84%of Cars Had OTDs of 60 Daysor Less in 2004-MY

Order-to-delivery times for almost all intermediate sedans in the 2004-model year were an average of 52 days for the overall segment. The fastest OTD for an intermediate was 39 days for the 2004 Chevrolet Impala.

However, deliveries of some early introduction 2005-model vehicles were delayed due to quality inspections at assembly plants, and were further delayed by a nationwide rail car shortage that impacted the entire fleet industry.

“Sporadic increases in OTD times for 2004 were primarily due to quality holds and rail car shortages,” said Jan Freund, director of manufacturer relations for Wheels Inc. in Des Plaines, Ill.

Linda Tiberi, manager of motor company relations for PHH Arval in Sparks, Md., agrees. “We saw some models with longer OTD, which were mostly all-new 2005 models, while other carryover models were faster. It almost balanced out.”

Data for this year’s order-to-delivery study was provided by six fleet management companies: ARI, Donlen, GE Commercial Finance Fleet Services, LeasePlan USA, PHH Arval, and Wheels. The study tracked new-vehicle deliveries during the 2004-model year for 82 models, which represented 188,260 vehicles. The models tracked were those with approximately 1,000 units registered to commercial fleets in the 2003-model year, according to data supplied by R.L. Polk.

The methodology used to calculate OTD averages for cars was to count the number of days from the date an order was placed with a manufacturer to the time the vehicle was delivered to a dealer (not driver pick-up). Truck OTD averages were calculated from the day an order was placed with a manufacturer to when the vehicle arrived at an upfitter or, if no upfitter was used, to a dealer.

Unexpected Rail Car Shortage
One of the key factors contributing to longer order-to-delivery times in the 2004-MY has been the nationwide rail car shortage. The shortage affected not only the auto industry, but also all other industries that rely on rail transportation, such as the agricultural, mining, chemical, and timber industries. One reason for the shortage was that the railroads were caught off-guard by the unexpected demand for their services as the national economy began to improve. In fact, freight volume this year is expected to exceed last year’s, which was a record. The increased volume of freight congested the entire rail network. Aggravating the problem was the number of engineers and conductors who retired under new federal rules, which left many railroads understaffed.

“The rail shortages caused significant backups of fleet deliveries at many of the automotive assembly plants,” said Tim Duckworth, operations manager, manufacturer relations for GE Commercial Finance, Fleet Services. {+PAGEBREAK+}

As with most industries, the rail industry has seasonal peaks, which usually begin about mid-July and extend into the autumn. The peak season is triggered by the fall grain harvest, shipment of retail merchandise for Christmas, and transporting new cars and trucks to dealers for the start of the new model-year.  Click here to view Chart 1

Another contributing factor to the rail car shortage was the consolidation of regional railroad operations and the subsequent miscalculation of the number of rail cars they could scrap and still meet customer volume.

“We continue to feel the brunt of rail car shortages and over-the-road carrier issues,” said Jim Creighton, director of operations for ARI in Mt. Laurel, N.J.

Increased trucks sales compounded the rail car shortage because fewer numbers of trucks, due to their larger size, can be loaded on a rail car than passenger cars.

“Certain manufacturers deserve credit for minimizing the delays by hiring private transporters to move the vehicles they were unable to ship by rail. It was an extra expense but it was necessary,” said Rick Shick, vice president - purchasing/license & title for Donlen Corp. of Northbrook, Ill.

However, this alternative was short-lived. “Once the rail backed up, everyone shifted to truck carriers. But with everyone using car haulers, this then caused a shortage in the car hauler industry,” said Duckworth.

Despite the rail car shortage, industry-wide OTD averages this year were much better than the abysmal delivery times that occurred in the 2000-model year.

“Although OTD, in some cases, might not have been as good as last year, overall it was still pretty good,” said Jack Pierce, purchasing director for LeasePlan USA in Alpharetta, Ga. “While there is still room for improvement, more than 80 percent of the cars tracked this year had OTD under 60 days. That’s not bad.”

