Car Order-to-Delivery Stable, Truck OTD Times Increase
Photo courtesy of GM.
Order-to-delivery (OTD) times for the 2014 model-year remained relatively stable when compared to MY-2013; however, there were notable delays, especially among popular truck and van fleet models.
"For the most part, sedans performed about the same, if not slightly better," said Candice Groth, factory order and vehicle information center manager at GE Capital Fleet Services. "The majority of the trucks had a significant increase in the order-to-delivery time frame. Trucks had shown a steady improvement in this area, until the 2013-MY."
This observation was echoed by Dave Andersen, director, new vehicle acquisition at Element Fleet Management, formerly PHH Arval. "The largest increase in OTD times occurred in the truck segment where we saw delivery times increase as much as 14 percent for certain models," said Andersen. "While some delays were unavoidable due to unforeseen weather conditions and an overly harsh winter, the nationwide rail-car shortage, recalls, and quality holds on various models were also contributing factors."
Both the truck and van categories experienced OTD increases in the 2014-MY compared to the past model-year, with the greatest increase being in the van segment.
"The truck segment saw an average increase of seven days, while the van segment saw a significant change of an 18-day increase in OTD," said Elizabeth Kelly, director of operations, vehicle acquisition for LeasePlan USA.
Key fleet truck and van models were impacted by increases in OTD. "The vehicle lines that were impacted the most were the Ford Econoline, Ford Transit Connect, Chevrolet Express, Ford F-Series, GMC Sierra, and Toyota Tacoma and Tundra," said Cindy Gomez, director of vehicle acquisition services at Donlen.
Another factor involved special equipment options. "Motor company constraints with special equipment options (SEO) for light- and heavy-duty trucks adversely affected OTD times throughout the year as well," said Andersen.
However, some truck models had very quick OTD times. "Most notably were Ram trucks, which continue to have the best OTD times of the domestic truck manufacturers. Dodge Caravan showed a three-day improvement over 2013," said Jim Tangney, VP of vehicle acquisitions at Emkay. "All Jeep models continue to have strong OTD times. In 2014, Chrysler introduced the redesigned Jeep Cherokee and its introduction was a success."
The same was true for GM products. "Overall, we saw 2014-MY OTD times improve for the majority of GM models," said Tangney. "The Chevrolet Silverado remained consistent with 2013, but the Chevrolet Express van was off from last year due to parts shortages to address the passenger air bag recall."
Gomez summarized the 2014-MY as follows: "The main factors that contributed to OTD delays were rail-car shortages, weather, new-model quality holds, material holds, and the opening of a new upfit plant in Saltillo, Mexico. Rail-car shortages and weather impacted all OEMs, but the Ford E-Series at the Ohio assembly plant seemed to be impacted the most, resulting in delivery delays of approximately 61 days. The Ford Transit Connect was held at the port due to material holds, which resulted in delivery delays of approximately 20 days," said Gomez of Donlen.
Despite these fluctuations in OTD times, for the most part, OTD was similar to the 2013 model-year. "Overall, the OTD times were fairly consistent from the previous model-year to the current model-year," said Partha Ghosh, director - supply chain management for ARI.
These were among some of the findings of Automotive Fleet's 15th annual OTD survey, which was based on data and analyses provided by seven fleet management company (FMC) survey partners. The seven survey partners were:
- Element Fleet Management
- GE Capital Fleet Services
- LeasePlan USA
- Wheels Inc.
The OTD survey tracked deliveries of 145,836 new vehicles in the 2013 model-year, representing 97 different models.
The survey methodology calculated OTD times for cars from the day an order was placed with a factory to vehicle delivery to a dealer (not driver pick up). 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.
Top Factors Impacting OTD
The key factors influencing OTD continue to be the same.
"The factors during this model-year were essentially unchanged from the prior year — rail-car shortages (further aggravated by winter weather issues), recalls, supplier commodity constraints, and quality related issues," said Ghosh of ARI.
The top five factors that contributed to OTD performance were summarized by Kelly of LeasePlan USA:
- Rail delays.
- Winter storms.
- Hail storms.
- Longer lead times in the truck and van segment.
