The 2020 model-year will be remembered as one of the most complex order-to-delivery (OTD) cycles in the history of fleet.
In retrospect, the 2020 model-year really divides into two segments: the pre-pandemic period from Oct. 1, 2019 to Feb. 28, 2020, and, separately, the March 1 to Sept. 30 period, which included the economic shutdown and temporary closure of all vehicle assembly plants in North America.
Pre-Pandemic OTD Dynamics
In many ways, OTD in model-year 2020 in the pre-pandemic period was very similar to what the industry experienced in model-year 2019, but that’s not saying much because 2019 was not that great a year for fleet OTD.
“As is typical every year, we see some OEMs and specific models perform better while others declined.We continue to see consumers move away from sedans and this put pressure on some of the popular SUV and crossover models. We are seeing a similar trend with fleet customers as well,” said Tim Cengel, senior procurement manager for Wheels Inc. “There was still a high demand for pickup trucks in both fleet and retail markets and this pushed truck OTDs higher. We also saw a sharp increase in demand for hybrid models as our customers look to improve their performance on green initiatives.”
As an unprecedented year, 2020 model-year ordering ushered a new level of OTD complications as this was the first time ever that fleet vehicles were ordered and delivered in the middle of a pandemic.
“Overall, the impact of the COVID-19 pandemic on the automotive industry, the fleet sector, and organizations across the country has been profound,” said Ted Davis, vice president, North American supply chain for ARI. “Virtually every aspect of the industry has been significantly affected in some way. And while many of the larger challenges are extremely apparent, such as OEM production delays, these issues also set off a domino effect for fleet operators.”
This domino effect reverberated throughout the entire automotive supply chain and logistics ecosystem.
“This resulted in volatile production and supply chain support for OEM parts and component suppliers. It is not just the OEMs that have to worry about COVID-related disruptions in their own facilities, it also applies to the suppliers,” said Matt Miller, vehicle status specialist for Donlen. “Disruptions of this type can still have a devastating ripple effect down the supply chain if there are extended work stoppages.”
Not only did this ripple effect impact 2020 fleet ordering and delivery, this ripple has also extended into the next model-year, that will impact the ordering and delivery of 2021 model fleet vehicles.
“Many of the domestic OEMs were able to extend their 2020-MY production to avoid the cancellation of orders, but this has delayed the start of 2021-MY ordering and the release of ordering guides,” said Angie Lauer, assistant vice president of vehicle acquisition for Enterprise Fleet Management. “As a result, production has been pushed back for the start of the 2021-MY for some models. This means that it’ll be important for orders to be placed early in the model-year to meet vehicle needs in early 2021.”
During the pandemic, some fleets elected to acquire vehicles, when available, out of stock from dealer inventory or direct from bailment pools to accelerate the replacement of assets and avoid lengthy OTD delays.
“Availability of vehicles in general has been strained in the industry due to last-mile delivery needs across many businesses. In lieu of factory ordering, many fleets have opted to purchase vehicles out of stock or through bailment reducing overall availability and inventory,” said Candice Groth, director of operations, fleet acquisitions for Merchants Fleet.
In addition to light-duty fleet vehicles, OTD for medium-duty trucks has also been impacted. “Medium-duty chassis availability continued to be a challenge for the 2020-MY,” pointed out Lauer of Enterprise Fleet Management.
Before COVID-19 was declared a pandemic, OTD for the 2020 model-year, for the most part, paralleled what the industry experienced during the prior 2019 model-year.
“Prior to the COVID-19 pandemic disrupting the entire supply chain, order-to-delivery times generally mirrored the broader macro-trends we’re seeing across the industry. Cars, crossovers, and SUVs performed comparable to the 2019-MY with less than a handful of models seeing an increase in OTD times,” said Davis of ARI.
Enterprise Fleet Management made a similar assessment. “Average OTD times were very similar in 2020 compared to 2019. The average OTD time for 2020 models was slightly less compared to 2019 models,” said Lauer of Enterprise Fleet Management.
