivery time will be within days,” Hart says. “If I know that I might not get an essential part for three days, I am less likely to buy that equipment. We scrutinize equipment much more closely if we know we have to buy parts from a foreign source.”

Other barriers

Still, producers don’t all think the same way. Douglas Manufacturing Co.’s Paul Ross recognizes this, detailing that there are two types of customers within the industry.

“First, there are those that focus on the initial cost of products,” says Ross, whose conveyor components company is based in Pell City, Alabama. “Second are those that focus on the total cost of ownership. Our customers fall into the second category.”

These types of customers value operating as efficiently, as effectively and as safely as possible, Ross adds. The initial cost of a product is a secondary consideration for them.

But, again, not all customers think alike.

“Over the past 20 years, the industry has accepted products made overseas, and budget constraints and cost-cutting measures have influenced these buying decisions,” Ross says. “Of course, budget constraints drive companies to buy cheaper products that are entirely sourced overseas, specifically to China.”

In Ross’ experience, most customers who base their decision-making solely on cost eventually realize unintended consequences that reshape their focus. Producers don’t always shift their mindset after a bad experience, though. Sometimes, there are factors in play that restrict change, according to Kanaris.

“This is going to be an issue that has to be resolved, not by the plant manager or the guy who is getting a budget and building a plant based on it, but from top management,” Kanaris says.

Kanaris hopes to see greater change, as he hears negative sentiments about China and its labor pool. The concept of low cost, however, is a tough one to overcome.

“It depends on leadership,” he says. “If we have good leadership, we will move ahead. I’m talking about the actual people who own the plant, who own the [producers]. If they don’t adopt a theory, local manufacturers don’t have a chance.”

Looking ahead

In time, Chinese-made equipment could gain acceptance within the industry. Quality standards need to be addressed, and a support network made up of dealers or others must be in place to give producers the assurance they need to thrive.

Foreign manufacturers have overcome these hurdles in the past to win the confidence of U.S. producers. Market acceptance isn’t won overnight, but foreign companies have taken the many steps necessary to effectively compete in the U.S. Clay Albright, vice president at Caldwell Stone Co., offers an example of such a manufacturer.

“In our industry, I’d say 90 percent are the American flag-flying, gun-toting American,” says Albright, whose company is based in Danville, Kentucky. “But I can point to Komatsu. The word itself is clearly not American, but many parts are made or assembled in America. They employ Americans, and then you’re buying from a dealer.”

In Caldwell Stone’s case, it recently purchased a Komatsu WA500 yard loader through Brandeis Machinery & Supply.

“While some components may not be American, you’re helping salesmen who are American who live in my community,” Albright says.

Whereas “Made in America” was at one time “fully made in America,” the needle has moved on what made in the USA means.

“Toyota is made in Georgetown, Kentucky, and I’m sure a number of parts are not made in America,” Albright says. “Toyota is Japanese-owned, but that is a huge employer in Georgetown. It was one of the biggest acquisitions in the history of the state. It’s the same with Komatsu.”

According to Rich Smith, vice president of products and services at Komatsu America Corp., Komatsu began marketing machines in the U.S. in the 1960s and established a presence in North America in 1970.

The company was mired in a narrow band of market share for what seemed like a number of years, Smith says, but Komatsu made a decision about a decade ago that changed its position in the U.S.

“We started looking at we have to be more than [an] equipment supplier and at an outcome-based scenario,” says Smith, who has worked at Komatsu for 30 years. “[For example]: What are customers actually looking for? Yes, they need a machine, but why do they need a machine? And then work backward from there to help them achieve their desired state.”

In addition to changing its approach to customers, Komatsu built a distribution network. Without that, Smith says manufacturers – within the U.S., from China or from elsewhere – have little chance of succeeding.

Komatsu also brought its manufacturing into the U.S., and it now has 28 North American manufacturing facilities after completing its acquisition of Joy Global in 2017.

“What that ultimately means: Experts on those machines are here in the United States, [and] manufacturing is here,” Smith says. “So if there’s a problem, we can go all the way back down to the shop floor where it is built.”

To Smith, the idea of “Made in America” is essentially “Made and supported in America.” That, he says, is what American manufacturing comes down to.

“If you were purchasing a car and said: ‘I want to buy a Toyota Camry,’ but then found out your nearest dealership is 700 miles away, it’s probably not going to happen,” Smith says. “You know that eventually you’re going to need support.”