The Road Ahead and Other Key Considerations for 2022 Amid Supply Chain Delays

As a disrupted supply chain complicates day-to-day operations across a multitude of industries, issues of order fulfillment are a growing concern for those of us in the equipment finance industry. The manufacturers and distributors my team and I work with across different industries are being challenged to adapt their fulfillment operations to the current situation. Given the continued delays and other potential complications that have risen from new COVID-19 variants, I anticipate supply chain issues will continue well into late 2022, impacting the way our clients anticipate equipment purchases for the foreseeable future.

Although supply chain disruption is an obstacle to growth, our industry continues to find ways to adapt accordingly, as it has done since the pandemic began. While no one is certain of how long it will take to ease the bottlenecked supply chain, here’s what those seeking equipment purchases in 2022 can anticipate when planning their year:

Rising Prices

As pent-up demand due to the pandemic contributed to the rise in delays, so too will inflation, labor shortages and other pricing shifts impacting equipment availability and the need for financing. Not only have the prices of raw materials skyrocketed but changing fuel costs have also begun to impact overall shipping costs, which have also shot upward as shipping vessels back up outside of ports across the globe.

Larger manufacturers and commercial retailers with higher purchasing power will get the first line of access to supplies and parts to fulfill orders and equipment. Additionally, many of them will work around the supply chain bottleneck by chartering their own ships and long-haul planes, as demonstrated by Amazon who is investing in the entire fulfillment process by even manufacturing its own containers.

As nearly every piece of the fulfillment process has seen an increase in operating costs, those planning for larger equipment investments in 2022 should plan accordingly for higher costs within their budgetary needs and consider utilizing financing options that allow them to be more flexible while considering their organization’s growth. For example, fair market value leasing solutions may make monthly payments more manageable amid rising equipment costs.

Shifting Growth Plans

While heightened demand has slowed the fulfillment process, it has also driven immense business growth for many companies, and while the anticipation for growth amid 2020’s slowdown is welcome news, those looking to 2022 should remain flexible in their plans for expansion.

In particular, the trucking industry has seen a sizeable rise in demand as consumers, with their sizeable savings flock to stores for both online and in-person shopping. According to a March 2021 report from Bloomberg Economics, Americans amassed an estimated 1.7 trillion in savings since the beginning of the pandemic through January 2021. With re-openings giving Americans the confidence and motivation to spend largely again both online and in-person, the trucking industry has become all the more critical as it remains the foundation of America’s e-commerce network.

That said, trucking and logistics companies have been hit hard with an overwhelming amount of consumer volume and labor shortages which has put immense stress on their day-to-day operations. This has led companies in this sector to consider costly upgrades and expansions for the new year.

Trucking and logistics companies, as well as other industries seeking to make large commercial investments should keep these temporary changes in demand at the top of their considerations for upgrades.

The market remains volatile, and with continued COVID-19 developments impacting daily operations, and the international economy’s performance, organizations looking to invest in large equipment upgrades should define which investments will benefit their bottom line the most.

Delays, Delays and More Delays

As expected, equipment orders will continue to get backed up by the congested supply chain pipeline, but there are steps businesses looking to invest in upgrades can take to keep the process moving along. For instance, many manufacturers may be waiting on additional or final parts to complete the manufacturing of their equipment. Organizations may have an option to take equipment now that is not fully complete but still functions for the specific function it was ordered. Furthermore, customers need to be prepared to take delivery of the equipment once ready, otherwise they are at risk of being de-prioritized in the fulfillment of their order which can result in further delays

Those looking to expand their businesses more quickly may have the option to take demo models of the equipment in the interim. Organizations may need to form a deeper level of trust with the equipment manufacturers providing demo equipment in the interim, but this can be a great way to utilize the equipment and continue working on expansion plans while waiting on the latest technologies to arrive.

With many incomplete equipment orders, financing options can be structured to support organizations’ equipment acquisition needs as they continue to navigate through the disruption in the supply chain. Additionally, financing options may be available to support organizations who may have been looking to put their Section 179 bonus appreciation tax benefits to use this year but may have needed to wait to take advantage of the savings benefits as orders placed now may not be delivered until later into 2022. Those considering taking advantage of Section 179 tax benefits should consult a tax advisor to confirm qualification before building the approach into this year’s taxes

Given the rising rate environment, organizations may want to take advantage of financing structures that lock in the rate and start the contract now with payments deferred until the expected equipment delivery date. Organizations should ensure that the deferral period does align with the equipment delivery date otherwise there is the risk that payments will need to be made prior to equipment being operational and generating revenue.

Getting Past the Roadblock

Supply chain issues will remain a formidable barrier for growth across industries which heavily rely on the latest in equipment and tech-enabled tools, like trucking and logistics companies or healthcare. Taking steps to utilize the right financing programs will help organizations address potential disruption in supply chain and effectively address growth plans for 2022. While obtaining the latest technology may be delayed there are plenty of strategies to upgrade equipment and maximize the operations of old equipment amid today’s fulfillment issues.

Equipment suppliers continue to work diligently to deliver new equipment and upgrade older technologies. Companies can ensure that they are still ahead of the curve by utilizing effective financing options to address any delays in equipment deliveries.

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