18 Recommendations to Improve OTD for Upfits
There have been a number of initiatives adopted by OEMs and fleet management companies (FMC) to assist their clients in improving order-to-delivery times (OTD), especially for trucks and vans requiring upfitting.
“More fleets are turning to vans to fulfill fleet applications, and van sales exceeded forecasted volumes in model-year 2015. In certain cases, end-user demand exceeded production capacity, which resulted in longer lead times,” said Partha Ghosh, director – supply chain management for ARI. “A strong retail demand has emerged over the past year or so, which, coupled with the relatively low price of fuel, has led to extended lead times on popular pickups and SUVs. These factors required OEMs to recommend placing orders much sooner than expected, and, in many cases, even close order banks early. Other complications arose from material shortages that limited the option to add shifts or overtime at manufacturing plants.”
Another factor impacting OTD is that many fleet vans are produced outside the U.S.
“Compact vans that are produced in Europe and shipped to the U.S. take an extraordinarily long time to clear customs and to complete modification. The manufacturers need to work on shortening this time on those vans,” said Howard Goldman, vehicle purchasing manager for Merchants Fleet Management.
Ghosh elaborated further on this issue: “Given the significant increase in demand over the past one to two years, lead times, in general, have gotten longer, and that trend is likely to continue, absent any significant decrease in demand or increase in production capacity,” he said. “However, the Transit Connect saw an improvement of about four weeks in OTD (from a range of 22 to 24 weeks in 2014, to 18 to 20 weeks in 2015), due to the change in its production location from Turkey to Spain. For other models, however, there were no dramatic improvements in OTD.”
In addition to impacting productivity, OTD can have other negative financial impacts on fleets.
“Production and delivery delays result in added costs for the customers and drivers. FMCs are forced to present alternative models and/or ordering methods and some entail higher-than-expected acquisition costs. The daily OEM contacts are frequently limited in their ability to provide alternative solutions, to respond quickly, and resolution of issues is often slow,” said Jessica Krams, manager, vehicle order management for Wheels Inc.
Fleet allocation has also created problems, especially when model-years turnover and orders get pushed to the next model-year. “Increased fleet allocation for popular models would be great for our customers instead of being pushed to the end of the queue, which can add months to an order,” said Goldman.
According to Ghosh, the entire supply-chain process needs to be considered when discussing OTD performance, and there are five major stages that compose the supply chain:
1. Vehicle and upfitting specification, driven by the client, FMC, and upfitting partners.
2. The vehicle (chassis) ordering, scheduling, and production process managed by the OEMs.
3. The movement of the vehicles, as performed by logistics services providers in transporting vehicles between the OEM and upfitters, as well as after upfitting to the dealers.
4. The upfitting process, which is probably the most variable aspect of the supply chain, since it depends greatly on the complexity of upfitting that’s required.
5. The final stage, the delivery process of the finished vehicle to the client, usually performed by the dealer, and inclusive of the licensing, registration, and any inspection requirements.
“Any number of challenges can, and usually do, occur in any one or more of these stages, and the complexities of the supply chain seem to be increasing as business and client expectations continue to grow. Managing the supply chain end-to-end is the key to improving OTD performance,” said Ghosh.
Building on this theme is Ken Gillies, truck ordering and engineering manager for Element Financial’s fleet management business. “A fleet upfitting strategy that considers the following helps avoid trouble: a good replacement plan, a good match between the job requirements and the vehicle, vehicle/chassis manufacturer (OEM) capabilities and incentives, and using an upfitter properly matched to your needs,” he said.
Elizabeth Kelly, director of operations for LeasePlan USA, provides additional suggestions on how to improve OTD. “The increase in OTD times is causing many issues with the productivity of fleets, which can be very frustrating to fleet managers,” she said.
When facing these problems, Kelly suggested reviewing three factors to lessen the impact of delays:
1. Re-evaluate order cycles. Ordering a bit earlier or even staggering orders throughout the year could help avoid some of the delays.
2. Understand lead times and production schedules. There have been many changes to both of these in recent years and the once-standard answer is now very specific for each model.
3. Consider alternative vehicles if those lead times and production dates do not meet their needs.