57% of All 2005 Models Had OTDs Under 60 Day
Order-to-delivery for high-volume fleet units improved in the 2005-model year; however, OTD lengthened for lower-volume fleet models compared to 2004 deliveries, according to Automotive Fleet's
sixth annual OTD study.
Data for this year's study was provided by six fleet management companies: ARI, Donlen, GE Commercial Finance Fleet Services, LeasePlan USA, PHH Arval, and Wheels. The study tracked new-vehicle deliveries for 86 models during the 2005-model year, representing 153,683 vehicles. The models selected were those with more than 1,000 units registered to commercial fleets in the 2004-model year, with several exceptions.
The methodology used to calculate OTD averages for cars was the number of days from the date an order was placed with a manufacturer to the time the vehicle was delivered to a dealer (not driver pick-up). Truck OTD averages were calculated from the day an order was placed with a manufacturer to when the vehicle arrived at an upfitter or, if no upfitter was used, to a dealer.
2005 OTD Was Relatively Smooth
“The key factors influencing OTD times for the 2005-model year were once again primarily related to transportation and quality hold delays, although the soft retail market may have prompted unscheduled plant downtime, which may have added to the increase in OTD for some models during the 2005-model year,” said Rick Shick, vice president of acquisition services for Donlen Corp.
On the whole, commercial fleets experienced relatively similar OTD compared to 2004; however, there were some longer than anticipated lead-times during the year.
“These can be attributed to high retail demand for vehicles like the DaimlerChrysler LX models, plant shutdowns for low-demand vehicles, and problems with vehicle invoicing and MSO production,” said Jim Creighton, director of operations for ARI in Mt. Laurel, N.J.
Despite these factors, OTD, in general, was relatively smooth during the 2005-model year.
“There were not many vehicles that took a long time to build in 2005, especially high-volume fleet vehicles, which are being built very quickly,” said Jack Pierce, vice president, operations for LeasePlan USA.
“When you look at the vehicle models of which GE ordered more than 1,000 units, our OTD decreased by 10 days compared to 2004 orders,” said Lance Schultz, manager of manufacturer relations and vendor management for GE Commercial Finance Fleet Services in Eden Prairie, Minn. “But when you look at the overall number, which includes deliveries with five or more vehicles, there was a slight increase on the average OTD.”
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The most prevalent reasons for delays were transportation-related.
“The majority of vehicles are delivered within 60 days,” said Jan Freund, director of manufacturer relations for Wheels Inc. in Des Plaines, Ill. “When delays occur, it is primarily due to transportation issues and quality holds.”
Ongoing OTD Issues
“Although the time from when the manufacturer gets the order to when the vehicle is shipped has improved, there still needs to be improvement in the transportation process,” said Linda Tiberi, manager, motor company relations for PHH Arval in Sparks, Md. “Some of this is within the manufacturer’s control and in other areas they have less control, such as the shortage of rail cars,” said Tiberi.
“Though not as pronounced this year, quality holds are still ongoing,” said Freund. “The convergence of vehicles coming off line with those released from quality holds can create a backlog resulting in further shipping delays,” said Freund.
The rail car shortage continues to be a persistent problem and has been for the past several years.
“The rail car shortage has impacted us more at some plants and some vehicle lines,” said Dennis Baranik, manager, fleet planning & strategy for Ford North American Fleet, Lease, & Remarketing Operations. “In addition, there were several derailments and weather-related track outages, which delayed 2005 OTD,” said Baranik.
However, the rail car shortage does show signs of improving.
“The railroads are making the investment to acquire more rail cars, but it takes time to get new rail cars built and to repair the old ones to make sure that they are at the right place and right time when needed,” said Kathy Mathiesen, POINT supervisor for Ford North American sales planning and distribution.
“All manufacturers need to continue to focus on the transportation delays and quality hold delays,” said Shick. “Obtaining information on vehicles delayed for quality holds and the like is extremely challenging, to say the least. To the extent possible, it would be wonderful if the delays were brought to our attention in a timely manner along with a prognosis indicating when the vehicle should be released back into the transportation system. We could then proactively communicate this information to the fleet managers, and they in turn could communicate it to their end-users, which helps us all manage expectations and make contingency plans where necessary. All too frequently these problems are identified through our internal exception reporting processes,” said Shick.