- Above average order rejects due to option compatibility.
"The car segment saw only minimal improvement due to the volume growth across all segments and rail issues," said Kelly of LeasePlan USA.
Another key factor was the increased overall sales and order volume in the U.S. market. "This included increased vehicle volumes due to continued industry growth, new-model launches and quality inspections, and parts shortages, as related to the quality inspections and recalls," said Brad Vliek, VP client solutions at Emkay.
Impact of Quality Holds
Although not as severe as the 2013 model-year, quality holds continue to impact fleet OTD. "There were some specific issues, but none that could be considered as a major factor," said Ghosh of ARI.
One reason for the improvement has been the proactive measures taken by OEMs.
"Several automakers are now working more closely with suppliers to improve communication, maximize production, and ensure quality-made parts in an effort to avoid failures and bottlenecks during vehicle assembly. This type of process certainly needs to be utilized to alleviate some of the delivery delays," said Jan Freund, director of manufacturer relations at Wheels Inc.
This was seconded by Groth of GE Capital Fleet Services. "The manufacturers were more transparent with what was happening with a particular vehicle lineup and sharing information on quality holds or constraints. The information shared was also more proactive versus reactive. It definitely felt like many of the manufacturers listened to our concerns from previous model-years and wanted to establish a better rhythm to keep us up-to-date. Being well-informed allowed us to relay this information to our mutual customers through our fleet management solutions team," said Groth.
However, quality holds continued as OEMs sought to manufacture the highest vehicle quality possible.
"It is standard operating procedure for all the manufacturers to have containment holds for quality inspections prior to giving the approval to release new vehicles for shipment," said Tangney of Emkay. "This year was an improvement over last year, but we did see some quality containment holds related to the Ford Transit Connect, Lincoln MKZ, Chrysler 200, and Jeep Cherokee."
Another model impacted by quality holds was the Ram ProMaster. "There was a 60-day quality hold on the 2014 Ram ProMaster that caused substantial delivery delays for this model," said Gomez of Donlen.
Ongoing Rail-Car Shortage
A perennial OTD issue is the ongoing rail-car shortage. "Rail-related issues with transporting models to market challenged the industry. The biggest impact was obtaining accurate vehicle status. Communication efforts and weekly manufacturer meetings, allowed us to guide our clients through the issue," said Kelly of LeasePlan USA.
The rail issue promises to become more severe in future years as there is increased demand for rail assets, in particular from the oil industry.
"In June, Automotive Fleet magazine published a terrific article on the nationwide rail condition. We all know, by now, that there is a shortage of locomotives, rail cars, and crews; we've been talking about it for many years. But, AF called attention to a dramatic increase in shipments of crude oil and agricultural products, as well as a sizeable increase in automotive production since the recession. Add severe weather to the mix and you have a 'perfect storm' of circumstances resulting in shipping backlogs and longer OTD times of new vehicles," said Freund of Wheels Inc.
Ghosh of ARI also cited rail-related delays, which delayed fleet OTD. "Rail-related issues were more of an apparent factor this year than perhaps in prior years, due to a number of reasons, including weather, stronger volume/demand, as well as impact from increasing use of rail capacity from surging oil production. Manufacturers responded as best as possible under these challenges," said Ghosh.
Sometimes delays were very severe. "Rail congestion resulted in some vehicles being held up in transportation for more than three months, and conditions didn't really start improving until June," said Freund.
Agreeing was Groth of GE Capital Fleet Services. "The rail-car delays were the main focus of our 2014 model-year OTD experience. The manufacturers made
tremendous efforts in sharing information as they received it throughout the rail-car shortage. It was a learning opportunity for not only FMCs, but also customers who had to recalibrate delivery time frames and expectations going forward," said Groth.
Another factor contributing to the rail-car shortage has been the increased volume of retail automotive sales.
"Rail-car shortages continue to be the biggest contributor to OTD delays. The auto industry has been growing for the past several years and is now approaching close to 17 million vehicles produced last year, up from 9.7 million vehicles five to six years ago," said Mark Donahue, team lead, fleet analytics at Emkay. "This rapid growth has outpaced the rail-car production for the auto industry, and now growing demand is coming from the energy (oil, gas, and coal) and grain industries. This competition for rail cars and rail routes has made it extremely challenging for all OEMs."