Delays Due to Quality Inspections
Another reason for delays, especially with some early introduction all-new 2005 models, were quality inspection and quality holds at the assembly plant. New models have a slow ramp-up period for quality inspection.

“Manufacturers are very concerned with quality,” said Tiberi. “When quality inspections are done, the vehicles are held in containment. But it took longer than expected to pull them out of the containment lots, which delayed shipping.” {+PAGEBREAK+}

“Vehicles are pulled for quality inspections at the same time newly built vehicles continue to come off the assembly line. The convergence of cars coming off the line with those held in containment further create the backlog and magnified the problem of the rail car shortage,” said Freund. Click here to view Chart 2

“We appreciate the concern for quality, but the process must be improved,” added Creighton.

Shick agrees. “When these vehicles were pulled off the line, the manufacturers had a difficult time keeping track of the vehicles. In many cases they were unable to provide information regarding the actual location of the vehicle within the transportation system, whether it had shipped or not, or if not shipped what would be the estimated ship date. This was very frustrating to customers,” said Shick. “The manufacturers’ quality initiative is certainly important, but they need to minimize the delays caused by these quality checks.”

Freund believes that quality inspection delays may continue. “With so many new models scheduled to be introduced, fleet managers need to consider the potential for delivery delays when putting together their selector. The cost of delays, should that occur, needs to be factored into the selector decision, and is the manufacturer willing to offer any guarantees? Driver satisfaction is also a factor. Drivers are anxious to receive their new vehicle, so keeping them updated regarding vehicle delivery delays is also important,” said Freund.

Truck OTD was lower than cars. “The reason is that some build combinations are tricky, but the delays that occurred this year will make next year’s OTD numbers look lower,” said Pierce.

Manufacturer OTD Initiatives
“All of the Big 3 are focusing on OTD because they are concerned about client satisfaction, and OTD is one of the drivers of that satisfaction,” said Tiberi. “They are all focusing on improving scheduling processes.”

Improved production scheduling is one reason for the improvement in OTD.

“The manufacturers are doing a much better job in scheduling, and this is true for all of the domestics,” said Duckworth. “They have taken a more assertive approach as to how they schedule fleet orders.” {+PAGEBREAK+}

Freund agreed. “All of the manufacturers are working to improve their scheduling processes by recognizing fleet orders as sold orders.”

When the order-to-delivery sequence is examined by each separate component, the greatest decrease in time has occurred in the order-to-scheduling period and the scheduling-to-production period, said Duckworth. “The fleet departments at the OEMs have become more aggressive at grabbing allocation that traditionally would have gone to the retail world. We have seen that across the board,” said Duckworth.

“Initiatives associated with rapid order fulfillment and readily available pool vehicles have also helped to decrease OTD,” added Creighton.

Pierce of LeasePlan also agrees. “Fleet orders continue to get better exposure and respect by the manufacturers. As for what more could manufacturers do to improve order-to-delivery times, the question should rather be what is the gain to continuing to improve OTD?” asked Pierce. “I’m not sure what the end goal is for OTD from an industry standpoint. Obviously, there is still room for improvement for some of the manufacturers, but for the most part, the manufacturers are doing an admirable job of getting fleet vehicles quickly preferenced and built. For the most part vehicles are being delivered pretty quickly.” Pierce added that the real test would occur in the 2005-model year. “We will see many more new models introduced at that time.”

Tiberi agrees that domestic manufacturers have been very consistent in meeting estimated time of arrival for fleet orders. “You don’t often hear of problems on the manufacturer side,” said Tiberi. “Where we run into more issues is with transportation. If something is going to go wrong, it is generally in transportation, such as a unit missing a ship-thru or held up at a ramp. But even these types of problems are now at a minimum,” said Tiberi.

Ford Focuses on Production and Scheduling to Improve OTD
An ongoing OTD initiative for Ford Motor Co. has been improving its internal systems and processes, said Dennis Baranik, manager, fleet planning & strategy for Ford North American Fleet, Lease, and Remarketing Operations (NAFLRO).

