Order-to-delivery (OTD) times for 2016 models was another case of good news and bad news, and, in many ways, was similar to what was experienced by fleets in the prior model-year.
During the 2016 model-year, the top three factors influencing OTD were:
- Strong retail demand that impacted production allocation and lead times, especially for trucks and vans.
- Ongoing rail-car shortages.
- Upfitter bottlenecks and missed ship-thrus.
The good news is there was a decrease in extended quality holds, which in prior model-years resulted in long delays and uncertainty as to actual delivery date.
“The overall number of vehicles held up for an extended period of time due to a quality hold decreased this past year. We saw fewer vehicles sit for upwards of 30 days without release dates, which helped alleviate congestion at plants and ramps,” said Jessica Krams, manager - vehicle order management for Wheels.
Another factor that contributed to fewer OTD headaches was mild weather conditions.
“The fact that most of the country experienced a warmer and milder winter certainly contributed to lead times decreasing for the 2016-MY,” said Krams. “Ramps, plants, and the rail network did not have to contend with digging out from snowfall to the same extent they had the previous few winters. Delays after a winter storm hit were minimal and in general did not impact the overall flow of vehicles moving in and out of plants and ramps.”
Strong retail and fleet sales increased OTD for some popular vehicles segments. “The strong retail demand that has existed over the past couple of years, and continues to be supported with the consistent low price of fuel, has led to extended lead times on popular pickups and SUVs,” said Partha Ghosh, director, supply chain management for ARI.
Certain makes and models of vans experienced pressure on OTD times due to increased fleet demand.
“It is evident from the pattern over recent years that vans continue to grow in importance and value to clients, and, as a result, in certain cases demand exceeded capacity leading to longer lead times or even general availability. While production increases are being implemented where possible, fleet have had to increase their flexibility with the available choices and configurations in the market,” said Ghosh.
One example of an increase in OTD for a specific van model was the Ram ProMaster. “Although, overall, there were no significant changes from MY-2015 to MY-2016 in OTD, there were some notable shifts to specific models, including an uptick in order-to-delivery times for vans, such as the Ram ProMaster, because a large portion of this make/model was allocated to the U.S. Postal Service,” said James Crocker, director of fleet operations for Merchants Fleet Management.
These were among some of the many findings that were revealed by Automotive Fleet’s 17th annual OTD survey, which is based on data and analyses provided by seven fleet management company (FMC) survey partners that included ARI, Donlen, Element Fleet Management, EMKAY, LeasePlan USA, Merchants Fleet Management, and Wheels Inc.
The AF OTD survey tracked deliveries of approximately 117,105 new vehicles in the 2016 model-year, representing 131 different models.
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.
“Most of the delays we saw on new or redesigned models were caused by limited parts availability at the beginning of the model-year,” said Krams of Wheels.
On the whole, OTD for the 2016 model-year was relatively good.
“It’s a good year when you cannot recall too many models that had delivery delays that clients weren’t already aware of or anticipated,” said Jim Tangney – VP Vehicle Acquisitions for EMKAY.
Comparing 2016 OTD to 2015
In a side-by-side comparison, there were many similarities between the 2016 and 2015 model-year.
“When you look at the OTD averages across all 2016 models, the majority saw lead times remain consistent or decrease from 2015. This is thanks to a number of factors, including the relatively mild winter, as well as fewer quality holds at the assembly plants, which helped reduce the number of backlogs at plants and ramps,” said Krams of Wheels.
Donlen likewise agreed that OTD for MY-2016 was comparable to last year.
“Overall the order to delivery lead times for most models stayed the same compared to MY-2015; however, I am seeing a trend of an increase in delivery for models that are built within Mexico, specifically RAM ProMaster and Chevrolet Trax,” said Cindy Gomez, VP vehicle acqusitions for Donlen.
Some models saw an upward creep in OTD, but, on average, delivery times were comparable to 2015. “Overall, we saw 2016-MY OTD times creep up from those in the 2015-MY, but still within a time frame that is reasonable for the more common fleet models ordered,” said Tangney of Emkay.
Others, likewise, agreed with this assessment.
“It’s difficult to establish an exact comparison because of the many new products in the market; our analysis; however, shows an average of 11.3 days increase in OTD from MY-2015 to MY-2016, mostly driven by truck and van models,” said Ghosh of ARI. “There were a number of factors for this increase, including increased demand and logistical issues.”
For most models there were no dramatic improvements in OTD.
“Many carryover models in the car or crossover segments typically fell in the 8-to-10 or 10-to-12 weeks range, without many delays. Given the significant increase in demand over the past year to two years, lead times in general have gotten longer especially for certain models, and that trend is likely to continue, absent any significant decrease in demand or increase in production capacity,” said Ghosh of ARI.
Some models witnessed dramatic improvements in OTD as production capacity was increased at its assembly plant.
“Significant improvements were made in OTD for the Chevrolet Colorado due to increased plant capacity and better fleet allocation,” said Crocker of Merchants Fleet Management.