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Delays in Returning Upfitted Units to Traffic from Upfitters
Fleet management companies say that the manufacturers need to improve the amount of information provided to them when units go to upfitters and provide timely and accurate information on when the unit re-enters the manufacturer’s transportation network.
“Sometimes there is a delay in getting this information transmitted to us,” said Tiberi. “We have situations in the ship-thru process in which vehicles are mis-shipped, or they miss the upfitter altogether and have to be backhauled. The ship-thru process still needs improvement.”
“We have also seen some delays with vehicles going back into traffic once the upfit is complete. Carriers look for a full load to return to the plant,” said Freund.
Delivering Dealers’ Impact on Slowing Fleet OTD
Another facet of OTD is what occurs once the vehicle arrives at the dealership. Receiving timely and accurate information about when the vehicle arrives at the dealership is a vital part of the process, according to Tiberi. “PHH’s dedicated delivery team uses this information to proactively follow the status of the vehicle once it arrives at the dealership until the delivery to the driver has been completed,” she said.
Also, accurate data makes it easier for fleet management companies to measure dealer performance. “If we get an arrival date a week before the unit actually arrives, then we are using that to measure dealer performance. It will look as if the dealer took a longer time to deliver the vehicle to the driver,” added Tiberi.
OTD Initiatives by Fleet Management Companies
“GE is working on a dealer strategy that involves selecting dealers that are closest to the driver with the highest level of service,” said Schultz. “This is one of our customer-driven initiatives to create a hassle-free delivery for drivers.”
GE has also developed Driver Com, a series of e-mails to drivers following their vehicle from order date to estimated delivery date to the dealer. “The improved communication with drivers has cut the delivery time to the driver in half,” said Schultz.
In addition, GE utilizes numerous OEM-provided pools. “We have seen an increase in pool offerings, both OEMs and our pools. We monitor the number of units in the pools and consult with our customers to determine optimum inventory levels. Currently, our pools are yearlong arrangements, but levels tend to fluctuate according to seasonal demand,” said Schultz.
PHH Arval has streamlined its dealer paperwork to make it easier to be completed by dealers.
“Utilizing our preferred dealer network whenever possible ensures timely deliveries,” said Tiberi. “Also, the implementation of automated tools, including electronic communications, has improved the turnaround of delivery confirmation. Our delivery team is focused on proactive communication with our dealers.”
“Wheels’ customers experience same-day order transmissions. Cars and trucks are treated the same, including those requiring upfit. Body POs are now available online through FleetView,” said Freund. “Wheels is directly connected to the manufacturers’ transportation systems. Along with our estimated delivery calculations and exception-based application, we identify problems in real-time. By identifying issues early, we can often resolve or minimize the impact on the customer’s delivery,” added Freund.
“Donlen has increased pool utilization whether it be bailment pools or various other pools offered by the manufacturers, discussed large order volumes with the manufacturers prior to placement, worked with the import manufacturers to identify vehicles in inventory or in the pipeline that could be converted, and focused heavily on managing exception reporting and communicating with the manufacturers to identify delays,” said Shick.
Donlen has improved and streamlined the delivering dealer paperwork which ensures it arrives at the delivering dealer sooner, thus facilitating the delivery process. “We are continually reviewing the courtesy delivery and associated processes for opportunities to further improve the overall experience and the associated turnaround time,” said Shick.
“ARI closely monitors production status to proactively detect production issues in advance, and we have streamlined our invoice processing and delivery paperwork production to reduce the time the vehicle is at the delivering dealer,” said Creighton.
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DaimlerChrysler Set to Launch New Forecast/Scheduling System
According to DaimlerChrysler Fleet Operations, it continues to focus OTD efforts on people, process and technology, and its commitment to a partnership relationship with fleet customers.
“We have added manpower in our production/scheduling department with increased metrics to monitor orders to ensure proper production is in place to meet customer needs,” said Victor Toral, production planning senior manager for DaimlerChrysler Fleet Operations.
