March 2024
Inflation and supply chain disruptions have cast giant shadows over major purchases, including and not limited to recreational and custom commercial vehicles. These sectors, crucial for many target audiences (leisure and business) are facing, and will continue facing, challenges as economic dynamics shift as supply chains to these industries are under tremendous pressure. Furthermore, the impact of the upcoming Presidential election could shape the trajectory of the 2025 GDP. We’ll discuss the impact of each of these in the following paragraphs.
Inflation, the incessant increase of pricing on goods and services over time, affects purchasing power on everything, including recreational and custom commercial vehicles. As the last pandemic changed how many people work and play, more and more people are looking for mobile office space including the aforementioned products which accelerates higher demand on products which then directly impacts pricing: price inelasticity.
Supply chains will also directly contribute to pricing. The network of suppliers, from steel to electronics, is continuing to struggle to meet the heightened demand. Furthermore, delays in the delivery of essential components and raw materials will adversely affect the production schedule which in turn drive up manufacturing costs throughout the cycle.
And with us living in a global economy, unprecedented challenges can infect local manufacturing. One of the most notable global issues that impacts locally is the semiconductor market. The shortage has led to countless delays and increased costs, not to mention the frustration from both manufacturers and end users as they anxiously await the completion and delivery of products.
Energy costs should not be overlooked. As the cost to run plants and front offices continue to increase, the transference of those costs impacts the pricing as well. Although many companies try to absorb as much of the cost increases, inevitably these cost leak into the manufacturing equation as well. All said, most of the brunt of the economic challenges in the recreational and commercial markets are faced at home, the end users.
Buying a recreational or custom commercial vehicle has such an emotional element that delays in receiving, or not having one available for purchase at all, adversely impact and sometimes delays the buying process. The increase in the cost of ownership, combined with the delays further exacerbates the emotional component. Add those frustrations to the possibility of not able to go on the planned vacation, or making a construction deadline, has been markedly greater in the last few years than any other time in history.
So, how do we mitigate frustrations and emotional drains if you’re the manufacturer? It may sound cliché-ish, but clear and open communication with your end users. Staying in contact with your customers about delays, and possible delays, could help alleviate some fears and concerns. Also, coming up with alternative, creative solutions can also go a long way in building trust between the manufacturers and their customers.
From a manufacturing perspective, also seeking alternative suppliers can alleviate your burdens. Having your team collaborate on alternative solutions, designs, and/or sustainability will hopefully build a stronger bond between teammates and suppliers.
Finally, politics. Some experts say the next election will cause a greater erosion of supply chains and trust. While others say the election will jump start our economy and relaxing the supply chain bottleneck.
One thing is for sure, we must be diligent in our efforts to find ways to deliver our products, enhance our user’s experiences, drive down, or mitigate the escalation of, costs. As Heraclitus once said, “The only constant in life is change.” Boy, did he have it right.
Good luck, from your friends at Workforce by RBD
