Order-to-Delivery Times Increase Slightly in MY-2010
Multiple factors increased fleet order-to-delivery times, such as quality holds, massive recalls, the Cash for Clunkers program, GM & Chrysler’s emergence from bankruptcy, and the decision to build to demand, not to capacity.
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More 2010 model-year vehicles had order-to-delivery (OTD) times increase than decrease when compared to prior model-year delivery times.
One of the biggest factors contributing to OTD delays was quality holds, which delayed the delivery of some high-volume fleet vehicles.
"Quality holds were the single greatest factor and created transportation logjams," said Rick Shick, vice president, vehicle acquisition/truck services for Donlen Corp.
Other fleet management companies participating in this year's survey likewise cited quality holds as a key factor in longer OTDs. "Quality holds/inspections of vehicles led to an increase in OTD," agreed Carolyn Edwards, director of operations for LeasePlan USA.
PHH Arval also identified quality holds as one of the top factors in delaying OTD. "These actions presented a 'double-edged sword' effect for manufacturers. While they want customers to receive vehicles in a timely manner, they are also very concerned with quality, ensuring product was delivered as perfect as possible, minimizing the need for vehicle recalls," said Linda Tiberi, manager of motor company relations for PHH Arval.
The reason quality holds delayed shipments is that vehicles are parked in a storage lot and may linger at that location. "If quality is questionable, vehicles may be moved to a storage lot until a solution is determined and the fix is completed," said Jan Freund, director of manufacturer relations for Wheels Inc. "This will cause delays in releasing the vehicles for shipment."
A variety of other factors also contributed to the increase in OTD for MY-2010. Other factors cited by Dave Nagy, senior VP of operations for Emkay, included production capacity/order demand, plant downtime, new-model launches, plant quality holds, and rail capacity.
"Some additional issues that influenced the increase in delivery times were dealer closures, vehicles stuck at the ramp, and supply and demand issues for several popular fleet vehicles," added Marnie Korlath, manufacturer & dealer relations manager for GE Capital Fleet Services.
Another important factor was the emergence of General Motors and Chrysler from Chapter 11 bankruptcy, which delayed new-model production.
"As MY-10 production commenced, GM and Chrysler were emerging from bankruptcy and the vehicle demand continued to be low," said Freund. "Several assembly plants were shut down and drained of parts affecting production timing. Those plants started slowly taking several weeks to get back to normal output."
Lower retail sales in MY-2010 benefited fleet production. "Plants were pulling orders for production very soon after order placement," said Greg Carson, director of operations for Union Leasing.
However, lower retail sales also contributed to slower line rates at assembly plants, which impacted railcar shipments. "There were shipping delays due to railcars and carriers waiting for full loads to depart," said Bob White, vice president of operations for Automotive Resources International (ARI).
These transportation delays were compounded by the ongoing shortage of railcars. "We've seen delayed shipments as several truck and rail carriers are cautiously adding back resources," said Freund of Wheels.
These were among some of the findings from Automotive Fleet's 11th annual OTD survey. Eight fleet management companies provided data for this year's study:
● Automotive Resources International (ARI).
● Donlen Corporation.
● Emkay Inc.
● GE Capital Fleet Services.
● LeasePlan USA.
● PHH Arval.
● Union Leasing Inc.
● Wheels Inc.
The survey tracked deliveries of 159,349 new vehicles in the 2010 model-year, representing 86 models.
OTD time for cars was calculated 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. An industry average was calculated for each model tracked, based on information provided by participating fleet management companies.
Corporations continued to be cautious about vehicle replacement cycling. "The economy is still causing end-users to be cautious in their vehicle replacement cycling," said Jim Tangney, vice president of vehicle acquisitions for Emkay.
Despite order volumes being below historical norms, OTD, on average, increased for the 2010 model-year.
"We saw a minimal increase of approximately two days over 2009 models," said White of ARI.
Some OTD times may actually be longer than those published in the survey. "True averages on some models may be higher than depicted, as erroneous delivered-to-dealer status was received on vehicles, which, in reality, didn't arrive at the delivering dealer until approximately 60 days later," said Shick of Donlen.
