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Market Trends

Most OTD Times Improve in 2007-MY

October 1, 2007, by Mike Antich

Order-to-delivery (OTD) times for most 2007 model-year fleet vehicles improved due to greater railcar availability resulting from a slowdown in retail sales, cutbacks in daily rental volume that increased production allocation for commercial fleet orders, a decreased number of quality holds, and the absence of any major weather-related delays such as those experienced last model-year, according to Automotive Fleet’s eighth annual OTD survey.

Seven fleet management companies provided data for this year’s study: Automotive Resources International (ARI), Donlen, Enterprise Fleet Management, GE Capital Solutions Fleet Services, LeasePlan USA, PHH Arval, and Wheels. The study tracked new-vehicle deliveries for 242,973 vehicles during the 2007 model-year, representing 89 models. The models selected were those with more than 1,000 units registered to commercial fleets in the 2006 model-year; however, there were exceptions to this criterion.

OTD time for cars was calculated from the day an order was placed with a factory to vehicle delivery to a dealer (not driver pickup). Truck OTD was calculated from order placement to delivery to an upfitter or, if no upfitting was required, to a dealer. The days spent at an upfitter were not included in truck OTD times. An industry average was calculated for each model tracked based on the information provided by the participating fleet management companies.

OTD Times Improve
“Overall lead times decreased for the 2007 model-year,” said Rick Shick, vice president of purchasing for Donlen Corporation.

Linda Tiberi, manager of motor company relations for PHH Arval, agreed. “In some cases, improvement was as great as 15 to 30 days. However, order-to-delivery times did increase on certain truck models,” said Tiberi. “Generally speaking, cars, as opposed to trucks, experienced the greatest improvement. The reason is that retail demand is greater for trucks, including SUVs, crossovers, as well as pickups, compared to the demand for cars.”

Tim Delaney, manager of operations for ARI, summarized the model-year by saying: “Better quality product out of the gate. There were fewer transportation issues. We identified later production start-up dates in ’07 compared with ’06. Plant downtime seems to have extended shipping and delivery by two to three weeks.”

Improvements in OTD times for certain high-volume fleet models helped bring the overall industry average down.

“Overall, the average OTD for car and truck models decreased for MY-07. Several high volume mid-size car models contributed to the decrease that offset the OTD increase on select truck and van models,” said Jan Freund, director of manufacturer relations for Wheels Inc.

Another factor was improved manufacturer efficiencies.

“We saw a slight improvement in overall order-to-delivery times for 2007 models compared to 2006, which can be attributed to improved manufacturer efficiency, fewer transportation delays, and better railcar availability,” said Tim Martin, vice president of operations for LeasePlan USA.

Import-badged manufacturers have also made a dent in order-to-delivery times with their fleet pools. “The increased availability of vehicles allocated to commercial pools had a positive impact on order-to-delivery for 2007 models,” said Martin.

However, several factors delayed OTD for some 2007 models.

“Reduction of capacity at some plants extended order-to-delivery times for some orders that were in the pipeline. The Canadian National Railway Strike caused delays in GM and Ford products shipped out of plants in Ontario,” said Dave Pellinger, manager of manufacturer and dealer relations for GE Capital Solutions Fleet Services. “There were also a few isolated quality holds that drove order-todelivery times up.”

One factor that negatively impacted order-to-delivery this year was the increase in the number of dealers going out of business. “This created the need for more vehicles diverted to alternative dealers and again, in some cases, created another ‘black hole’ in the transportation segment of order-to-delivery,” said Tiberi.

Another factor was greater-than-anticipated demand for some new models. “Initial demand for the new Dodge Caliber and Jeep Compass exceeded Chrysler fleet expectations, and a few customers experienced longer-than-expected build times on early orders. Allocation requests are submitted early, which can be difficult to predict on a new model,” said Freund.

