There have been a number of initiatives adopted by OEMs and fleet management companies (FMC) to assist their clients in improving order-to-delivery times (OTD), especially for trucks and vans requiring upfitting.
“More fleets are turning to vans to fulfill fleet applications, and van sales exceeded forecasted volumes in model-year 2015. In certain cases, end-user demand exceeded production capacity, which resulted in longer lead times,” said Partha Ghosh, director – supply chain management for ARI. “A strong retail demand has emerged over the past year or so, which, coupled with the relatively low price of fuel, has led to extended lead times on popular pickups and SUVs. These factors required OEMs to recommend placing orders much sooner than expected, and, in many cases, even close order banks early. Other complications arose from material shortages that limited the option to add shifts or overtime at manufacturing plants.”
Another factor impacting OTD is that many fleet vans are produced outside the U.S.
“Compact vans that are produced in Europe and shipped to the U.S. take an extraordinarily long time to clear customs and to complete modification. The manufacturers need to work on shortening this time on those vans,” said Howard Goldman, vehicle purchasing manager for Merchants Fleet Management.
Ghosh elaborated further on this issue: “Given the significant increase in demand over the past one to two years, lead times, in general, have gotten longer, and that trend is likely to continue, absent any significant decrease in demand or increase in production capacity,” he said. “However, the Transit Connect saw an improvement of about four weeks in OTD (from a range of 22 to 24 weeks in 2014, to 18 to 20 weeks in 2015), due to the change in its production location from Turkey to Spain. For other models, however, there were no dramatic improvements in OTD.”
In addition to impacting productivity, OTD can have other negative financial impacts on fleets.
“Production and delivery delays result in added costs for the customers and drivers. FMCs are forced to present alternative models and/or ordering methods and some entail higher-than-expected acquisition costs. The daily OEM contacts are frequently limited in their ability to provide alternative solutions, to respond quickly, and resolution of issues is often slow,” said Jessica Krams, manager, vehicle order management for Wheels Inc.
Fleet allocation has also created problems, especially when model-years turnover and orders get pushed to the next model-year. “Increased fleet allocation for popular models would be great for our customers instead of being pushed to the end of the queue, which can add months to an order,” said Goldman.
According to Ghosh, the entire supply-chain process needs to be considered when discussing OTD performance, and there are five major stages that compose the supply chain:
1. Vehicle and upfitting specification, driven by the client, FMC, and upfitting partners.
2. The vehicle (chassis) ordering, scheduling, and production process managed by the OEMs.
3. The movement of the vehicles, as performed by logistics services providers in transporting vehicles between the OEM and upfitters, as well as after upfitting to the dealers.
4. The upfitting process, which is probably the most variable aspect of the supply chain, since it depends greatly on the complexity of upfitting that’s required.
5. The final stage, the delivery process of the finished vehicle to the client, usually performed by the dealer, and inclusive of the licensing, registration, and any inspection requirements.
“Any number of challenges can, and usually do, occur in any one or more of these stages, and the complexities of the supply chain seem to be increasing as business and client expectations continue to grow. Managing the supply chain end-to-end is the key to improving OTD performance,” said Ghosh.
Building on this theme is Ken Gillies, truck ordering and engineering manager for Element Financial’s fleet management business. “A fleet upfitting strategy that considers the following helps avoid trouble: a good replacement plan, a good match between the job requirements and the vehicle, vehicle/chassis manufacturer (OEM) capabilities and incentives, and using an upfitter properly matched to your needs,” he said.
Elizabeth Kelly, director of operations for LeasePlan USA, provides additional suggestions on how to improve OTD. “The increase in OTD times is causing many issues with the productivity of fleets, which can be very frustrating to fleet managers,” she said.
When facing these problems, Kelly suggested reviewing three factors to lessen the impact of delays:
1. Re-evaluate order cycles. Ordering a bit earlier or even staggering orders throughout the year could help avoid some of the delays.
2. Understand lead times and production schedules. There have been many changes to both of these in recent years and the once-standard answer is now very specific for each model.
3. Consider alternative vehicles if those lead times and production dates do not meet their needs.
How Fleets Can Improve OTD
There are many actions fleet managers can implement to improve OTD for the vehicles they order. Some of these include:
Order Early: “In general, I would encourage fleet customers to place orders as early as possible to avoid potential risks of delayed production due to high demand of certain popular models, quality holds, and transportation delays. The retail market is expanding and that could affect fleet allocation, create longer lead times, and slow shipments even further,” said Krams of Wheels Inc.
Use Bailment Pools: “For time-sensitive needs, increase the use of upfitter bailment pools and manufacturer pools, such as GM eFleet, Ford Rapid Order Pool, Toyota Emmediate, etc. When fleets have more urgent availability needs, other custom pooling solutions are sometimes pursued where it makes sense given the circumstances,” said Ghosh of ARI.