“In addition, this fall, DaimlerChrysler is launching a new version of its fleet forecasting and scheduling system that will enable it to more effectively secure production for our customers and prioritize fleet vehicles throughout the scheduling and manufacturing processes,” said Toral. “This bottom-up system will allow us to forecast better at a detail level by each one of our fleet submarkets, providing a more stable forecast to our suppliers.”
At the suggestion of its Fleet Advisory Council, DaimlerChrysler developed a process to work more closely with customers to secure production forecasts from them. “These forecasts are gathered twice a year to cover fall and spring ordering cycles, and it is helping us to secure production in advance to meet customers’ expectations,” said Toral. “Our customers play an important role in improving OTD by providing information about vehicle acquisition needs, and we plan to leverage that information to better serve all of our customers.”
Ford Focuses on Stability and Reliability in OTD Process
An ongoing OTD initiative for Ford Motor Co. has been improving its internal systems and processes, said Baranik.
Ford is concentrating its OTD improvement efforts on the period from a time an order is placed to its scheduling and ultimate production. “Our team is looking at the order fulfillment process from end-to-end. The team is focusing on seven key projects relating to order fulfillment, including configuration, ordering, scheduling, visibility, and delivery,” said Peggy O’Neill, communi- cations manager, order fulfillment for Ford Motor Co. “The first initiatives in the pipeline are the configuration and editing processes, which are designed to reduce the redundancy and opportunity for errors,” said O’Neill.
Over the next four years, Ford will completely replace all computer systems used in-house and by its dealers in the ordering and scheduling end of the business. Ford anticipates that the new computer system will be fully operational by the 2009 calendar year.
Ford also has an ongoing initiative to improve OTD by tracking vehicle status while a unit is at an upfitter. Key Ford upfitters use hand-held scanners to track order status events, such as unit arrival, upfit completion, and when the unit leaves the upfitter and re-enters the Ford transportation network. These updated status events are transmitted each night to Ford’s Web site - www.fleet.ford.com/,” said Mathiesen.
GM Fleet & Commercial Employs Multi-Pronged OTD Initiatives
For the past four years, GM has designated all commercial vehicle orders with its highest priority build, which is equal to retail sold orders.
To further improve OTD, GM has a variety of fleet-related initiatives in place, according to Mark Karney, director of forecast planning and customer support for GM Fleet & Commercial Operations (FCO).
For example, GM FCO instituted weekly meetings to track all fleet orders and compare the expected production date with the actual production schedule. The weekly meetings include representatives from order fulfillment, scheduling, fleet and non-retail order processing, and FCO customer support teams. During these weekly meetings, GM makes adjustments to scheduling to keep fleet orders on track.
GM has an initiative to improve the communication process with customers when unplanned production-related issues occur. This initiative includes GM’s top 60 fleet customers, based on order volume. GM calls these customers when unplanned production issues occur and lets them know the impact on lead-times.
“We hold special handling meetings with our key accounts when we have large blocks of orders coming in, and we arrange for weekly conference calls that include those customers to identify potential roadblocks in building orders on time,” said Karney.
Another GM initiative is improving its forecasting process. “Forecasting order flows weeks in advance allows us to better plan the material flow into the assembly plant and get the vehicles built when we say they are going to be built,” said Karney.
Toyota Initiatives Focus on Automated Pool Process
Toyota launched its automated pool process in July 2004, which, for orders that match the models put in the pool, cut average OTD time down to 49 days for the manufacturer’s North American products. The process was merged with Toyota’s Final Requirements System (FRS), whereby vehicle order information is exchanged with the plant.
In the past, for example, if a fleet ordered a specific color not already available in the pool, a request was sent to the plant to change a pool vehicle to the desired color. The automated process expands the plant’s options to meet a fleet’s needs.
Toyota has also launched a new dealer report for courtesy deliveries informing the dealer of which vehicles are being delivered. Previously, dealers didn’t know which vehicles were going to be delivered until they already showed up, said Gail Kunkle, national fleet/commercial vehicle operations manager for Toyota Motor Sales USA.
