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)
- 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.)
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.
New-Model Quality Holds
Quality holds have been an ongoing issue with OTD over the past several model-years. Although resulting in some delays, quality holds in 2011 were not as severe as was experienced in MY-2010.
“Quality holds have had a growing impact on OTDs for the past couple of model years,” said Freund.
As competition for market share increased among auto manufacturers, so did the emphasis on quality. “In the current industry environment, while vehicle quality is a client requirement, the expectation is that impact to OTD should be minimal. While there were no major quality holds, an emphasis on minimizing delays is still warranted,” said Tiberi of PHH Arval.
Another example of a delay caused by a quality hold was with Chrysler.
“Chrysler experienced a production delay introducing its new Chrysler 300. It had a quality hold when the radio unit it had intended to use that had an 8.4-inch screen needed to be replaced with a new suppliers’ radio that had a 4.3-inch screen. Getting the new radio engineered, quality tested, and the supply of product delayed the shipments of early orders,” said Dave Nagy, senior VP of operations for Emkay, Inc.
However, FMCs were quick to compliment OEMS on working with them to communicate delays resulting from quality holds.
“We did experience some new-model quality holds. The manufacturers made a concerted effort to control this area and partnered with us to communicate the quality hold with our mutual clients,” said Edwards of LeasePlan USA.
Freund of Wheels, Inc. noted that all manufacturers maintain stringent standards and guidelines for quality testing. However, after the Toyota recalls made headlines in 2010, automakers focused even more attention on ensuring quality.
“This led to a stark increase in the amount and duration of quality holds impacting OTD times. For example, Ford experienced significant delays across several models in 2011 (most notably the F-150, Explorer, and Taurus) as vehicles were held for final inspection and rework,” she said.
“And, the longer it takes for vehicles to pass inspection, the more they pile up. This year, both Ford and Chrysler noted that buildups of inventory awaiting inspection at assembly plants and outside storage yards were causing new-vehicle shipping delays. In addition, because information related to quality holds is often considered confidential, it may be difficult for factory contacts to communicate the exact reasons why a vehicle is being held up or offer projected shipment dates.”
No matter the reason, the results can be frustrating for fleet managers and their drivers, Freund noted. “Some delivery times bounce around dramatically as order volumes fluctuate or supplier issues arise. This can be particularly frustrating for customers who place orders believing the lead time is 10 weeks, and it suddenly jumps to 16 weeks,” she said. “While the OEM’s insist that fleet is a priority, we often find they are unable to expedite fleet production or shipment, especially when delays result from quality inspections and repairs.”
Rail Car Shortage
There were a variety of rail-related issues in transporting new models to market that impacted OTD. As in past years, a shortage of rail cars contributed to OTD delays by causing vehicles to stay in storage until a sufficient number of rail cars arrived.
“Rail car shortages and other rail-related delays did impact OTD times this year and will continue to be a problem in the years to come,” said Butera of Donlen. “Significant rail infrastructure improvements are needed to help improve OTD in the future.”
Railroads are hoping to increase rail car availability with the uptick in economic activity. “As commerce increased, including the ramp up in production by the automotive industry, there was competition for a limited supply of available rail cars,” said Tiberi of PHH Arval. “A significant volume of rail cars remained in storage facilities, while the railroad operators tried to respond to the spike in demand from various industries. Early in the 2011 calendar-year, heavy snow storms also impacted timely rail shipments.”
Automakers reported an industry-wide shortage of rail cars across the U.S., Canada, and Mexico.
“Many rail cars were put in storage during the economic recession, and the rail car companies have been slow to release them back into service due to the reduction in the workforce and ongoing economic uncertainty. In addition, severe weather that swept through many parts of North America over the course of the winter had a lingering effect on the availability and movement of rail cars throughout the continent,” said Freund of Wheels, Inc. “The limited number of rail cars affected the delivery of vehicles to dealers. In addition, manufacturers and body upfitters reported some delays in returning completed vehicles for shipment. When rail cars were unavailable or delayed, upfitted units awaiting shipment oftentimes were held up at the body companies due to limited space at assembly plants.”
In addition, there were regional bottlenecks caused by the rail car shortage.
“There were some rail-related issues in the upper Midwest for both Chrysler and GM due to increase in demand for certain models,” said Hoban-Mraz of GE Capital Fleet Services.
Some OEMs were hit harder than others by the rail car shortage. “Related to the U.S. rail car shortage ending June 2011; Chrysler was by far the hardest hit,” said Foster of ARI.