Impact of a Soft Retail Market
“The primary factor positively influencing OTD performance in the 2007 model-year was the soft retail market and cutbacks in vehicle sales to daily rental companies,” said Shick of Donlen.

The soft retail market improved fleet OTD by freeing up railcar availability, a perennial problem delaying fleet orders.

Two years ago, the impact of Hurricane Katrina played a major role in delaying fleet deliveries. “This past year, we did not have to contend with effects of significant weather-related issues such as hurricanes, hailstorms, or floods causing vehicles to be held at the ramps, often unloaded, inspected, reloaded, and rerouted, which delayed vehicle deliveries,” said Freund.

The other key factor behind the improvement in OTD was the cutback in daily rental volume.

“The Detroit manufacturers cut allocation on daily rent vehicles, which opened up production allocation for commercial fleet orders,” said Freund.

Also, OEMs have improved their manufacturing efficiencies. “I would point to the increased focus on operational efficiency by all manufacturers as a key factor positively influencing order-to-delivery times during 2007. In the current lean, competitive environment, not only are the manufacturers focusing on their internal processes, but they are also teaming with transportation vendors to shorten processes. We have experienced a higher level of partnership with the manufacturers by being supplied with their order-to-delivery metrics, which, in turn, allows LeasePlan to look at where we can gain greater efficiency,” said Martin of LeasePlan USA.

Greater Availability of Railcars
There was sufficient railcar volume to support fleet deliveries in 2007, due in part to production cuts by the manufacturers and a full recovery from the shortages caused by Hurricane Katrina.

“From a long-term perspective, there is concern surrounding the availability of railcars to support the market. Increasing equipment failures, due to the age of the railcars, and the industry’s budget constraints limiting the number of new railcar orders, contribute to this concern,” said Martin.

Shick also cited the slow new-vehicle retail market as a reason for the increased availability of railcars.

“The soft retail market and reduction in vehicle sales to daily rental companies minimized railcar shortages experienced in previous years,” said Shick.

Freund seconded this assessment. “This past year we did not experience extensive shipping delays due to railcar shortages. It’s due to the slowdown in new-vehicle sales and the overall economy, which, in turn, freed up the availability of railcars and engines,” said Freund. Another reason for greater availability of railcars was that more fleet models were transported by carriers.

“Railcars were not an issue this year as they were last year. More vehicles are being moved by carrier whenever possible,” said Tiberi of PHH.

However, geographic-specific shortages of railcars did occur. “Shortages were not as prevalent (or publicized) compared to previous years,” said Delaney of ARI. “There was a backlog in rail transit primarily out of the truck plant areas (Dearborn and Kansas City) during the months of April through July. We have been informed that there are limited railcars to accommodate the height of some models,” said Delaney.

Truck OTD Lagged Behind Cars
In most cases, trucks, especially vans and pickups, experienced the poorest OTD performance. “Contributing factors included higher retail demand for these models, a greater complexity in the manufacturing process, as well as some instances of parts shortages,” said Tiberi of PHH.

Supplier constraints on particular truck and van models contributed to long OTDs. “The Econoline 30-percent increase was due in part to the diesel delays. Silverado extended lead times due to the SEO — special equipment options — on the 1WT work truck model,” said Delaney of ARI.

Jan Freund agrees, “A single option can cause delays in production. A supplier shortage of diesel engines and tires resulted in delivery delays for the Ford Econoline van. In addition, Ford representatives indicated longer-than-normal production times on the F-150 were a result of going from two production plants down to one.”

GM indicated increased demand caused extended lead times for the Chevrolet Express van. “The increased demand may be due to the discontinuation of the Astro cargo van,” said Freund.

New models also experienced order-to-delivery increases in the 2007 model-year.

“With the Camry, until the FRS pool is built up, you would expect lead times to be higher than normal, and with the demand for hybrids because of rising fuel costs, product capacity was simply outpaced,” said Shick of Donlen.

Tracking vehicles at upfitters continues to be an issue.