This sentiment was echoed by LeasePlan USA. “Our analysis compared order-to-delivery time from the two model-years, and we saw little to no change from the 2019 to the 2020 model-year,” said Billy Nation, manager, vehicle acquisition for LeasePlan USA.
Ongoing strong truck demand in both the fleet and retail markets prior to the pandemic continued to cause constraints with chassis availability, especially with those units requiring upfit equipment.
“Many truck and van models that are popular with vocational fleet operators saw their OTD times increase for the 2020-MY. There was a noticeable year-over-year increase for nearly all truck models with the exception of the GMC Sierra, which improved as compared to last year,” said Davis of ARI. “Additionally, lead times for several van models spiked significantly for the 2020-MY, but on a positive note, OTD times for the Ram ProMaster City improved this year thanks to Ram’s pool availability.”
Mike Albert Fleet Solutions also reported increased OTD for trucks and vans prior to the suspension of vehicle assembly at OEM plants. “Large van OTD, and overall availability were very long. In some cases, orders placed later in the fall were cancelled due to demand,” said Steve Armstrong, manufacturer relations manager for Mike Albert Fleet Solutions. “The mid-size SUV segment continues to be the most popular and OTD times for most of these models have been long – some up to 16-20 weeks.”
Others likewise confirmed that 2020 OTD was trending longer than what was experience in the 2019 model-year.
“From what I saw, most commodity brands’ OTD timeframes appeared to be trending a bit longer right from the start (about 20%-30%) than 2019 figures. Premium segments and European OEMs seemed to be more in line with the previous 2019 timeframes,” said Miller of Donlen.
Other FMCs reported an improvement in OTD for cars. “Element observed a 16% weighted-average improvement in OTD cycle time for cars, a 22% weighted-average improvement in OTD cycle time for trucks, and 21% weighted-average improvement in OTD cycle time for vans, SUVs, and crossover vehicles from 2019-MY to 2020-MY during the period of Oct. 1, 2019 to Feb. 28, 2020,” said Eric Miller, director – stock ordering & order fulfillment for Element Fleet Management.
These were among some of the many findings that were revealed by Automotive Fleet’s 21st annual OTD survey, which is based on data and analyses provided by eight fleet management company survey partners that included: ARI, Donlen, Element Fleet Management, Enterprise Fleet Management, LeasePlan USA, Merchants Fleet, Mike Albert Fleet Solutions, and Wheels Inc. The comprehensive OTD survey tracked deliveries of 185,062 new vehicles in the 2020 model-year, representing 111 different models.
Due to the fact that the pandemic caused a suspension in new-vehicle production, fleet orders were divided in pre-pandemic and fleet orders during the pandemic when assembly plants closed. The study surveyed 127,589 vehicles ordered during the pre-pandemic period of Oct. 1, 2019 to Feb. 28, 2020 and separately, another 57,203 fleet vehicles were tracked during the pandemic from March 1, 2020 to Sept. 30, 2020.
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 pickup). 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.
Pandemic Disrupts Fleet OTD
The COVID-19 virus was declared a pandemic on March 11, 2020 by the World Health Organization. Two days later, a national emergency was declared in the U.S. to stop the spread of the COVID-19 outbreak. The national emergency declaration divided the economy into essential and non-essential businesses. Essential businesses were those that support critical infrastructure. All other businesses were deemed non-essential, which triggered an idling of their vehicle fleets.
“The COVID-19 pandemic just made OTD worse with some models taking five to six months or more to be delivered,” said Armstrong of Mike Albert Fleet Solutions.
Upon being notified of the closing of automotive assembly plants and the idling of non-essential fleets, all FMCs quickly marshalled their resources to assist fleet clients deal with this unprecedented situation.
“When the factories shut down in March for three months, fleet customers needed advice, guidance, and support, and that’s where our team stepped up. The minute shelter-in place orders went into effect, we established a COVID-19 communications task force, as well as a cross-functional team, from dealer services, to vehicle acquisition, client experience, maintenance, and license and title, to proactively monitor the ever-changing situation with vehicle production, delivery, titling, registration, and service,” said Troy Peterson, vice president operations – vehicle management for LeasePlan USA. “On the order-to-delivery front, our experts worked directly with the manufacturers and delivering dealer network to obtain frequent updates and in- sight into the status of dealerships. While some dealerships closed entirely, many continued to operate certain departments to provide essential services, which was incredibly helpful for fleets that operate essential businesses and needed to maintain operations. While the plants shut down in March and remained closed for three months, they still had cars that been built, which meant deliveries didn’t stop.”
