The sundry supply-chain headaches brought on the COVID-19 pandemic have just about worked their way out of the system for Rockwell Automation Inc., Chairman and CEO Blake Moret told an investment bank conference Sept. 12.
Like so many other manufacturers, Rockwell’s leaders have had to deal with shortfalls in services and components ranging from general shipping delays to semiconductor shortages since early 2020. The Milwaukee-based automation giant also had to deal with the dynamic of some customers over-ordering and thus exacerbating those supply-chain woes. But, he told attendees of Morgan Stanley’s 11th Annual Laguna Conference, those days are coming to an end.
“While we still have a lot of management in place to make sure that we continue to get that firm supply, it’s far better than it was,” Moret said. “We’re really dealing with that last bit of the tail.”
Moret and his team in recent months set a year-end target to have lead times return to their pre-pandemic levels and he told the Morgan Stanley event he’s confident Rockwell will get there. Clients who have seen their own order flows stabilize, he said, have in turn normalized their order flows which has let inventories fall into line through the manufacturing process. In short, parts are, with few exceptions, where they should be.
“They’ll either be on our distributor’s shelf or we’ll be able to make it within a period of days or a few weeks,” Moret said.
Normalization was a theme in Moret’s other commentary. He said Rockwell’s acquisitions of several management execution systems businesses as well asset management and cybersecurity software ventures will help even out the revenue peaks and valleys that come with traditional manufacturing equipment business cycles. The recent purchase of Clearpath Robotics, which specializes in autonomous robots for industrial applications, fits into that strategy.
Also adding some consistency over the medium term, he added, is the stream of investment into U.S. electric-vehicle, battery and semiconductor manufacturing capacity—“We think it’s still early innings”—as well as a broader awareness of manufacturers in the food sector as well as home and personal care segments that they need to invest in automation to offset chronic workforce shortages.
In the shorter term, though, some investors have been concerned about Rockwell’s order growth slowing. (During the second quarter, year-over-year organic sales growth was about 13%, less than half the company’s Q2 pace.) But Moret said that circles back to supply chain dust settling down and hasn’t been a surprise for Rockwell’s C-suite.
“This is playing out like we had thought it was going to play out,” Moret said. “We have said for some time now that, as lead times improve, […] we’re going to see orders reduce. It’s a little scary when you’re in that reducing side of things but we continue to see broad indications from our distributors, our customers, our salespeople that orders will rebound as that inventory is flushed out and as we get back to a less volatile pattern.”
Shares of Rockwell (Ticker: ROK) were down about 1% to roughly $290 in afternoon trading Sept. 12. They have risen slightly over the past six months, taking the company’s market capitalization to about $33.3 billion.