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Market Trends

Increased Upfit Volume & OEM Quality Holds Create Backlogs at Upfitters

September 20, 2012, by Mike Antich - Also by this author

Upfitters are feeling the pressure from the increase in the number of upfitted vehicles requiring a ship-thru. “The huge influx of vehicles in need of upfit have left some installers overwhelmed at times. We work closely with upfitters and monitor their capacity. When possible, we have moved vehicles to another installer to help mitigate delays but, with demand high, this isn’t always possible,” said Jan Freund, director, manufacturer relations for Wheels, Inc.

Echoing this sentiment is Steve LaPorte, director, business operations, North American Transportation & Shred Operations for Iron Mountain Information Management in Boston. “There have been significant product backlogs at the body companies as they struggle to keep pace with the sharp increase in demand after having dramatically pared back their workforces,” said LaPorte.

Likewise, Frank Cardile, senior VP of operations and supply chain for ARI, reported 60 percent of truck manufacturers and 87 percent of upfitters experienced “very significant” material/component supply problems during the past 18 months and he expects it to continue for the next 18 months.

“Order-to-delivery (OTD) time on large trucks keeps getting longer and longer,” said Phil Schreiber, fleet manager, North America for Otis Service Center in Bloomfield, Conn. “Some of the issues are with OEMs, some are with body manufacturers, and some are with upfitters. However, the end result is a six-month-plus of waiting. In 2012-MY, I stopped doing factory orders and purchased most of the chassis from bailment pools.”

Unintended Consequences
Many OTD issues are related to OEM quality holds. “Oftentimes, upfitted units awaiting shipment are held at the body company due to limited space at the assembly plants,” said Freund.

This issue was also cited by Cindy Gomez, manager of vehicle acquisition services for Donlen. “As a result of the quality holds, upfitters could not release vehicles back to the OEMs due to a backlog at the plant. This prevented release into OEM traffic for final delivery via ship-thru/freight re-entry. Many of the logjams at upfitters were a direct result of the quality hold,” said Gomez.

Another example of how quality holds create backlogs at body upfitters was cited by Freund. “One OEM held thousands of pickup trucks for more than 60 days while a supplier performed the necessary rework. Once the OEM released the pickups from the factory, the local installer was overwhelmed when it received more than 2,000 pickups for body upfit work all at once. It took the installer extra time to complete the upfit, resulting in further delays.”

As in past years, a shortage of railcars contributed to OTD delays by causing vehicles to stay in storage until a sufficient number of railcars arrived. In 2008 and 2009, the railcar providers were forced to put many railcars in storage, cut capacity, and trim staffing levels. The rail companies simply weren’t able to rebuild capacity to match the auto industry demand.

“All manufacturers experience logjams at the upfitters. Limited numbers of transportation haulers, railcars, and truck carriers allow for only a limited number of vehicles to be returned to the transportation hubs,” said Jim Tangney – VP of vehicle acquisitions for Emkay. “All the manufacturers monitor the volumes to best control the flow of large upfit ordering clients or heavy spring order cycles that challenge the logistics system.”

A corollary problem cited by a few fleet managers has been quality concerns about recent upfits. “Traditionally, our principal focus was on OTD metrics from the upfitters and body manufacturers, but what is now even more distressing has been the poor quality of the vehicles received. We have received the wrong-sized bodies, equipment with missing graphics, and improperly mounted liftgates, among other things, despite waiting months longer for delivery,” said one fleet manager who wished to be anonymous.

Improving OTD is a Team Effort
Fleet vehicles are particularly vulnerable to OTD delays because most fleet orders are concentrated among a handful of models. OEMs are actively working to resolve delivery bottlenecks. One OTD improvement for receiving and upfitting the Ford Transit Connect was adding a second port of entry, Jacksonville, Fla., in addition to Baltimore. “Many of the lengthy delays fleets experienced in previous years were due to issues with the Port of Baltimore. There were more vehicles than the port and the onshore transition group had capacity for when the vehicles arrived. Once the vehicles started moving to upfitters, they, in turn, didn’t have the capacity for them, thus creating a bottleneck of vehicles,” said Candice Groth, factory order and vehicle information center manager for GE Capital Fleet Services. “Adding the additional port in Jacksonville helped to mitigate this bottleneck.”

In the final analysis, quality must be a top priority for all OEMs, but the unintended consequence is that many delivery delays are directly attributable to quality holds. The industry needs to find a way to more effectively manage quality holds. Improving OTD will involve a team effort by all participants in the delivery process.

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Mike Antich

Editor and Associate Publisher

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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