One alternative to sourcing vehicles after the shutdown of the OEM assembly plants and dealerships has been short-term leasing and rental strategies.
“After the nationwide OEM assembly plant and dealer network shutdown and unstable market, we have noticed an increase with clients going to short-term leasing and rental solutions in lieu of traditional dealer stock or long-term factory orders,” said Groth of Merchants Fleet.
Ultimately, all assembly plants re-opened by the end of May 2020 and slowly recommenced production. “Impressive enough, when production resumed, it ramped up so quickly, and now, it’s like COVID never happened,” said Peterson of LeasePlan USA.
One reason for the quick reopening of OEM assembly plants is that they continued to accept new orders during the temporary closure. “While OEMs and non-essential services were closed, orders were still being accepted by the OEMs and production dates were gradually established as the plants reopened,” said Miller of Element. “The OEMs quickly worked through their backlog of orders and almost at pre-COVID cycle times to build and ship.”
OTD Impact of GM Strike
Prior to the pandemic, in September 2019, the United Auto Workers (UAW) strike at General Motors had a large impact on the delivery of future orders and had a significant impact on orders already in the system.
“We continued to see transportation delays in several places. A shortage of drivers affected truck transportation and caused delays at upfitters and ramps. We consistently heard from the upfitters that once they complete upfitting on vehicles, they didn’t get picked up in a timely fashion by the OEMs to be returned to ship-thru traffic. We also continued to see delays on orders shipping out of Mexico,” said Cengel of Wheels. “As a result of the GM strike several localized transportation bottlenecks were created that took weeks to work through late in 2019.”
Overall, the impact of the GM strike added about eight weeks of OTD to the impacted GM vehicles.
“The GM/UAW strike did impact OTD timeframes. After production actually resumed it was realistically a six to eight week delay once you account for GM plants typical ‘batch & hold’ process,” said Miller of Donlen.
The General Motors strike had differing impacts depending on where the vehicles were produced.
“For instance, the Chevrolet Equinox plant in Canada continued to produce vehicles throughout the strike. Vehicles produced in the U.S. saw between four to six weeks increase in OTD if they were ordered prior to the strike and hadn’t already shipped out from the plant,” said Cengel of Wheels Inc. “Once the strike was completed, GM did a good job of prioritizing fleet orders and lead times quickly returned to normal.”
The UAW strike also impacted the issuance of manufacturer statement of origin (MSO). “Previously MSOs were received at least a week in advance of vehicle delivery to dealership and during Q4 2019 this shifted to at time of arrival to dealership or later, which created pressure on the dealer network, transport vendors/tag agents and FMCs to ensure timely delivery on temporary tags while awaiting completion of ITR (Initial Title and Registration),” said Miller of Element.
GM recovered quickly from the UAW strike in most vehicle lines. “Vehicles coming out of the Wentzville, Mo., plant; however, still have some residual delays from the strike and pandemic. Cargo vans have a significantly longer order-to-delivery timeframe right now. However, considering the perfect storm of circumstances, GM had to face in 2019-2020 with the strike, COVID, workers not showing up for shifts due to fear of COVID, this is where professional patience comes in and we understand and accept the OEMs are doing all they can to get vehicles built and delivered. I remind people, the OEMs are eager for the vehicles to be delivered just like the rest of us,” said Groth of Merchants Fleet.
Although production was disrupted, most agree that it could have been much worse. “Overall, it felt closer to an extended model-year retooling. Once production did resume there were some additional delays with the typical batch & hold process, which is common after any longer production stoppage. There were also some unintended impacts to upfitters with supply of new vehicles to their facilities and pickups of completed units. In my opinion, the strike did have an unintended good consequence,” said Miller of Donlen. “While most of the plants had stopped production, a vast majority still had active logistics operations. This gave areas with congestion a good chance to clear out their backlog of units since there were no new units coming into the transport network.”
