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Natural Calamities Impact MY-2011 Order-To-Delivery Times

Last April’s earthquake in Japan and subsequent tsunami disrupted the automotive supply chain, causing parts shortages, which delayed order-to-delivery times. Extreme weather conditions also impacted vehicle shipments.

October 2011, by Mike Antich and Lauren Fletcher

Multiple factors influenced fleet order-to-delivery (OTD) times during the 2011 model-year. Delays occurred due to the Japanese earthquake (and subsequent tsunami), ongoing rail car shortages, a contractual dispute between several OEMs and a major vehicle transport company, limited allocation for high-volume fleet models, and myriad weather-related delays.

However, despite these occurrences, OTD times for MY-2011 were not noticeably different than 2010, with the exception of light-trucks.

“OTD times, year-over-year, experienced minimal change (10 days to two weeks) on most popular fleet vehicles. However, the greatest variance was experienced on certain pickup truck models, where OTD increased by as much as three weeks,” said Linda Tiberi, manager of motor company relations for PHH Arval.

This assessment was also made by other fleet management companies. “LeasePlan USA had poor order-to-delivery windows for some trucks and mid-size model vehicles. Most delays were due to the devastation in Japan, rail car shortages, transportation company changes, flooding in the Midwest, and quality holds,” said Carolyn Edwards, director of operations, vehicle acquisition for LeasePlan USA.

So how did OTD in MY-2011 stack up against MY-2010? “Based on our experience, improvements to OTD were insignificant,” said Tiberi of PHH Arval.

Others felt OTD results were mixed.

“When analyzing the data, some vehicles showed an increase in order-to-delivery time, while some showed improvement compared to 2010. Some of the factors that influenced the increase in delivery times were new models, quality holds, the crisis in Japan, and subsequent plant changes,” said Shannon Hoban-Mraz, operations manager - stock, manufacturer, and dealer relations for GE Capital Fleet Services. “For our customers, the most relevant impact was related to SUVs with the Ford Explorer showing the longest increase. The increase was mainly due to the new 2011 model.”
These were among some of the findings from Automotive Fleet’s 12th annual OTD survey. Seven fleet management company (FMC) survey partners provided data for this year’s study:

  • Automotive Resources International (ARI)
  • Donlen
  • Emkay, Inc.
  • GE Capital Fleet Services
  • LeasePlan USA
  • PHH Arval
  • Wheels, Inc.

The survey tracked deliveries of 141,775 new vehicles in the 2011 model-year, representing 85 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.

The Ripple Effect of the Japanese Earthquake and Tsunami

The Japanese earthquake of April 18, 2011, disrupted the automotive supply chain, and the ripple effect was felt in the U.S.

“The tsunami disaster is the biggest story of the year when it comes to OTD and it occurred in early spring at the height of the spring ordering period. This crippled Japanese manufacturers’ production plants in Japan and many of their U.S. plants that were reliant on parts from Japanese suppliers were also impacted,” said Jim Tangney, VP of vehicle acquisitions for Emkay, Inc.

The disruption caused by the Japanese earthquake was also cited by Cindy Butera, manager of vehicle acquisition services for Donlen. “Due to the events in Japan, parts and paint pigmentation shortages resulted in early build-out and orders on hold until parts and replacement paint pigmentation were made available,” said Butera.

Others similarly cited the Japanese earthquake and tsunami as a key factor in OTD delays for 2011 model-year. “The crisis in Japan was a key factor influencing the market’s order-to-delivery performance resulting in shipping delays, and parts and paint’s limited availability,” said Hoban-Mraz of GE Capital Fleet Services.

“Because of the earthquake, Japanese manufacturers ceased production of vehicles produced in Japan, and domestically produced models were affected by parts availability, said Chris Foster, manager of vehicle acquisition for ARI.

“The devastating disaster in Japan had a dramatic impact on vehicle output for several import manufacturers as production either stopped or was dramatically cut back in assembly plants in both Japan and the U.S.,” noted Jan Freund, director manufacturer relations for Wheels, Inc.

Freund noted that Toyota alone reported that more than 600 of its supplier plants had sustained damage. “After the earthquake and tsunami occurred, the automakers and suppliers immediately shut down factories across Japan to assess the damage and make the necessary repairs. The nationwide power restrictions caused further complications as factories and production plants attempted to get back on line,” said Freund. “Production stoppages and slowdowns throughout Japan naturally led to a shortage of materials, and automotive supply chain concerns came to the forefront for all the vehicle manufacturers. Difficulty assessing the capabilities of all supply tiers led to a challenging situation.”
The Japanese earthquake and tsunami had its greatest impact on the OTD of import-badged fleet models.

