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Market Trends

Impact of Plant Shutdowns on Ship-Thru Deliveries

September 8, 2008, by Mike Antich - Also by this author

By Mike Antich

With a dramatic decrease in retail truck sales, some fleets are concerned that assembly plant closures and production slowdowns may delay truck deliveries and ship-thru upfits. In addition, there are further concerns about potential fleet allocation issues, availability of transportation, extended lead times caused by shift eliminations, and reduced special equipment runs.

Many fleet managers tell me that the challenge for the 2009 model-year will be predicting and adjusting lead times, particularly on trucks, for all the announced and yet-to-be-announced plant downtimes resulting from the slow retail market.

"Fleet managers have valid concerns relative to trucks being upfitted via ship-thru. For example, when the plants are closed, how do these vehicles get back into the manufacturers' transportation system? The manufacturers will need to have contingency plans in place to address these concerns," said Rick Shick, vice president of purchasing for Donlen Corporation. "Delayed production startups, plants being idled, shift reductions, and unexpected plant downtime will be prevalent throughout the 2009 model-year. I think overall lead times, particularly on trucks and larger SUVs, will suffer," said Shick.

Bob Shipp, national truck sales manager for Automotive Resources International (ARI), also anticipates slower order-to-delivery (OTD) times for trucks. "We anticipate plant slowdowns and closures will have a negative effect on OTD times."

Another factor that may influence truck OTD for the 2009 model-year is the changing retail demand for certain vehicle segments. "We anticipate fleet clients with service-type trucks may experience delays in order-to-delivery times. We are anticipating manufacturer plants transitioning production to smaller fleet vehicles and hybrids, which are in greater demand. This may impact truck OTD," said Tim Martin, vice president, operations for LeasePlan USA.

Plant downtime is a particular concern for fleet managers who utilize the ship-thru infrastructure for upfits. "From what we've seen over the last model-year, it appears that once the vehicle is truly in the 'traffic' system and released from the mixing centers and ramps, the timeframe is not unusually long," said Christine Lando, supervisor of the Technical Consulting Center for PHH Arval. "Getting it to that point after the ship-thru upfitter notifies the OEM that the vehicle is ready for pick-up seems to be where some of the most common delays occur. This is especially true when the OEM requires additional downtime or new downtime outside of what was originally planned, leaving some upfitted vehicles ready with no immediate or timely way to get to the delivering dealers and into our clients' possession."

Yet another concern is having trucks stranded at a body upfitter during an assembly plant shutdown. "For various reasons, at these times, some manufacturers are unable to get trucks picked up from upfitters and put back into their transportation system. These vehicles are critical work tools. The manufacturers need to be ready with a contingency plan to get those vehicles picked up, shipped, and delivered," said Jan Freund, director of manufacturer relations for Wheels Inc.  “We asked one of the manufacturers how they planned to move completed upfit vehicles back into traffic when an assembly plant is shutdown. They acknowledged it was a problem and as recently as Sept 4, they still had ‘nothing new to report.’ While they say they understand the effect on the customer's business, completed vehicles are stuck at the upfitter and the manufacturer offers no assistance.”

With this in mind, fleet managers need to factor in additional time when planning vehicle replacement schedules. "Building in a little bit of extra time and ordering a little earlier may save the fleet maintenance costs on vehicles waiting to be replaced, as well as rental costs incurred due to delays in delivery," said Lando. "In addition, if replacement orders can be made in a consolidated fashion, it can increase the likelihood that all your vehicles are run through the OEM in the same production 'run.' This lessens the possibility that units are left hanging due to an unforeseen shutdown after the first group or previous groups of orders have gone through the production process."


Ways to Minimize Shipment Delays

Chrysler Fleet Operations says it works with fleet customers and its internal departments to minimize shipment delays due to plant downtime. "We advise fleet management companies and fleet dealers of production delays in our Fleet Facts newsletter, which will allow them to manage vehicle orders based on the plant production schedule. Upfitters are informed of their incoming vehicle inventory via our weekly e-Body Vendor report. This report allows them to manage the flow of vehicles in and out of their facilities," said Sharon Jones, pool manager for Chrysler Fleet Operations.

"We have established a solid pool team that works with our logistics department to monitor inventory shipments. Each evening the upfitters are required to send an e-mail to the carriers on all vehicles ready for delivery to their final destination. Production delays should not affect vehicles built and released or already at an upfitter and the transportation carrier and will escalate to logistics when necessary. In some instances, halted production will cause a short ship, meaning there may not be enough vehicles to fill a rail car. When this situation occurs, we will ship a short load or mix halted production vehicles from another plant to make a full load," added Jones.

Similarly, Ford says it is committed to maintaining accurate order-to-delivery timing across all vehicle lines. "We recognize fleet customers rely on our vehicles to keep their businesses running, and we take that responsibility very seriously," said Eric Guenther, manager, marketing and sales strategy for Ford North American Fleet, Lease, and Rental Operations. "Operating plans currently in place at our production facilities represent a highly efficient, balanced utilization of resources. We continually monitor our order rates, production, and shipping status to minimize any disruption in flow to our customers. When issues are identified, we routinely make adjustments to those operating plans to better meet current market requirements. Our goal is to ensure upfitters have a smooth flow of production and fleet customers receive their vehicles on time, every time," said Guenther. According to Ford, fleet managers are encouraged to take the following actions to maximize the efficiency of its production system:

  • Refer to weekly Distribution News Bulletins (DNB) to assess typical lead-times required from order submission to production. Factor in upfit timing requirements.
  • Submit orders as early as possible in an effort to assist us in planning accurately for your needs. Utilize priority codes to specify desired production week/month.
  • Keep in mind holiday shutdowns at assembly plants and upfitters in the fourth quarter.


Other Compensatory Strategies

Some fleet managers may decide to use the ship-to method instead of ship-thru; however, when the plant is down, it is a moot decision since the truck will not be available. "The only way to adjust to this is to order early, if possible," said Shipp of ARI. "The reason to ship-thru trucks is to have consistent quality upfits at a pre-negotiated price. To use ship-to upfitting for your trucks, you sacrifice both of these reasons. You may possibly pick up additional freight in moving the vehicle from the body company to the dealer or customer. Quality also can be jeopardized."

Another alternative is the use of bailment pools, either OEM or upfitter-sponsored to reduce OTD, said Shick.  However, the key strategy to mitigate ship-thru delays is advance planning. "This will be even more critical than in the past. Fleet management companies will need to work closely with fleet customers, OEMs, and upfitters to coordinate orders working backwards from the customer's desired delivery date," added Shick.

Lando seconds this assessment. "Earlier planning and ordering will be a definite must to receive vehicles when needed."

Let me know what you think.



  1. 1. Anonymous [ October 20, 2008 @ 09:24AM ]

    We are already seeing the impacts of plant shutdowns and delays (90%+ truck fleet). Our strategy has always been to leverage our volume and take advantage of volume discounts by single sourcing our manufacturer, but I was wondering if you (or other readers) have heard how or if fleet managers who single source (truck fleets) are rethinking their sourcing strategies due to these upcoming challenges.

    I would appreciate any information or thoughts anyone may have on this topic.

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Mike Antich

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Mike has covered fleet management and remarketing for more than 20 years and entered the Fleet Hall of Fame in 2010.

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