‘Smart Industrial Strategy’ Boosts Efficiency of Farm, Construction Equipment

Facing labor shortages and rising costs, businesses that use heavy equipment are adopting a “smart industrial strategy” that uses technology to boost productivity.

In farming, construction and forestry, for example, software platforms and semiautonomous features that have been added to the equipment are enabling the users to get more done with less labor and materials, executives at Deere & Co. said Friday (May 20) during the firm’s quarterly earnings call.

“In many cases, our machinery is lessening the usage and reliance on some of these inputs, so the more inflation that we see in chemical and fertilizer costs, in many cases, the more valuable our equipment has become to them,” Deere Head of Investor Relations Brent Norwood said during the call.

Doing More with Less

In farming, companies are deploying equipment that applies seed, fertilizer and chemicals more precisely, allowing them to get the same yields while using less inputs.

For example, Deere’s ExactRate system monitors and controls the application of liquid fertilizer, enabling companies to use less of this input that has been experiencing rapid inflation. The company reported that agriculture companies are finding they can get the same or even greater yields while using less inputs.

“Traditionally, in ag, to boost yields, we’ve seen an approach that had to be ‘do more with more,’ but with rising input costs, our customers are looking at how they can do more with less,” Deere Deputy Financial Officer Joshua Jepsen said during the call.

Reducing the Need for Skilled Labor

In construction and forestry, companies are using excavators with technology and semiautomated functions that enable them to grade with increased productivity and accuracy while also increasing safety and reducing the need for skilled labor to operate them.

“When you think about labor challenges — skilled labor on the job site — a tool like SmartGrade effectively automates the job so that someone with not a tremendous amount of experience can get in and perform a job as well as an experienced operator,” Jepsen said.

As with the agricultural applications, this enables construction and forestry firms to do more with less. Technology like this is increasingly being used in construction, earthmoving and road building.

Accessing Talent, Technology, Business Opportunities

During the first quarter, Deere added to its precision ag technology capabilities by making some acquisitions.

“Consistent with the themes that we’ve previously discussed of digitization, automation, autonomy, life cycle, electrification and sustainability, we’ve executed during the quarter to expand our access to talent, technology and business opportunities in these areas,” Deere Senior Vice President and Chief Financial Officer Ryan Campbell said during the call.

For one, the company formed a joint venture with GUSS Automation, which offers semi-autonomous orchard and vineyard sprayers. Because the sprayers can be remotely supervised by one operator and use software to control application rates, they increase productivity while reducing the need for skilled labor to operate the equipment.

“I highlight this investment as it is illustrative of the new smart industrial strategy focused on production systems,” Campbell said. “Our teams work to deeply understand customer production systems and how to deliver better outcomes, both from an economic and sustainability perspective — then we work to deliver differentiated solutions.”

Managing Profit and Loss

Asked by an analyst if consumers are trading down on certain product categories in response to the higher costs they are facing, company representatives said that buyers are seeking equipment that enables them to be more productive when applying those higher cost inputs, adding that machinery is a relatively smaller portion of their profit and loss (P&L) statements than seed, fertilizer and chemicals.

“We see our take rates for our tech that allow our customers to manage their P&L better continue to be very strong, and we would expect them to get stronger,” Campbell said. “So, if anything, we see customers trading up, not down.”