“If you break down OTD, there are four main parts: ordering, scheduling, production, and delivery,” said Baranik. “In terms of delivery, we have spent the past three or four years reducing the average delivery time from 16 to 17 days down to an 8- to 10-day range, which is a very reasonable level.” As a result, Ford is concentrating its OTD improvement efforts on the period from a time an order is placed to its scheduling and ultimate production. “For instance, over the next two to five years, we will completely replace all of the computer systems used in-house and by our dealers in the ordering and scheduling end of the business,” said Baranik. “Currently, time is lost because these systems don’t talk to each other. Time is lost transmitting data between systems and waiting for overnight batch runs so one system can download and then upload data to another system.” Ford anticipates that the new computer system will be fully operational by the 2009 calendar year.

Ford also has an ongoing initiative to improve OTD by tracking vehicle status while a unit is at an upfitter. Nine Ford upfitters (covering 99 percent of commercial truck volume) now use hand-held scanners to track order status events, such as unit arrival, upfit completion, and when the unit leaves the upfitter and re-enters the Ford transportation network. These updated status events are transmitted each night to Ford’s Web site, www.fleet.ford.com.

“This daily reporting allows fleet managers and customers to track a vehicle’s order status while at an upfitter,” said Kathy Mathiesen, plant operations interface team (POINT) manager for Ford North American Sales Planning and Distribution.

In addition, Ford now color-codes labeling for ship-thru vehicles making it easier to identify these units without having to read the label or invoice. “It makes it easier to locate one-off type of vehicles,” said Mathiesen.

During the 2004-model year, there were delays with the E-Series van due to the mid-model year introduction of a new diesel engine. A number of these units were held up at the assembly plant for quality checks prior to shipment. Similarly, the 2004-model Taurus was delayed due to quality issues with several components that necessitated delaying some of the production run at the plant to await quality checks. In addition, Freestar OTD times increased to 76 days as a result of a Canadian rail worker strike that affected the Oakville assembly plant. <>

GM Fleet Implements Four New OTD Initiatives in 2004-MY
During the 2004-model year, GM has improved lead-time for 25 vehicle lines based on its internal data. It accomplished this through a variety of fleet-related initiatives.

For example, GM Fleet & Commercial Operations (FCO) recently instituted weekly meetings to track all fleet orders and compare the expected production date with the actual production schedule. The weekly meetings include representatives from order fulfillment, scheduling, fleet and non-retail order processing, and FCO customer support teams. “During these weekly meetings we make adjustments to scheduling to keep fleet orders on track,” said Joe Switalski, director, FCO forecasting, planning & customer support.

Another fleet initiative implemented by GM is working directly with three of its large fleet customers who buy a diversity of GM models. These three fleet customers’ cumulative orders represent 90 percent of the models produced by GM. “At new model launch, these customers send in live orders that we use to stress test the ordering system and identify problems that cause rejects. Once identified, we fix these problems before the ordering system is opened to the rest of GM’s fleet customer order base. This is a great way to cleanse our ordering system and eliminate a number of rejects that occur in the early part of a model year and minimize delays,” said Switalski.

GM also launched an initiative in the 2004-model year to improve the communication process with customers when unplanned production-related issues occur. “We are becoming more proactive, especially in customer support,” said Switalski. This initiative includes GM’s top 60 fleet customers, based on order volume. “We will call these customers when unplanned production issues occur and let them know the impact on lead-times,” added Switalski.

In December 2003, GM implemented a truck OTD initiative to reduce the lead-time on special paint orders. A minimum of five orders is required to schedule a special paint order. “Within a four- to six-week period, if there is not a minimum batch, then the fleet customer is given the choice to change to another SEO color or to a regular production order paint,” said Lee Snyder, fleet & non-retail order processing manager for GM Order Fulfillment. However, for strategic fleet customers, GM has established an exception process that will build trucks with a special paint order after four weeks even though there is not the required minimum number of units, added Snyder. Click here to view Chart 3

For the past three years, GM has designated all commercial vehicle orders with its highest priority build, equal to retail sold orders. “For some car lines, this has cut processing days almost in half over this three-year period,” said Switalski.