Donahue added: "The rail-car shortage affected all manufacturers, plants, ramps, and transportation mixing centers. Due to the amount of units waiting to be shipped via rail, there were often delays of three to four weeks over the winter months from January through March. The rail industry, as a whole, is being challenged with increased demand that is coming from various areas, such as increased U.S. oil production, record grain and agricultural shipments, increased vehicle volume growth and North America plant capacities, vehicle imports from Mexico, and vehicle exports abroad. All of these areas are growing in volume and the rail industry is scrambling to meet the demand with new rail cars and locomotives."
Severe weather conditions also contributed to delaying rail deliveries. "The rail-car shortage affected motor companies' abilities to move vehicles to delivering dealers. Additionally, adverse weather conditions affecting motor companies' abilities to transport vehicles and the dealers' abilities to deliver vehicles," said Andersen of Element Fleet Management.
Also citing weather as a contributing factor to rail delays was Donahue of Emkay. "The extreme weather across the U.S. and Canada last winter was another root cause of industry-wide rail-car shortages that delayed the return of empty rail cars to the loading sites for each OEM. The extreme amount of snowfall, as well as extreme cold temperatures, added to the rail-related delays. The extreme cold required some smaller rail transports to reduce train weights because of the impact the cold has on the brake pressure for stopping. Fewer rail cars meant fewer vehicles transported on each load," said Donahue.
Agreeing was Tangney, also of Emkay. "The extreme winter we had in both snowfall totals, as well as extreme cold, added to the rail-related delays. Due to the extreme cold, rail transports needed to reduce train lengths/weights because of the impact the cold has on the brake pressure for stopping. Fewer rail cars meant fewer vehicles transported on each load," said Tangney. "The industry experienced delays in the distribution network and there were thousands of units awaiting shipment between the plants, ramps, and mixing centers. Due to severe weather conditions throughout the country, they were experiencing a shortage of rail cars. They were shipping by rail, but nowhere near the normal shipping rates. Many units had been waiting for weeks to leave their locations and each location was doing its best to ship out the oldest units first."
Compounding these issues was the need to educate both internal and external customers.
"The entire delivery season was focused on triaging. Not only was there a rail-car shortage, but, when there were rail cars to transport vehicles, the extreme cold forced the railroads to operate the rail cars with less weight (fewer cars) and at slower speeds. It was a perfect blend of Mother Nature going up against supply and demand of rail cars," said Groth of GE Capital Fleet Services.
Some fleet models were impacted more than others due to the rail-car shortages.
"Rail-car delays had a significant impact on OTD in 2014. The new Ford Transit high- and medium-roof vans required a new type of rail car to be transported. Ford worked with the rail-car industry to accommodate these new models. To their credit, the motor companies were creative and sometimes able to offer alternatives to speed up deliveries, but the impact was widespread across the fleet business," said Andersen of Element Fleet Management.
Although a perennial issue, FMCs agreed that 2014 was one of the most difficult years that they remember for rail-related delays.
"This year was one of the most challenging years we experienced with regards to rail car and car hauler transportation issues. Due to rail-car shortages that we experience every year, in addition to the extreme snowstorms this year, some OEMs hired outside carriers to pick up and deliver vehicles," said Gomez of Donlen.
One alternative to using rail assets was to ship vehicles by truck carriers.
"All manufacturers increased their utilization of local truck carriers to expand their normal delivery radius to help clear out rail and shipping yards. Some OEMs even moved vehicles to other shipping hub locations where rail cars where more plentiful," said Donahue of Emkay.
However, not all truck carriers were initially successful alternatives to rail.
"Some OEMs hired outside carriers to pick up and deliver vehicles. Although we commend OEMs for obtaining additional resources to reduce the number of vehicles impacted by this issue, the result ended up causing additional problems," said Gomez of Donlen. "Since the new carriers were not trained on the delivery process, we were receiving delivered-to-dealer dates when units actually arrived at the upfitter. In addition, some vehicles were not being reported delivered at all, which resulted in FMCs having to manually track vehicles to determine if units had finally arrived at the dealers."