The ongoing struggle by railroad companies is to get enough rail cars in the right locations and this year was no exception.
“Fewer rail cars, inconsistent plant production, and poor weather led to situations where rail cars were not always available and plants experienced shortages,” said Tangney of Emkay, Inc. “The flooding we experienced this year really added to the problem as many rail cars had to be diverted around affected areas of the country, especially the Midwest and Southeast areas of the country, delaying deliveries and returns to the plants. Several manufacturers moved to using more transport carriers for their deliveries.”
The earthquake and tsunami disaster in Japan also impacted rail car availability, but in a positive aspect.
“The disaster in Japan actually allowed for improvement in rail deliveries in late spring as the Japanese manufacturers had fewer vehicles arriving from abroad and this lessened demand for rail cars for those vehicles,” said Tangney.
The shortage of rail cars also impacted the accurate communication of vehicle status.
“LeasePlan USA was challenged with some rail-related issues in transporting models to market. The biggest challenge was obtaining accurate vehicle status. Through communication efforts and weekly manufacturer meetings, we were able to guide our clients through this issue,” said Edwards.
Weather-Related Delays in OTD
One of the most significant factors resulting in OTD delays for 2011 models was weather-related.
“Weather-related issues ran the gamut from the earthquake and tsunami in Japan to flooding, hail, and snow storms in the U.S.,” said Tiberi of PHH Arval.
Other FMCs likewise cited the abnormal amount of weather-related delays that occurred during MY-2011.
“Typically, FMCs can expect OTD delays due to limited allocation, quality holds, and rail car shortages, but this past year, there seemed to be more delays related to weather than we are used to seeing,” said Butera of Donlen.
The instances of extreme weather not only delayed OTD, but also resulted in vehicle damage.
“Due to hail damage and flooding, many vehicles were damaged beyond repair, which resulted in replacing the orders with a 2012 model. We can expect to see new orders for the 2012-MY to be delayed as OEMs are allocating the 2011 replacement orders first,” said Butera.
Again, many of the weather-related issues were more severe in specific geographic regions. “The severe winter weather conditions experienced in several areas in the Midwest and East contributed to an increase in delivery times,” said Hoban-Mraz of GE Capital Fleet Services.
Another region impacted was the Northeast. “OTD delays occurred due to flooded ramps, snow in the Northeast, and, most significantly, hail damage,” said Foster of ARI.
Flooding caused rail traffic to be diverted around the affected areas, causing transportation delays.
This assessment was seconded by other FMCs. “Flooding in the Midwest this summer contributed to order-to-delivery delays because rail cars could not travel into or out of the affected areas. In addition, we had to reorder many vehicles that were at the delivering dealer when the flooding hit, which caused further delays,” said Edwards of LeasePlan USA.
In the 2011 model-year, a number of models showed dramatic improvement in OTD. “One of the most impactful improvements in regards to volume was the Chevrolet Equinox. The contributing factor was production changes introduced by GM in the late 2010 model-year, which it saw the benefits of in the 2011 model-year,” said Hoban-Mraz of GE Capital Fleet Services.
Another model showing dramatic improvement was the Transit Connect.
“The OTD for Transit Connect improved substantially. Ford has added an additional transport ship to carry vehicles from Turkey to U.S. ports. Ford has also improved and streamlined its process from the time a vehicle arrives at the port from Turkey and is shipped to the end destination,” said Butera of Donlen.
Other models registering OTD improvement gains were those that have been in production for a while. “We saw the most improvement with our GM orders — Impala, Malibu, Express and Savana vans, Silverado and Sierra pickups, and full-size SUVs all showed improvement over last year. The possible reason for this is that these are mature GM models that GM has strong plant allocation for,” said Nagy of Emkay, Inc.
The Malibu was cited by several FMCs as a model with a dramatic improvement in OTD. “While we experienced high OTD times for a number of models, one popular fleet model that showed marked improvement was the Chevrolet Malibu. OTD times for the Malibu in 2011 were well below the industry averages,” said Freund of Wheels, Inc.
However, on the whole, most models had OTDs in 2011 similar to 2010.
“Overall, most fleet models had delays due to the devastation in Japan, rail car shortages, transportation company changes, flooding in the Midwest, and quality holds. However, there are no particular models that we would classify as having the most improved order-to-delivery window,” said Edwards of LeasePlan USA.
Some delays in OTD were the result of mitigating circumstances.