Multiple Factors Impact OTD
Another factor that influenced 2010 OTD times was the successful Cash for Clunkers program, which siphoned production to the retail market that might otherwise have been available to fleets.
"This created increased retail demand for some models, such as Ford Fusion and Subaru Forester," said Freund of Wheels. "Afterwards, the manufacturers had to build back dealer inventory, which caused delivery of commercial fleet orders to be pushed back during that time."
Models that were popular in both the fleet and retail markets experienced order delays.
"One factor that had a negative impact on certain popular models' OTD was created by the high demand for specific models after manufacturers had taken actions to 'right-size' production," said Tiberi of PHH Arval. "This has presented a continuing challenge of balancing production with demand."
One example was with Ford products. "Ford's market share increased the most for the 2010-MY, and with that increase came longer lead-times for these major fleet models, such as the Focus, Fusion, Milan, Taurus, and Escape," said Tangney of Emkay. "All of these models are popular with fleet and retail customers, and this demand has caused supply issues and longer lead times. GM has controlled its production and kept dealer inventories low to improve profitability and demand. Newer models, like LaCrosse, Traverse, Acadia, and Enclave, have been difficult to locate at dealers as GM dealer inventory is at the lowest level in a decade."
Supplier constraints also delayed OTD. "There were various supplier constraints, most notably with the Ford Super Duty and Transit Connect," said White of ARI.
Others likewise cited supplier constraints. "Manufacturers need to work with their suppliers to ensure they have enough parts on hand to meet demand," said Carson of Union Leasing.
OTD was also impacted by the massive recalls issued by Toyota, which shut down some of its plants.
"The Toyota Camry went from 66 days in 2009 to 84 days for 2010 models, and the Toyota Camry Hybrid went from 75 days in 2009 to 95 days for 2010, both showing significant increases in OTD times, which were contributed to the recalls that were announced," said Korlath.
However, if you factor out the impact of the recalls, some fleet management companies said Toyota's OTD in 2010 was comparable to the year prior.
"Toyota OTD for 2009-MY was better because of the gas pedal issue that occurred in the 2010-MY," said Carson of Union Leasing. "If Toyota did not have this problem, OTD for both model-years would have been comparable."
In addition, manufacturers are building to demand and not to capacity.
"Manufacturers are working to balance production with fewer assembly plants, fewer suppliers, extensive quality checks, and new-model introductions," said Freund. "They do not want to overbuild; yet, at the same time, some plants that produce popular models are building to capacity."
Shifting specific model production also contributed to plant downtime. "Moving specific model production to a different plant delayed production," said Edwards of LeasePlan USA.
Weather continues to be a factor impacting OTD times. "Inclement weather contributed to delays by rerouting vehicles around impacted areas," said Shick. "Even though upfitted vehicles aren't included in the survey results, the increase in vehicles missing ship-thru was apparent this year and impacted order-to-delivery for truck customers."
Another factor cited was large allocations for some fleet customers. "This played a role in the increase in order-to-delivery times for the Ford Escape, along with demand versus supply of popular fleet vehicles," said Korlath.
There were some models that had dramatic improvements in OTD, such as Ford Escape Hybrids. "The Ford Escape Hybrid showed the biggest improvement in order-to-delivery time, from 155 days in 2009 to 70 days in 2010," said Korlath.
"This dramatic improvement in the Escape Hybrid OTD was a result of Ford rectifying a battery shortage situation and, to a lesser extent, order submission timing," said Shick of Donlen. "Many of our orders in the 2009 model-year were placed at the height of the battery shortage situation."
Another factor influencing 2010 OTD, especially for diesel-powered trucks, was the new 2010 diesel emission standards, which went into effect Jan. 1, 2010.
"The 2010 EPA diesel engine emissions standards caused an early buildout of the 2010 diesel truck models," said Dave Decker, manager, truck engineering for Wheels Inc. "In most cases, there was a gap of 4-6 months before the manufacturers started production of the 2011 diesel models. This impacted the OTD times for these trucks and created a shortage of diesel engine trucks in both bailment pools and dealer inventories."