Navigating market volatility: The importance of flexible manufacturing systems for heavy equipment OEMs
2024 was a particularly challenging year for many heavy equipment manufacturers – and the heat is still on. Key market segments are facing stormy weather, leading to excess inventory. Even though this sudden demand dip will likely just be temporary, it’s symptomatic for the times we live in. More than ever before, OEMs need to build resilience against an increasingly turbulent global business environment with heavy equipment smart manufacturing solutions. In addition, the transition to a new generation of machines continues to take place at scale, requiring flexible manufacturing systems that can handle the ever-growing diversity of orders.
Many manufacturers are on the verge of redesigning their operations to that end, making complex, strategic decisions that may have a huge impact on their entire organization. Advanced software will help them reduce that risk by making choices right the first time, based on facts and supported by virtual validations.
Planning heavy equipment production in times of disruption
When supply and demand don’t match, it can severely impact OEMs, but also their dealers, partners and suppliers. Unfortunately, such circumstances are due to occur ever more frequently. In our increasingly connected world, we’ve become more vulnerable to global disruptions of all kinds. In fact, while the current demand dip took shape, the heavy equipment industry was still recovering from all business fluctuations that came in the wake of the pandemic. Looking forward, continuously shifting geopolitics and global market conditions will continue to be volatile.
Manufacturers always need a solid, long-term outlook for their target markets to predict the needs of their customers and plan which products they will take to market. However, it also requires the flexibility to react to volatility.
Even if predictions say there is light at the end of the tunnel as demand could normalize during the course of 2026, some major heavy equipment players have lost confidence that the tide will turn any time soon. The reality is that, today, both farmers and contractors are still delaying their investments in new equipment because of a number of factors, most of which are beyond their control.
Secure the future with a flexible manufacturing system
The best OEMs can do to tackle both short and long-term market challenges is to identify how more flexibility can be incorporated into their manufacturing operations, allowing them to adjust production volumes to fluctuating demand. While designing such an approach, they may want to consider all the existing infrastructure and processes across their entire manufacturing ecosystem, including those at partners and suppliers. Taking all of these factors into consideration can help manufacturers spread out their risk and ultimately achieve a more resilient strategy that benefits all stakeholders.
The need for a flexible manufacturing system is not new to heavy equipment OEMs. Adapting to change is necessary to efficiently and flawlessly supply the large variety of products customers typically demand. And as the transition to a new product generation keeps expanding, that requirement will become even stronger. Inevitably, OEMs will find themselves in a time of enormous production complexity, where almost every order will be unique, and supply must match demand one on one.
Traditional assembly versus flexible manufacturing systems
In contrast to a traditional assembly line, a flexible manufacturing system has the ability to route the product being built to a number of different machines or work cells based on resource availability, scheduling constraints and customer demand. Each machine and work cell can perform many diverse manufacturing operations. To accomplish this, an automated material handling system is usually employed. This material routing, combined with the high level of manufacturing automation, makes it possible to achieve the high level of flexibility required to increase system productivity while at the same time reducing the overall cost of manufacturing.
To meet the challenge of designing, building, and ramping up a highly complex flexible manufacturing system, digital manufacturing software can be used along the entire system lifecycle. It is important to optimize the layout to achieve the highest level of flexibility. Simulation is extremely critical to ensure that the control system will work as designed with the minimum possible amount of physical commissioning. Robot and CNC programs should also be developed offline and then uploaded to the shop floor to decrease system ramp up time. There are many different digital manufacturing tools that can be used to minimize the risks and increase the quality of flexible manufacturing systems.
Taking manufacturing to the next level
To (re)design their current operations to this ability, heavy equipment OEMs will soon face many strategic decisions, each of which will involve a lot of risk. When are greenfield investments (building new facilities) required and justified? Or are brownfield investments (upgrading existing facilities) the better alternative? In addition to producing what, where and how many, there is also the question of ‘with whom?’. Which suppliers and partners offer the best odds of success? Those must be financially attractive, but also reliable, innovative and a guarantee in terms of sustainability.
Each of these decisions can have a huge impact on the entire organization and entails enormous complexity because of the versatility of factors that play a role. It’s key that while striving for flexibility in their operations, OEMs are not compromising their known KPIs. On the contrary, those must improve at the same time. The only way to achieve this is by thorough analysis using a high volume of facts and data in analytics and simulation scenarios.
For example, with current advanced capabilities in software systems, OEMs can map out their entire manufacturing ecosystem and study interventions in what-if scenarios, thus improving flexibility while optimizing for numerous KPIs. With new technologies such as artificial intelligence (AI), heavy equipment manufacturers are no longer restricted to merely considering quantifiable aspects, like time and cost, but can also include less directly measurable requirements, such as reliability, sustainability and innovation.
Virtually validate every investment
When it comes to deciding on investments in significant changes to either infrastructure or processes, it’s clear that software capabilities must go beyond mapping out and optimizing current operations. Instead, decision makers need accurate predictions for heavy equipment smart manufacturing. In this context, simulation plays a key role. With today’s specialized tools, OEMs can meticulously model new processes, production lines and plants, evaluating them for numerous scenarios long before the actual investments take place to ensure decisions are evidence-based and right the first time.
Such simulations will also enable manufacturers to ramp up confidently, quickly, and flawlessly, whether it’s with CNC-programmed part production, deploying a new sequence of operations, (re) organizing assembly lines or planning welding processes. Those are just a selection of disciplines that can be modeled in detail, virtually tested upfront and optimized for various aspects, including efficiency, throughput, cost and ergonomics, but also product quality and reliability, which can avoid rework and delays.
Software is the key to efficient, flexible and sustainable manufacturing operations
Success for heavy equipment OEMs will depend on their capacity to adopt such software capabilities and integrate them in their standard processes for making manufacturing decisions. It will be a crucial step in their digitalization journey. Those who can do so, will be rewarded with more efficient, flexible and sustainable manufacturing operations, will be more resilient than their competitors in a highly volatile business climate, and will be better prepared to keep matching supply and demand when the transition to the new generation of equipment takes place at scale.
At Siemens, we provide a variety of software solutions to help heavy equipment OEMs adopt a flexible manufacturing system, including manufacturing process planning, part manufacturing and execution systems. Check out the many resources Siemens has dedicated to heavy equipment smart manufacturing below:
In April of 2025, there will be another Bauma event in Germany, an excellent opportunity for heavy equipment enthusiasts like me to see where the innovation train takes us next, despite the currently difficult business climate. I look forward to discovering what’s new in the areas of electrification and automation and will share my observations in a new blog post this spring.