“Status was timely and accurate as it relates to scheduling and production. However, the same was not the case with information related to the shipping of vehicles. For example, tracking vehicles involving a ship-thru to an upfitter continues to be a challenge for the manufacturers. In some cases, vehicles will fall into ‘black holes’ at ramps, creating voids in status as well as delayed delivery. Additionally, the lack of, or delay in receiving ‘delivered-to-dealer’ dates is a definite issue that impacts the ability to measure that portion of the order-to-delivery process,” said Tiberi of PHH.

“Ford F-450, F-550, Toyota Tundra, and Avalon models showed the most days improved due to increased inventory in the immediate pool units,” said Delaney of ARI.

“The improvement in Avalon was primarily a result of greater availability in the second year of production as the Avalon was redesigned in 2006 and availability was extremely limited initially. I credit the other Toyota improvements to working with customers to maximize utilization of the Toyota’s FRS pool. The improvements in the large sport/utility segment are attributable to the soft retail market and the spike in fuel cost. Over and above the soft retail market, Chrysler seems to have made some significant progress in reducing order-to-delivery time on a number of models,” said Shick.

Fewer Quality Holds
Quality holds were reduced in the 2007 model-year, an impressive accomplishment considering the number of new entries into the market. “GM’s hold for the glass recall on Equinox and Torrent was the only significant delay,” said Delaney of ARI.

Tiberi agrees. “Quality holds have not been a major issue for the 2007 model-year.”

This view was seconded by Shick. “New-model quality-hold issues were minor this past model-year compared to previous model-years.”

“While not a significant problem last year, frequently new-model shipping delays occur while the assembly plants conduct detailed quality inspections prior to releasing vehicles for shipment,” said Freund.

However, few industry observers foresee quality holds as being a thing of the past.

“With manufacturers continuing to focus on vehicle quality, we expect quality holds to play a factor in the foreseeable future. But overall, quality holds did not have a great impact on order-to-delivery times for fleet vehicles in the 2007 model-year,” said Martin of LeasePlan USA.

Lessor OTD Initiatives
Each fleet management company is implementing initiatives to help fleet managers when problems occur during the order-to-delivery process.

ARI: A new status initiative has been introduced by ARI in fall 2007. It is also continuing its proactive investigation into manufacturer and transportation delays, said Delaney.

Donlen: There is an ongoing increased focus by Donlen on continuous improvement in its preferred dealer network. It has improved new-car delivery paperwork to the delivery dealer and increased pool utilization. It has also established client-specific pools when factory orders aren’t practical. “Large order volumes are discussed with manufacturers and upfitters (where applicable) to ensure issues affecting order-to-delivery are addressed prior to order placement,” said Shick.

Continued focus on exception reporting and communicating with manufacturers to identify and address potential delays has been enhanced by the accessibility and electronic receipt of manufacturer logistical data. A new Web-based “easy order” button that simplifies order placement primarily for customers utilizing manufacturer or bailment pools has enhanced order placement.

“In the coming year, we will redesign our Web-based driver-ordering process, which will further reduce order placement time for both our customers and Donlen. We also have a project underway to dramatically improve status on vehicles being upfitted,” said Shick.

GE Capital Solutions Fleet Services: One area of focus for GE Fleet Services has been to implement terms in dealer contracts specifying targets for the dealer’s prep and delivery cycle times. “We have also been reporting their performance back to them on a quarterly scorecard. Dealers who do not meet target delivery cycle times are provided feedback on process improvement ideas. If the issue persists, we may reevaluate our relationship with them,” said Pellinger.

Another area that remains a focus for GE is proactively identifying delays and promptly notifying fleet managers when there are OEM shipping delays, quality holds, or other issues that may cause variances from published order-to-delivery times. “This addresses the piece of order-to-delivery that we cannot directly influence,” said Pellinger.