But, there are pros and cons of using a bailment pool. “Using a bailment pool means the chassis spec will be generic and may not meet the exact spec that had been developed. Additionally, fleets may have to wait for the new model-year pricing, which will lead to delays pending start-up dates, potentially higher costs, and re-development of the spec depending on major changes from the manufacturer,” said Mark Pilong, truck spec process facilitator for ARI.
Order in Bulk: “If possible, try to order in bulk. Vendors are usually willing to provide discounted pricing if they are able to order materials and schedule their production lines based on a larger order volume,” said Mike Sturges, manager – regional truck sales for ARI.
Anticipate Lead Time: “Communicate with your FMC or upfitter to understand the anticipated lead time and overall production time frames. OEM production time frames will vary especially around start-up and build-out dates. Many times manufacturers will move build-out dates forward, catching many fleets off-guard. This results in the inability to place needed orders and will lead to delays in searching for stock units, which will come with an increased cost and not an exact chassis spec to what had been developed,” said Pilong of ARI.
This thought was also echoed by Steve Swedberg, truck engineering & ordering specialist for EMKAY. “Lead-times on equipment and bodies can be very long, though delays can be minimized by ordering additional equipment at the same time as the chassis. Arranging installs via ship-thru can also help to cut down on delivery fees,” he said.
Also recommending fleets make upfit specifications at the time of the factory order is Goldman of Merchants Fleet Management. “When upfit specifications are made after the factory orders have been placed, a ship-thru code cannot be added. When specifications are added after the factory order, the upfit must be done after it has arrived at the dealership, which can lead to a difficult coordination between the dealer and upfitter,” he said.
Analyze Merits of Local Install vs. Ship-Thru Upfitting: “Do not allow upfit or modification to occur at the local level; rather, whenever you can, always choose ship-thru with major upfitters. When compared to the value of ship-thru solutions (consistency of build, lowest cost for transportation, and the ability to leverage volume purchases), a local upfit is typically more expensive and takes more time,” said Chris Foster, manager, truck & equipment for ARI.
Consistency of work is another advantage of using a ship-thru program.
“It is important to understand that dealer-installed upfits may compromise fleet consistency as we are at the mercy of the local dealer to obtain the equipment. All installed items are not created equally,” said Greg Carson, director of fleet operations for Union Leasing.
Also advising against local installs is Rich Zambroski, manager, truck excellence for Element Financial’s fleet management business. “For planned replacements, we typically recommend clients consider ship-thru rather than local installs. This option is more efficient and cost effective, as it helps save money on the transportation expense and the fleet will have more uniform vehicles,” said Zambroski.
Coordinate Upfit with Chassis Order: “Upfitters should be proactive and order service bodies and schedule the upfits when the chassis is in transit,” said Goldman of Merchants Fleet Management. “Timeline efficiency should be maximized by ensuring transportation availability has been confirmed when the upfit is expected to be complete. From a clients’ perspective, it’s very frustrating considering how long they have waited to take delivery.”
Ensure Greater Collaboration Between Fleets & Upfitter: “It is essential for fleet managers and operators to collaborate on upfits to ensure the operator can efficiently and effectively complete their job function and have a seamless transition to their new vehicle,” said Goldman.
Determine in Advance Whether Local Chassis Support is Available: “Check for local OEM support when choosing a chassis. Delivering a new truck to an operation that may have to drive 200 miles for OEM support or warranty will likely not be well received by your field people. Also, be sure you are aware of the OEM’s service network before committing to a particular manufacturer to better facilitate moves for service and repairs,” said Joe Brightwell, truck operations manager for Wheels Inc.
Elaborating on the need to consider the local service network and its ability to service upfitted units is Foster of ARI. “The best example of this is in the case of upfitting for compressed natural gas (CNG). Often, fleets fail to properly consider the service network for the CNG kit provider. While not as critical as it once was, as OEMs become better trained to assist, other upfit component service networks should be considered. Fleet managers should pay close attention to the components on their upfit specifications to ensure that an adequate service network exists where they plan to deploy the vehicles in question,” said Foster.
Use Upfitter Pools: “For unplanned replacements, due to accidents or other unforeseen circumstances, we suggest using upfitter pools rather than going out-of-stock to acquire vehicles. Utilizing upfitter pools could save anywhere from $2,000 to $3,000 or more per vehicle, plus you’ll also save on transportation costs and waiting time,” said Zambroski of Element Financial’s fleet management business.
Consider Second Use of an Upfit: “It is important to determine if the upfit can be ‘deinstalled’ at the end of the lease without compromising the integrity of the defleeted vehicle,” said Carson of Union Leasing. “Determine the additional vehicle value (if any) for installed upfits that will not be deinstalled prior to off lease disposal.”
OTD Initiatives by Upfitters
In the past, after vehicles entered an upfitter, there was often a lack of real-time knowledge of the upfit status. But, this is changing.