A direct-order entry (DOE) system that allows fleet management companies to electronically transmit orders and receive status updates, invoice, and spec and pricing information is targeted for a September 2005 launch.
Last year, Toyota implemented an e-mmediate pool system consisting of fixed build units immediately available to commercial accounts. In the future, Toyota plans to allow customers who do not have ordering capability to view the list of immediate units available online instead of having to go through the fleet management company.
OTD for Imports is Improving
“This year, Toyota and Nissan have more effectively communicated and promoted the utilization of fleet spec’ed vehicles that are either pooled or already in the pipeline,” said Shick. “Subaru continues to manage OTD very well. Saab recently announced plans to pool 9-3 Sedans. Volvo and Mercedes all assist by trying to fill orders with port inventory or inbound vehicles as do most of the primary import manufacturers,” added Shick.
“Toyota has made inroads in improving its order-to-delivery timeframe. It utilizes pools and tries to put more inventory in the pools to meet the needs of their customers,” said Freund.
Tiberi agrees. “Toyota has made great strides in improving its order-to-delivery times. This has been a major initiative with them. It has been our experience that all import manufacturers, from those who have been committed to fleet for some years, such as Toyota and Nissan, to newcomers, such as Mercedes-Benz, are making improvements. These improvements include a combination of shortening lead-times, often through reserving fleet allocation and improved communications,” said Tiberi.
Among the import-badged manufacturers, Subaru has the fastest OTD times, said Freund.
“The simple reason why our OTD time is favorable is because our fleet orders are treated the same as retail,” said Charles Reed, manager, national fleet sales operations for Subaru of America. “Fleet orders receive the highest available priority in scheduling, production, and shipping.”
However, fleets say that more improvement is needed from the import manufacturers.
“Toyota and Nissan OTD times are still not up to the Big Three standards. Increases in U.S. production and better, more expansive pools would help reduce their overall OTD,” said Creighton.
Pierce of LeasePlan USA agrees. “There is still a lot of room for improvement among the importers. However, although import companies have long lead-times, it is what they advertise,” said Pierce.
Freund cites the same point. “The imports are consistent and reliable. If they tell you it is going to take 10-12 weeks, it takes 10-12 weeks.”
What Still Needs to be Done?
“The majority of vehicles are delivered within 60 days,” said Freund. “My concern continues to be when something does go wrong. One delayed vehicle can result in huge cost and revenue losses for the fleet customer, and driver satisfaction is also a factor. The amount of time and effort it takes to resolve a problem is costly to the manufacturer and the fleet management company. The manufacturers need to react quickly to resolve delivery delays, before three days turns into 30 days,” added Freund.
Shick of Donlen shares the same sentiments. “I believe the typical fleet manager just wants to have lead-times accurately communicated to them so they can plan accordingly, but those lead-times need to be accurate and adhered to with very few exceptions - pooling of vehicles to address those exceptions would be a welcome contingency. We encountered several situations where we assigned a vehicle from a pool inventory only to have it not ship without any communication advising that it did not ship,” added Shick. “The exceptions need to be communicated in a timely manner along with expected resolution dates.”
Despite these inconsistencies, the manufacturers have made tremendous improvement in their communication with fleets.
“Manufacturers did a great job communicating delays or logistics affected by unforeseen circumstances, such as bad weather,” said Schultz.
“We are getting better and more consistent information from the manufacturers on equipment that is on hold or constrained. That’s enabling us to guide clients and advise them upfront so they can choose alternatives if they want,” said Tiberi.
Creighton of ARI suggests that manufacturers improve OTD by increasing the use of rapid order fulfillment pools and streamlining the administrative functions associated with invoicing and MSO production.
“Additionally, all status systems for a particular manufacturer should be in sync, contain the same data, and be available on a real-time basis,” added Shick. “Perhaps the standardization of status information would be a worthwhile endeavor across the industry,” added Shick.
Schultz echoes these suggestions. “Manufacturers can improve OTD by developing more status events and faster notification when status events are reached,” said Schultz.