LeasePlan USA: LeasePlan is continuing to develop and focus its efforts on utilizing improved manufacturer status data to build more efficient automated follow-up with the delivering dealer network to minimize the time between factory delivery to the dealer and ultimately to the driver. “LeasePlan’s status tracking team continually refines our exception management reporting to ensure that vehicles exceeding the expected order-to-delivery times are prioritized. We also continue to leverage the benefits of working with preferred dealer networks that have dedicated staff focusing their efforts on fleet clients,” said Martin.

PHH Arval: Tiberi said PHH Arval has continued to make improvements that allow it to more quickly find units out of normal status parameters and to identify why these units are not on track.

These unit-level reports summarize for clients the issues causing delays by nameplate and supplier. PHH “supplier scorecards” are routinely reviewed with clients and help customers measure PHH’s performance and that of the OEMs, upfitters, and dealers. This data can be used to evaluate past and present performance, and define changes to improve future activity.

“A comprehensive approach such as this makes it easy for clients to partner with the entire supply chain, reduce end-to-end cycle time, and improve overall order-to-delivery performance,” said Tiberi.

Wheels: Approximately 90 to 95 percent of orders are now placed through Wheels’ FleetView and DriverView Web-ordering application. “Our vehicle specification set-up and QC process cuts OTD time because our Web tool ensures clients only place ‘buildable’ orders, avoiding delays from the manufacturer rejecting inaccurate orders. Our exception-based status reports for cars, trucks, and body upfit tracks vehicles from order thru delivery to the driver. We track and monitor the vehicles, communicating issues to the manufacturers, upfitters, dealers, and customers to improve delivery timing and minimize the impact of delivery delays,” added Freund.

In addition to regular dealer contacts, the Wheels dealer relations team initiated a special education project, contacting dealers to review the fleet delivery process. “This was particularly helpful for import dealers who typically do minimal fleet courtesy deliveries,” said Freund.

What Still Needs to be Done?
Fleet managers want lead times accurately communicated to enable planning. “Exceptions need to be identified and communicated in a clear and timely manner. Increased pool offerings would help address situations where lead times are expected to exceed the norm. Incorporating the logistics data into the current production status feed would also improve our ability to track and communicate exceptions,” said Shick of Donlen.

Another area is tagging commercial fleet orders for prioritization in the event vehicles are pulled for inspection.

“After talking about this for years, I am happy to hear a couple manufacturers are piloting programs at the assembly plants to tag commercial fleet orders for prioritization in the event vehicles are pulled for inspection. This process should help keep the commercial orders moving through the system and avoid extensive shipping delays that previously lasted weeks or months,” said Freund.

Tiberi of PHH seconds this observation. “The ability of manufacturers to successfully track vehicles after they leave the plant is an area that definitely warrants attention, including a process to communicate more effectively on mis-shipped and damaged units,” said Tiberi.

Delaney summarized the issue: “Faster scheduling and leaner manufacturing.”

Import producers will need to focus on order-to-delivery times in some manner, said Pellinger of GE.

“Some import vehicles (especially hybrids), can take 26 to 42 weeks from order to delivery. Customers are questioning the delays. There must be something that can be done. All OEMs can work to improve the quality of the status data, specifically completeness, accuracy, and timeliness, which will help us all more proactively identify vehicle delays,” said Pellinger of GE.

One suggestion is for the OEMs to become more proactive in notifying fleets of OTD delays.

“It’s interesting that manufacturers do not have the appropriate tools necessary to identify production and shipping delays and proactively notify the FMCs (fleet management companies), but rather react to FMC and customer inquiries. Some manufacturers are all over orders with an option edit hold — for example, a color — looking for an immediate response from the customer to change the order. It would be helpful to see the same energy applied by the manufacturers to problem resolution and estimated timing as to when a vehicle is going to be built or shipped. Frequently, they are unable to give even an estimated timeframe when delays occur,” said Freund.

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Mike Antich

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