The vehicle segments most impacted by the UAW strike and later pandemic-induced assembly plant shutdown were trucks and vans. “We expect the biggest delays to be with popular GM vans and trucks that had their production delayed because the UAW strike and COVID-19. Some vans are taking almost a full year to deliver,” said Lauer of Enterprise Fleet Management.
Some fleet customers who were impacted by the strike made the decision to cancel their orders. “While the UAW strike didn’t influence OTD performance as significantly as other factors across the industry, it certainly impacted some fleet operators more than others. During the temporary stoppage, many customers opted to cancel orders and shift to other manufacturers,” said Davis of ARI. “Additionally, the temporary shutdown caused a logistics lead time delay of approximately two to three weeks for ship-thru units.”
On the whole, FMCs were complimentary of how GM expedited fleet orders before and after the UAW strike.
“GM worked hard to clear out vehicles from the factory lots both before and then shortly after the strike started. We saw only a limited number of units that were stuck and had to wait until the end of the strike to start shipping,” said Lauer of Enterprise Fleet Management. “GM also did a good job of providing proactive communication throughout the entire strike.”
Shortage of Vehicle Inventory
There were a variety of other factors that impacted OTD in the 2020 model-year. “This included early model-year cutoffs on many popular fleet models, strong fleet order volume for trucks and vans, and plant production capacity constraints, and quality holds,” said Lauer of Enterprise Fleet Management.
Another factor that triggered OTD delays in MY-2020 was changes to build schedules, which was cited by Miller of Element.
High demand for specific segments was another factor cited by Armstrong of Mike Albert Fleet Solutions. Strong demand for trucks and SUVs by both retail buyers and fleet customers caused constraints that lengthened OTD.
“Demand still far outpaced supply for SUVs (all sizes) and pickups. Both of these white hot segments had OEMs scrambling to decide which market (fleet vs. retail) actually receives their production allocation. The balancing act that is still continuing today,” said Miller of Donlen. “We are still consistently seeing constraints and delays on full-size truck and van models. It is not uncommon to see ¾-ton truck and full-size van lead times flirting with being five to six months out. Figure in already known constraints for some popular equipment groups and that adds another six to eight weeks. Plants have tried to utilize adding extra shifts, but they unfortunately still seemed to be coming up short.”
There were also other delays impacting overall OTD for models that were being discontinued, mostly sedans. “Commodity models (especially Ford Fusion/Lincoln MKZ) had much longer than usual transport times once they were actually built and released from the factory. There was a large jump in year-over-year timeframes,” added Miller of Donlen.
Armstrong of Mike Albert Fleet Solutions cites the continued strain on the transportation network as one of the top five reasons contributing to OTD delays in the 2020 model-year.
Other factors impacting OTD were:
Transportation Issues and Driver Shortage
Among the top issues impacting OTD were logistics delays in moving vehicles, in particular, transportation delays due to a driver shortage.
“Various areas of the country were impacted by a reduction in the available carrier drivers, which created transport delays, especially when bypassing the ship-thru process to meet client delivery expectations,” said Groth of Merchants Fleet.
Transportation issues were also cited by Davis of ARI. “Prior to the ongoing pandemic, several other industry factors combined to further disrupt OTD times. Of particular note, transportation and delivery is an area we’re monitoring closely for potential delays,” said Davis. “While each of these individual delays don’t appear significant on the surface, minor delays at each stage of the supply chain compound quickly and can significantly impact overall OTD performance. We continue to work closely with our customers to adjust and plan accordingly for these bottlenecks in the supply chain to help mitigate the impact on their business.”
DMV Closures and Delays
“Several state DMVs were closed for lengthy periods of time impacting license and title and registration for new and used vehicles,” said Groth of Merchants Fleet.
Courtesy Delivery Dealers
Another cause of OTD delays occurred at the dealer level, especially during the courtesy delivery process.