“We have seen more and more upfitters offering electronic status feeds and have partnered with them to incorporate those feeds into our system,” said Kelly of LeasePlan USA.
In addition, OEMs have been proactive in working with upfitters to expedite the upfitting process and improved OTD.
“To minimize upfitter delays, FCA has refined the 2015-MY Ram ProMaster ship-thru process, which has led to a reduction in OTD,” said Jim Tangney, vice president – vehicle acquisitions for EMKAY. “Ford experienced some challenges at its Kansas City plant where the plant works more days than the upfitters and it leads to a glut of vehicles (Transits and F-150s) that, in some cases, need to be stored at off-site parking lots until they can be moved to the upfitter. Ford has been working with the upfitters to improve communication and traffic flow with the use of scanners and system alerts.”
Another upfitter initiative was reported by Wheels Inc. “We’ve made some significant headway with the body upfitters. Communication on the upfit and delivery requirements is ongoing and Wheels established daily status transmission files with several more upfit vendors this past year,” said Krams of Wheels Inc.
LeasePlan USA has implemented similar initiatives. “We implemented several system enhancements in the past year to help provide our clients with better estimates to the vehicle’s arrival at the dealer,” said Kelly of LeasePlanUSA. “For upfitted vehicles, we account for the upfit completion time as well as the extra transportation time.”
How OEMs can Improve OTD
The following suggestions are from FMCs on how OEMs can improve OTD:
Improve Communication: “Manufacturers need to communicate to FMCs on a frequent and timely basis to inform us about the reason for delays and when they anticipate a resolution. Because OEMs do not provide us with this information, we are, therefore, unable to set realistic expectations with our customers,” said Cindy Gomez, director of vehicle acquisition services for Donlen.
Enhance Forecasting Capabilities: “Better forecasting by OEMs, rail, and upfit suppliers should help ease the delays and long lead times. All players, including the end customers, should evaluate alternative transportation to help get vehicles in the hands of drivers faster,” said Kelly.
Forecasting also includes advance notice of supplier constraints, “OEMs need to improve the forecasting of supplier constraints, as well as implementing a more robust reporting system, that will catch exceptions and minimize delays,” said Mark Donahue, manager, fleet analytics for EMKAY.
Increase Collaboration Between all Logistics Partners: “Manufacturers should be taking a more holistic and proactive approach to identify orders that have been impacted by extended delays. To do this, OEMs need to pay attention to order receipt date (as well as aging vehicles at plants and ramps) and take initiative to get the vehicles back on track for timely receipt by the customer,” said Krams of Wheels Inc.
Donahue of EMKAY, likewise, presented a similar suggestion. “Manufacturers collaboratively working together and with transportation companies, particularly rail, to secure additional rail cars and equipment to meet the increasing industry volume,” he said.
Utilize GPS Technology: “Customers are asking why the manufacturers are not utilizing GPS technology to pinpoint exact vehicle location and improve reporting. Indeed, customers have come to expect real-time data as technology continues to provide new information-sharing capabilities,” said Krams.
Enhance Collaboration with Supply Chain Partners: “With the main driving issue being the growing difference between supply and demand, any actions or strategies that OEMs can take to mitigate that difference will result in better OTD. Continuing the focus on improving quality control, developing contingencies for various scenarios, and improving execution are all various solutions or strategies in play or to consider,” said Ghosh of ARI. “Strengthening collaboration, coordination, and communication with the various supply-chain partners (e.g., parts suppliers, logistics service providers, upfitters, dealers, etc.) will result in better OTD over the long term. In the short term, recognizing the realities of the current and near-term landscape and having the most viable contingencies to deploy when needed is the key to effectively dealing with unpredictability.”
Stay Focused on the Original Order Date: “When a vehicle is held up for quality repairs, the focus tends to shift to that specific piece of the process, and the overall impact on the customer is no longer factored in as it should be,” said Krams of Wheels Inc.
Create Contingency Plans When Demand Exceeds Capacity: “Planning for overflow demand at additional plants is an area that has been almost non-existent. Many models are only built at specific plants and if they reach capacity it makes it hard to meet customers’ expectations on when a vehicle should be available,” said Goldman of Merchants Fleet Management.
Eliminate Deficiencies in the Courtesy Delivery Process: “The driver delivery experience is a critical piece of the entire process. The manufacturers need to work more closely with the dealers to help ensure timely and quality driver deliveries. Some OEMs recognize this and have been working to educate the dealers and encourage them to participate in fleet deliveries; we’d like to see this happen more often,” said Krams of Wheels Inc.
Factors Out of Our Control
However, no matter what initiatives FMCs and OEMs put in place to improve OTD, there are some factors that are outside the control of the fleet industry, namely rail transport.
“A number of changes can occur to improve OTD for future model-years, but rail cars continue to be a constraint for the transportation system. I would love to see this get cleared up,” said Goldman of Merchants Fleet Management.