Order-to-delivery times are increasingly challenging today’s fleet professionals, especially when it comes to trucks and vans. According to Automotive Fleet’s article “Average Fleet Order-to-Delivery Times Worsen in 2019,” the high volume of orders of trucks and vans are contributing to upfitter backlogs and missed ship-thrus. There is also the ongoing challenge of railcar and truck carrier shortages.
While order-to-delivery has slowed down, the demands of today’s businesses and consumers, which are operating in an increasingly on-demand world, have sped up. Add in the unexpected fluctuations that can occur in vehicle needs, both due to seasonal factors and the reality of accidents and breakdowns, and it’s clear that getting vehicles on the road can present quite the puzzle.
Now more than ever, it’s time for fleet managers to not accept the answer “this is how we’ve always done it” when it comes to acquiring vehicles. With a little creative thinking, you can unite multiple acquisition and leasing tactics to build a strategy that allows your business to effectively manage the peaks and valleys of vehicle demand. Let’s discuss each strategy and determine how the pieces fit for your fleet.
Piece 1: Factory Ordering
Despite the length of the factory order process, it remains the most cost-effective way to get your vehicles and should be the center of your vehicle acquisition plan. Factory ordering allows you to order the exact specifications you need, so you get consistency across the fleet. Pricing is also lower because of manufacturer discounts, and you have more control over standardizing your vehicles and eliminating extra packages.
Using factory ordering to its full potential while minimizing gaps in your fleet requires planning. The average fleet should anticipate cycling approximately a third of their fleet every three years. However, vehicle lifecycles can vary significantly based on application, whether or not there is upfitting, and other factors.
It is important to note that if your fleet does require upfitting, this typically adds another three weeks to the standard 12-16 week lead time. Not all vehicles are available for factory order as well, so you may need to use other methods if you have a highly specialized or unique vehicle need.
Finally, factory ordering requires you to be aware of cut off and build-out dates and to plan accordingly. Because fleet management companies have close relationships with OEMs, they will have the latest deadlines and dates, and some may even list them on their website. Working with a fleet management company can also be beneficial as they can ask for updates and act as your advocate through the order to delivery process.
Key considerations when using factory ordering as a piece of your fleet puzzle:
1. Plan ahead, and set regular fleet reviews on your calendar
2. Work with fleet consultants to help optimize your ordering cycle
3. Bookmark build-out and start-up dates, and check them regularly
Piece 2: Out-of-Stock & Dealer Lots
If your company has run out of time to place a factory order, you can call your local dealer or leverage your fleet management partner to perform an out-of-stock order, where they contact their nationwide network of dealerships to find an available vehicle somewhere that is closest to the needed spec.
The tradeoff for this time savings is that you likely will not receive the exact vehicle or spec you need. Vehicles at dealer lots are targeted to everyday consumers, not commercial fleets, which means they often come with extra features or in higher trim levels than a business would require. The result: you may end up giving your newest driver a vehicle with a higher trim level or a different model than the rest of your fleet. If out-of-stock is your go-to process to fill the order gap, introducing this kind of variability into your fleet repeatedly is a quick way to increase costs and administration while impacting your culture. However, if the job needs to be done quickly and the opportunity cost is high, you may still go with this route as an option.
Key considerations when using out-of-stock & dealer lots as a piece of your fleet puzzle:
- When time is of the essence, be flexible with your spec if you can
- Every dealer has a different process for purchasing, so leverage a fleet management partner to reduce your administrative burden
- Make sure to budget for transportation costs, as the best vehicle for the job may not be close by
Piece 3: Flexible Rental & Lease Options to Fill the Order Gap
While planning for the factory order process is the “gold standard,” it still doesn’t cover all situations. Many businesses experience fluctuations in demand throughout the year and need cost-effective ways to scale up (or down) quickly. Companies that experience these dynamics include:
- Companies with short-term contractors & project-based fleet fluctuations
- Industries like landscaping, construction, pest control, last mile delivery, or others that experience seasonality
- Companies that experience sudden growth, such as through an acquisition or launch of a new business line or model
The common go-to for an increase in vehicle demand is a daily rental. However, daily rental rates are among the highest vehicle rates a company can incur. Daily rentals should be limited to situations where there has been a breakdown and a substitute vehicle is only needed for a few days or weeks.
Short-term leasing (sometimes referred to as long-term rentals) is an ideal gap measure for extended periods of increased demand because it is more cost effective than daily rentals, and you can obtain a vehicle within days. Short-term leased vehicles can be kept for as little as a month and up to a year, and are simply returned to the lease provider at the end of the term. If a project turns into a long-term work commitment, you can convert your short-term leased vehicles to a long-term lease without having to trade the vehicles in.
An example of this is a construction company that has 1,000 pickup trucks on lease, but 200 of those vehicles may only be truly needed for the six months of the year that mark their seasonal high point. The company in this situation could opt to use a short-term lease just for those 200 trucks for 6 months versus leasing for a full year. This change would save them upwards of $610,000 in fixed and operating costs.
Key considerations for the flexible rental & lease piece of your fleet puzzle:
- Not all companies offer short-term options or lease conversions, so check with your fleet provider about your options
- Work with your fleet partner to right size your fleet and determine how many long-term assets you need versus variable units
- Daily and short-term rentals usually have different conditions than long-term leases, so read your paperwork carefully
Putting The Pieces Together for a Comprehensive Strategy
To keep your drivers on the road, you need to use all tools at your disposal, which means factory ordering, short-term leasing, daily rentals, and even out-of-stock orders all have their role. A comprehensive vehicle acquisition strategy may look something like this:
A construction company has recently launched a large new project, and has expanded its workforce rapidly in order to complete this project. The fleet manager must acquire 20 additional light-duty pickups to be ready for when the project begins in 4 weeks.
Because the situation truly requires a long-term asset, it makes sense to place a factory order for exactly what the company needs and use a short-term lease to bridge the gap while the company waits for delivery.
The fleet manager can use short-term leases on these 20 vehicles to supplement their fleet immediately. Simultaneously, the fleet manager can work with their fleet provider to factory order their standard sedans in order to achieve a lower cost than out-of-stock ordering. Once the factory-ordered vehicles arrive, the short-term lease vehicles can be returned.
Solving the Puzzle Means Putting All Options on the Table
When tackling vehicle acquisitions, it is important to put all the options on the table and piece together what makes sense for your business’s unique needs and situation. By using factory ordering, out-of-stock, and short-term options in their ideal application, you can ultimately reduce idle assets and improve cost per mile.