“Overall, the performance of courtesy delivery (CD) dealers remains a significant challenge. Dealership turnover and a general lack of priority for fleet units is leading to delays in final delivery of vehicles,” said Davis of ARI. “To combat these delays, a growing number of fleet operators are opting for driveaway solutions instead. This growing trend, combined with common driver pool shortages and the ongoing railcar shortages (which is unlikely to subside in the foreseeable future), is resulting in extended lead times from transport companies as well.”
Reduced Dealer Staffing
Merchants Fleet also cited issues with dealer staffing reductions. “There was a considerable reduction in dealer administration, which impacted getting dealers paid, courtesy deliveries on factory orders and coordinating getting vehicles picked up or transported to final destinations,” said Groth of Merchants Fleet.
Limited Dealer Inventory
Dealer inventory was also another issue cited by Merchants Fleet that is impacting OTD. “Low dealer stock inventory created an additional demand in the marketplace which we continue to experience with the need for trucks and vans. There were multiple suppliers going after the same vehicles bidding against each other,” said Groth of Merchants Fleet.
Recalls on High-Volume Fleet Models
“Specific quality control holds and/or active recalls also impacted large volumes of units on order. Two specific models come to mind with multiple issues were the Ford Explorer and Ram Classic (DS) pickups. There were multiple examples of Explorer units that had been produced and were waiting for six to eight weeks (or more) to get these issues worked out prior to shipping,” said Miller of Donlen.
“Upfitter throughput has led to some delays as well. Prior to the pandemic, order volume remained high and upfitters worked extremely hard to keep chassis moving through the build process, but traditional capacity challenges lingered. Fortunately, many upfitters made the most of the OEM shutdowns by focusing on pre-COVID production backlogs to keep the supply chain moving forward,” said Davis of ARI. “Overall, most upfitters have done a tremendous job navigating the challenges of this unprecedented year.”
Upfitter delays was also cited by Enterprise Fleet Management. “Backlogs at AME (aftermarket equipment) upfitters were another factor, which led to an increase in the number of missed ship-thrus,” said Lauer of Enterprise Fleet Management.
Low Bailment Pool Inventory
“Bailment pool options have always been a viable option where we worked with upfitters and OEMs to source vehicles to reduce OTD lead times, but given low inventory with OEMs, such as Mercedes-Benz and FCA, stock has been depleted over the past several months and hasn’t been restocked sufficiently,” said Groth of Merchants Fleet.
Communication Is Key
“While a number of these factors are extremely complex and, in some cases, completely out of anyone’s control, one thing that is abundantly clear is that transparent communication and creative solutions will be more important than ever before as we work to navigate these unprecedented times together,” said Davis of ARI.
The importance of communication with OEMs was also cited as critical by LeasePlan USA during the suspension of new-vehicle production. “One of the most impactful courses of action during the pandemic in my view was staying in such close alignment with the OEMs, working to assure fleet vehicles were prioritized in the production cycle ahead of retail units,” said Peterson of LeasePlan USA. “We are fortunate to have such strong relationships with the manufacturers, in addition to title and registration services. These partnerships not only helped us stay on top of delivery times during the pandemic, but they also enabled us to provide customers with insight and up-to-date information they needed to navigate through ordering, delivery, and license and titling during such an unprecedented time.”
Echoing this sentiment was Wheels Inc. “I would like to complement our OEM partners on the level of support they have provided during the difficult months while the plants were shutdown,” said Cengel of Wheels Inc. “There was a great deal of unknown at the time, but I believe our daily contacts and operational support staff did a great job keeping us updated. They provided regular updates on the status of their assembly plants, status of dealerships via spreadsheets to help us monitor courtesy delivery and they even helped out with order cancellations. I felt like they stepped up and met the challenge as best they could.”
The OTD issues addressed are just a few of the current challenges many fleet managers are working to overcome as the country begins to emerge from the pandemic.
“As budgets tighten and organizations adjust their fleet strategies amidst economic uncertainty, we’re likely to see order cycles further disrupted. Some fleet operators will continue reducing or eliminating new vehicle orders due to budget constraints. Others will shift from a purchase/finance approach for acquisition, to a leasing scenario to help preserve capital and liquidity,” said Davis of ARI