Several anomalies in the order-to-delivery data were reported this year for two GM models. The first involved the Pontiac Bonneville. The order banks for the 2004 Bonneville were opened in July, although the pre-planned production start-up was not scheduled until October because production was being moved from the Orion assembly plant to Hammtramck. “We opened the Bonneville order banks earlier at the request of fleet customers so they would not have to special handle Bonneville orders,” said Switalski.

The reason for the longer OTD for the 2004 Chevrolet Colorado was the result of a torrential storm that struck the Shreveport, La., area, where the truck assembly plant is located. It caused an unforeseen logistics delays for thousands of vehicles because the assembly plant continued to produce the pickups despite a shortage of logistics equipment by transportation suppliers. “With the shortage of bi-level rail cars, we just couldn’t get enough rail cars fast enough,” added Switalski. “It was a special case situation brought on by an act of God.”

DaimlerChrysler Focuses on People, Process, & Technology
DaimlerChrysler reports that it is witnessing the fruits of initiatives launched in 2003 as its order-to-delivery times for 2004 models improved.
“Based upon industry data, we achieved a more favorable result compared to last year’s figures,” said Lisa Way, senior manager, Business Relations Group for DaimlerChrysler Fleet Operations.

“DCX’s overall OTD improved over last year’s figures, despite industry rail car and car hauler shortages,” said Way. “We were also able to see these improvements while launching high-volume vehicles such as the new Dodge Durango, Dodge and Chrysler Stow ’n Go minivans, and the Chrysler 300 series and Dodge Magnum full-size sedans.” {+PAGEBREAK+}

In addition, DaimlerChrysler has implemented a new corporate forecasting and scheduling system enabling it to more effectively prioritize fleet vehicles throughout the scheduling and manufacturing processes. “We also provided fleets access to VinVision, a vehicle tracking system developed by Insight Network Logistics, to leasing companies and dealers, which created an effective and timely communication medium for managing customer orders,” said Way.

“VinVision definitely helps because it provides a lot of detail,” said Shick. “DaimlerChrysler plans to incorporate VinVision into the Chrysler Direct Order Transmission (CDOT) by the end of the calendar year, which will further help us keep track of units,” added Shick.

DaimlerChrysler Fleet is continuing to focus its OTD efforts on people, process, and technology, said Victor Toral, senior manager, production planning for DaimlerChrysler Fleet Operations.

“We have added manpower in our production/scheduling department with increased metrics to monitor orders to ensure proper production is in place to meet customer needs,” said Toral.

Toral also cited assistance from DCX’s newly established Fleet Advisory Council will contribute to improved OTD. “We created a subcommittee to specifically focus on OTD to determine best-in-class methods,” said Toral. “Our customers play an important role in improving OTD by providing information about vehicle acquisition needs, and we plan to leverage that information to better serve our customers.”

Toyota Ordering System Matches Fleet Orders with Pool Vehicles
All commercial fleet orders for Camry, Corolla, Avalon, Sienna, Tacoma, and Tundra models are sourced through Toyota’s North American assembly plants in Kentucky, California, Indiana, and Ontario, Canada.

Among the new lead-time reduction initiatives implemented by Toyota is a new ETA system, launched last year, which posts status reports online at www.fleet.toyota.com. The Web-based system daily updates the anticipated delivery time for each fleet order.

To expedite fleet deliveries, Toyota also maintains a commercial pool program. “We build a mix of pool vehicles each production month that represents the most popular models and build specs that commercial customers typically order,” said Gail Kunkle, national fleet operations manager for Toyota Motor Sales USA. “As commercial customers place orders at a later point in time, for expedited delivery these orders are matched against the pool according to the delivery window specified by the customer and the actual build schedule of the units.” Toyota recently enhanced the pool matching process whereby its system will search all fleet and non-fleet orders every 10 minutes looking for a vehicle match. If a match is found, the ordering system will automatically fill the request by swapping it out with another vehicle order.