“Chrysler struggled with some of its lead-times on models as it transitioned to Fiat and introduced many new enhancements to its models. Many of the Chrysler models saw increases over the previous year, most notably the 200 and 300s, the Journey, Compass, and Patriot,” said Tangney of Emkay, Inc. “Ford struggled to meet demand for its products for both retail and fleet customers. Its popular fleet models, Fusion, Taurus, Escape, and F-Series, saw increased demand and lead-times as both retail and fleet customers vied for production allocations.”
Another model cited was the F-Super Duty. “The F-Super Duty cancellations caused major issues in terms of overall delays. Since they were not built, they do not necessarily get reflected correctly in OTD times, but the need to re-order from 2011 to 2012 clearly caused delays for clients,” said Foster of ARI.
What Still Needs to be Done to Improve OTD?
All of the participating FMCs believe there continues to be a number of enhancements that need to be made in order to improve OTD for future model-years. “ Improvement begins with clearer estimates of lead times. Most manufacturers now provide vague details of delays and use generic 8-10 week time frames for cars and 10-12 weeks for trucks,” said Foster of ARI. “To improve this, we’d like to see increased consistency and timeliness of information, specifically regarding cancellations, restrictions, and parts availability: 2011 order cutoffs forced 2012 vehicle orders. The introduction of predictive analysis and improved communication would allow the fleet management companies to better control expectations at the client level.
One benefit of improved OTD has been platform sharing. “We are starting to see the benefits of more vehicles sharing the same platforms and simplifying the production process. This will increase the efficiencies of the plants and allow production to flow smoother with the reduction of build combinations. On the other hand, if there is a supplier issue, it will impact more vehicles, so the manufacturer supplier base needs to be strong and have redundancies. We saw that this year with many manufacturers impacted by the paint pigment issue that one Japan supplier provides,” said Nagy of Emkay, Inc.
However, as in past years, FMCs want more communication from the OEMs when potential transportation issues begin to emerge.
“We would like to see an increase in manufacturer communications and for the manufacturers to take an even more proactive approach in communicating situations such as holds, constraints, and railcar shortages that may significantly increase the OTD time,” said Hoban-Mraz of GE Capital Fleet Services.
OTD is always and will continue to be a challenging area for the fleet industry. “However, manufacturers, transportation companies, and upfit suppliers continue to do a good job identifying opportunities to improve order-to-delivery times. Perhaps more emphasis on the transportation segment and quality holds would improve order-to-delivery times for fleet management companies and our clients,” said Edwards of LeasePlan USA. “For instance, becoming a bit more proactive in identifying transportation issues before they occur would help OTD times greatly, especially in the midst of a heavy ordering season. We believe this could be accomplished by the manufacturers working with their suppliers to take a more proactive approach to meeting the needs of their customers together.”
Many FMCs cited the introduction of new technologies as an opportunity to improve OTD in future model-years. “Optimizing technology to provide improved tracking of vehicles throughout every step of the order-to-delivery process should be standardized. There should also be improved communications to call out proactively, whenever possible, which vehicles will likely experience delays,” said Tiberi of PHH Arval.
As some FMCs cite, the key to improving OTD is to have a consistent presence in the fleet market. “Consistency is key. Manufacturers who want to participate in the fleet industry need to commit. We’ve seen some manufacturers step out of fleet at times, remove certain models and not prioritize fleet orders,” said Freund of Wheels, Inc. “Inconsistent OTD times are indeed a major source of concern. Regardless of the reason for the delays, there are real business and cost implications for fleet customers that the manufacturers need to respect. The manufacturers need to manage their businesses and processes in a way that allows fleet orders to be better prioritized, with more accurate delivery estimates communicated to fleet management companies and to individual fleets.”
Another concern cited by FMCs is that OEMs adhere to a build-to-demand production philosophy. “ARI hopes that supply-and-demand issues do not influence a reversal back to old ‘keep factories working’ philosophy,” said Foster.
In looking toward the future, Rick Shick, VP of purchasing for Donlen noted that he “would like to see the OEMs develop a consistent approach, methodology, and format for communicating lead times to include the order receipt windows impacted by changes in OTD time. For example, if lead time on a given model increases from 10 to 14 weeks, what order receipt date range is impacted?” he queried. “Currently, the logistical status system is separate from the production status. Ideally, OEMs could integrate logistical status data into our electronic production data status feeds and provide with the current electronic status feed we receive daily. Because these systems include an ETA-to-Dealer date, it could help manage customer expectations, reduce inquiries, and save time for OEMs, FMCs, and fleet managers.”