Expect Delays
Bloomberg Businessweek|August 09 - 16, 2021 (Double Issue)
One factory’s logistics show the cost to businesses of strained U.S. infrastructure
By Mike Dorning

Every vehicle that comes off the assembly line at Volvo Construction Equipment Corp. in central Pennsylvania is a test of America’s highways, rail lines, and ports. And too often they let the company down—slowing the influx of global supplies that feed its main U.S. production facility, which builds wheel loaders, soil compactors, and other industrial vehicles.

During a stretch in April and May, bad traffic on nearby Interstate 81 delayed the arrival of steel plates from Georgia on three occasions. Such incidents send senior production controller Mike Middaugh to his computer to test alternative assembly schedules, given what parts the factory has on hand and what other deliveries might be accelerated.

“It’s very much a puzzle. You’ve got all these pieces,” Middaugh says. When he succeeds in rejiggering production, he can see the impact from his perch overlooking the factory floor. Mechanical tuggers—a sort of powered cart—scutter around pulling vehicle frames off assembly lines as output is resequenced. It all takes time and adds costs, and that’s if the flow of parts can even accommodate a switch.

Sometimes, after hours of poring over spreadsheets and testing multiple alternative scenarios, Middaugh finds the only answer is to stop production. For an operation that relies on just-in-time deliveries of parts and materials, delays have at times halted the Volvo plant’s production for half or even a full day, according to the company, which is part of the Volvo Group.

At Volvo’s factory in Arvika, Sweden, which also makes wheel loaders, the company regularly schedules deliveries of German-made engines to arrive as little as one hour before the first engine in the shipment is needed, says Gustavo Casagrandi, a vice president and general manager of Volvo’s Shippensburg, Pa., operations. “We could never do that here,” Casagrandi says.

The disruptions showcase why business leaders and local officials across the country are hoping President Joe Biden and Congress in the coming months can finally deliver a major infrastructure investment package, after years of political bickering in Washington that’s stymied previous attempts.

“It probably costs 5% to 10% of productivity,” Stephen Roy, president of Volvo CE’s North America region, says of infrastructure deficiencies. “We’re shutting the plant down. We’re idling the workforce.”

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