“The order-to-delivery time frames for import-badged vehicles were the hardest hit because of the earthquake and tsunami in Japan,” said Edwards of LeasePlan USA. “All import manufacturer partners communicated immediately with the fleet management companies. Their challenges were paramount in comparison to our domestic suppliers.”

Tangney similarly cited the problems encountered by import-badged OEMs in the wake of the earthquake and tsunami.

“The foreign nameplates struggled due to the tsunami disaster and the production and supplier parts issues it caused. If orders were not dramatically delayed, they were often forced to be cancelled. Supplier issues also impacted many manufacturers, foreign and domestic,” said Tangney. “Color pigment suppliers (for many black and red paints) were impacted by the disaster and many orders were delayed and then later altered as clients were forced to select new colors for their orders. Electronic suppliers that are Japan-based impacted the parts supplied for radios and navigation systems that also forced delays or orders to be changed.”

And the earthquake didn’t just affect Japanese production, according to Wheels’ Freund. She said that the Detroit Three also scrambled to address the disaster’s effects on their supply chain.

“For example, the Japan-based supplier of a key ingredient for metallic paint in U.S. vehicles was forced to shut down production in the wake of the disaster, causing automakers to adapt to the sudden shortage. While the Detroit automakers experienced limited impact to U.S. production, worldwide production was reduced as Asia and Europe experienced significant production stoppages,” said Freund.

The impact of the Japanese earthquake and tsunami was particularly felt by Japanese OEMs. “Except for some specific manufacturers and new-model launches the OTD times were not too different from 2010. The problem with many of the Japanese manufacturers is that their orders were never delivered because of the tsunami disaster and they were forced to cancel many 2011 fleet orders. Clients were forced to go with out-of-stock vehicles or reorder their vehicles as 2012 models with uncertain or delayed production start dates,” said Tangney. (These orders and their OTD numbers were not represented in the numbers presented for this article, but caused months of delays for their fleet customers.)

Shipping Disruptions

OTD delays were also attributed to a contractual dispute between major OEMs and a car hauler. In particular, Freund of Wheels, Inc. noted that Allied Truck, a major over-the-road vehicle transport provider, ceased providing services for several automakers in March due to contract disputes.

“The manufacturers secured alternative truck carriers, but communication and logistics systems with the new providers were slow to sync up, resulting in delivery delays. In addition, some of the new carriers did not accurately report when the vehicles they were carrying were delivered,” said Freund.

Allied Truck’s contract dispute, which lasted approximately six weeks, caused a backload in transport shipments during that period. “Allied stopped shipping vehicles as it tried to renegotiate its contract with the manufacturers. Many vehicles were being held at Allied locations and Allied refused to release them. Dealers were also allowed to arrange pick-up of vehicles directly from the plants if they chose,” said Tangney of Emkay, Inc. “The situation was finally resolved with manufacturers setting up alternative transport vendors to replace Allied.”

Supplier Constraints Delay Shipments

Many parts suppliers reduced production capacities in the aftermath of the economic downturn and the OEMs have taken a more disciplined “build-to-demand” approach to production, according to Freund of Wheels, Inc.

“Rather than using fixed, ongoing production schedules to generate a continuous stream of parts and vehicles, manufacturers have been forced to produce just as many parts and vehicles necessary to meet the current demand,” she said. “However, the production shortages took their toll when order volumes quickly increased between late 2010 and early 2011. Many suppliers could not keep up with the sudden increased demand, and, consequently, manufacturers experienced vehicle production delays. For example, Ford experienced a significant shortage of components used in its 4WD and AWD models, causing delivery times to stretch beyond the generally acceptable standards,” said Freund.

“Improper forecasting by the manufacturers put suppliers in the position where they couldn’t meet the demand when volumes increased rapidly,” said Foster of ARI.

According to Ford, one of the top factors influencing OTD was an increased industry vehicle volume from 10.6 million in 2009-CY to 11.8 million in 2010-CY.

Upfitters were also not immune to the challenging supplier environment, according to Freund. “Reduced access to parts, limited staff, and capacity concerns caused prioritization and scheduling issues that, in some cases, resulted in delayed upfitting and therefore, delayed delivery,” she said.

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