If the order submitted by the fleet customer does not match the vehicle specs in the pool, it goes through the FRS (Final Requirements System) process whereby information is exchanged with the plant. Toyota Fleet Operations is notified of the plant’s ability to accommodate the spec change.

Pool units that cannot be matched to exact customer orders via FRS progress through production, become available in the Toyota “e-mmediate pool.”

“The e-mmediate pool consists of fixed build units that are immediately available to commercial accounts, as soon as a few days depending on logistics,” said Gene Weber, manager, fleet/commercial vehicle operations for Toyota Motor Sales. Several months ago, Toyota automated the e-mmediate pool using a Web-enabled ordering system.

“Fleet managers interested in Toyota product should look at the e-mmediate pool and FRS pool to see if they can modify their specs to coincide with what Toyota has put in the pool. If they can, this would positively affect their lead time,” said Shick.

In August, Toyota started piloting an initiative aimed at a 30-day lead-time reduction for 4Runner, Highlander, and RAV4 models.

In the fourth quarter of 2004, Toyota will begin testing a new direct-order entry system that will allow major fleet management companies to electronically transmit new-vehicle orders on a daily basis to Toyota in lieu of using the automaker’s fleet Web site.

OTD Initiatives by Imports
Among the import-badged models, Subaru is producing the fastest OTD times. “Subaru is excellent, even among many of the domestic models. Subaru OTDs are consistent and reliable,” said Freund.

Subaru attributes its fast OTD times to a single reason. “Our commercial customers are treated as retail customers,” said Charles Reed, manager, national fleet sales operations for Subaru of America. “As far as Subaru is concerned, a sold unit is a sold unit, and each driver wants his or her vehicle as soon as possible. The commercial driver is not concerned with the allocation categories and manufacturer priorities regarding customer classifications.”

However, high retail demand continues to hinder fleet production for many import manufacturers by increasing lead-time for fleet orders, said Tiberi.

One issue related to import-badged fleet deliveries deals with status reporting of new-vehicle orders. “Similar to the Big Three, the import-badged companies need to improve status reporting and overall communication. Increasing domestic production facilities, wherever possible, would also be helpful,” said Creighton. “The best improvement came from Toyota, Nissan, and Subaru, but they are still not at the overall performance of the Big 3.”

Another suggestion to improve OTD for the imports is to allocate more production for fleet orders. “The reason the domestics are successful with OTD is because they have proper allocation and scheduling dedicated to fleet,” said Duckworth.

Freund cites rising expectations on the part of fleet customers. “It wasn’t that long ago that 60 days was considered an acceptable OTD. Import manufacturers, such as Saab and Volvo, who ship vehicles from overseas are right in that 60-day range. The most important aspect is dependability, so fleet managers can plan accordingly.”

What Still Needs to be Done
One OTD issue cited by fleet management companies was inconsistency in order status reports.

“Status reporting needs to be improved, especially during the transit time, once a vehicle leaves a plant or port until it arrives at its final destination. Our customers consistently cite accurate and timely production status as one of the most important factors of the vehicle acquisition process,” said Creighton.

“Oftentimes, OEM will release a status that is incomplete. For a small percent of the vehicles we order, we receive no status or inaccurate status, and at times the date for a specific event will change several times during the schedule, build, and ship process,” said Duckworth. “I think there are blips on the radar and when those blips occur they impact a small volume of vehicles.”

“More effort should be focused on communication and systems enhancements to streamline the overall process. More attention needs to be focused on options that constantly are in short supply, such as diesel engines, that result in very lengthy lead times to some trucks,” added Creighton.

One suggestion by Tiberi of PHH Arval is for manufacturers to inform fleets which build configurations might expedite OTD. Another suggestion from Tiberi is for manufacturers, on a month-to-month basis, to inform fleets which times during the month are best to place fleet orders. “For example, Toyota has a major initiative to improve OTD. They have a very sophisticated production system, but you need to have some orders (non-FRS units) in before the 10th of the month to be included in the upcoming production period. If you submit a production order after the 10th of the month, then you might have to wait another 30 days to get into the production schedule,” said Tiberi. “Fleets don’t always take that into account.”