Many view a silver lining to this year's OTD issues.
"The OTD challenges presented this year highlighted the increased need for offering our clients real-time status updates. This has always been a request, but keeping clients informed with real-time updates at every stage of the production and delivery process is critical. The quality of the status information we're receiving from both the motor companies and upfitters is constantly improving and becoming more accurate," said Andersen of Element Fleet Management. "We meet with our preferred network providers to refine and wade through different milestones."
With the perennial issues encountered due to the rail car shortage, some are advocating that OEMs perhaps examine alternatives to rail transportation and recommending that fleet managers place orders at different times of the year to avoid OTD delays.
"Between the growth in the industry and the transportation issues, the manufacturers need to evaluate alternatives to rail for spring deliveries. Becoming more proactive in identifying transportation issues before they occur, would greatly help OTD times, especially in the midst of a heavy ordering season," said Kelly of LeasePlan USA. "Fleet customers should factor in the rail and weather delays that occur every spring during planning. Simply changing some of the order timing, could potentially impact OTD."
Severe Weather Chills OTD
Calendar-year 2014 was a brutal year for Snow Belt states. "Throughout the winter, unusually high snow levels and extreme cold swept across many parts of North America, causing significant delivery delays. The severe weather caused many assembly plants, upfitters, and dealerships to shut down. The hazardous conditions impeded over-the-road carrier routes and significantly hindered rail-car deliveries. Many trains were diverted, shortened, or held up due to snow covered tracks and frozen switches. The weather also caused locomotive engines and crews to be stranded or scattered throughout the country, further exacerbating the logistical challenges, said Freund of Wheels Inc.
The severe weather conditions also caused substantial backlogs of new vehicles awaiting shipment.
"For several months, the OEMs struggled with the lingering effects of the severe winter weather and backlogs of vehicles at manufacturing plants, upfitters and dealerships. In May, the media reported that 180,000 vehicles were still waiting to be loaded on rail cars across North America. The average number of vehicles waiting for a rail car is typically 69,000," said Freund.
Groth of GE Capital Fleet Services adds, "Extreme cold, heavy snow falls, rail-car shortages, quality holds, and increased ordering volume created delays that were felt industry wide."
Not only were factories and upfitters impacted, so, too, were dealers.
"Dealership locations were either struggling to dig out or closed and the over-the-road transport companies stopped deliveries until road conditions improved," said Freund of Wheels Inc.
Kelly of LeasePlan USA also cited weather as a key factor in delayed delivery times. "Severe weather continued in 2014 with winter storms, record snow in most of the U.S., spring flooding in the Midwest, and severe thunderstorms and tornadoes across the country," said Kelly.
Despite the severe weather conditions, OEMs responded admirably to meet the challenge.
"This past winter was one of the severest in recent memory, and it did impact OTD during that time frame. There were examples of rail-car delays that lengthened OTD by a couple of weeks in specific cases, but, again, manufacturers understood the importance of maintaining OTD and responded with a sense of urgency," said Ghosh of ARI.
However, there were challenges in storing vehicles until weather conditions improved.
"There were extreme weather-related delays for the 2014 model-year. The severe snowstorms and cold weather during this past winter, accompanied with the rail-car shortages, increased the OTD substantially this year. We had vehicles that were moved to offsite locations and stayed at these locations for several months. The main issue was because of logistical limitations. These storage lots use a 'LIFO' (last-in/first-out) method of clearing the lot when the rail cars are available. Therefore, the first vehicle that is moved to these locations is typically the last vehicle that is shipped and is stranded the longest," said Gomez of Donlen.
Even when winter ended, the spring similarly posed problems to fleet deliveries. Of particular concern were hail storms.
"The spring always has its share of hail storms and this past year was no exception. Midwest plants and transportation hubs were hit by hail, damaged in some cases hundreds of vehicles. We had fewer of our vehicles caught in hail storms this year than we did in 2013, which was one of our worst years," said Tangney of Emkay.
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