Also commenting on OTD for the 2016 Chevrolet Colorado was Gomez of Donlen. “The Chevrolet Colorado had a late start in production which caused the longer OTD time for MY-2016. With that said, GM had done a good job communicating the late start up to customers and FMCs and setting realistic expectations,” said Gomez. “There was also a stop delivery recall that impacted the Colorado as well and GM ensured that materials were readily available to perform the repairs and minimize these delays.”
In general, OTD times have stabilized as production became more balanced with buyer demand. “The car, SUV, and truck segments have shown improvement for MY-2016, as they level back to numbers we saw in 2014, in contrast to the increase in all three previous years.” said Rick Smith, manager, vehicle acquisition for LeasePlan USA. “Some vans have consistently improved year-over-year. Chevrolet Express and GMC Savana vans have both improved significantly with averages down 35 days model year to model year. The OEM has stated they were better prepared for the large volume of orders received compared to 2015, as they were able to better forecast and properly allocate to handle the larger volume.”
Gomez of Donlen also cited improvement in Express/Savana OTD.
“GM has improved the OTD time substantially for 2016-MY Chevrolet Express Cargo Vans. For MY-2015, GM had a strict ordering process where customers had to request for allocation before orders could be submitted. This year that requirement was no longer needed and GM has focused on reducing the overall OTD by increasing their plant production which made a vast improvement for the 2016-MY,” said Gomez.
Another van model that experienced a decrease in lead time was the Ford Transit. “The addition of more specialty railcars to transport the medium- and high-roof Transit vans also contributed to the decline in lead time,” said Krams of Wheels.
According to Jamie Wallace, manager, vehicle acquisition for LeasePlan USA, there was a slight increase of one to three days in the overall delivery cycle — including delivery to the driver — due to various factors. Wallace said these factors included:
- Temp tag laws becoming more stringent.
- More states doing away with temp tags.
- More states requiring fleets to be registered with their secretary of state and,
- Initial registration laws requirements and documentation becoming more complicated.
Other extenuating circumstances that caused longer OTD times occurred outside the U.S.
“The small cargo vans, such as the Ford Transit Connect and Ram ProMaster City models, that are produced outside the U.S. were the most challenging because of their extremely long published lead-times,” said Tangney of Emkay. “Ford also experienced delays to Transit Connect at its Baltimore facility with units not getting returned promptly from the local upfitters in addition to the delays due to railcar shortages.”
Both Ford and FCA have addressed this issue by creating pools of fleet-ready vehicles.
“Ford and FCA have been able to offset the lead-times by offering pools for these models and that has helped if the pool is stocked and has the desired specifications. OTDs for these models showed improvement mainly because many of the orders are pulled from pool inventory,” added Tangney.
Some OTD delays were caused by production issues outside the U.S.
One example occurred in February 2016, when Toyota suspended production at assembly plants in Japan and delayed shipments of the new 2016 Prius hybrid. “All assembly lines halted production Feb. 8-13. The stoppage stemmed from a Jan. 8 explosion at an Aichi Steel Corp. manufacturing facility that has caused parts shortages,” said Tangney of EMKAY. “Similarly, in April 2016, Toyota halted almost all production in Japan after two major earthquakes and hundreds of aftershocks struck the island of Kyushu, affecting the supply chain. Production was down for a week.”
Strong Retail Demand
One of the biggest contributors to longer OTD times was strong sales to the retail market.
“Increased vehicle demand and continued industry growth for both fleet and retail markets contributed to longer OTD times,” said Brad Vliek, VP client solutions for EMKAY. “This also included delays caused by new-model launches and quality inspections/holds.”
Also citing production allocation as a key issue in longer OTD times is Krams of Wheels.
“For the models whose lead times did increase this year, the reason was typically limited production allocation at the assembly plants. This was especially true on several Ram models, the Nissan Altima, as well as some F-150 model configurations at the beginning of the model-year. Wheels worked diligently with the manufacturers to prioritize fleet orders; however, in some cases it took 60 days or longer for vehicles to get scheduled for production,” said Krams.
Plant downtime was another issue.
“Some manufacturers had extended plant downtimes exceeding three weeks, resulting in an increase of the overall OTD for models produced at those plants. It not only created production delays, but also protracted ramp-up periods once the plants reopened,” said Krams.
Recalls still continue to be an issue.
“Recalls were a consistent issue for MY-2016. Some vehicles affected were the Chevrolet Malibu, Ford Edge, Ram ProMaster, and Ford Transit. The Takata airbag recall also caused significant delays across multiple makes/models,” said Crocker of Merchants Fleet Management.
Ongoing Rail Constraints
A corollary problem created by the strong retail market was transportation constraints, in particular with a shortage of rail autorack carriers. “Railcar shortages were caused by an inability to keep pace with auto industry growth,” said Vliek of EMKAY.
Others made similar observations.
“Though seasonally adjusted annual rates (SAAR) continue to rise, we are still not seeing a parallel rise in railcars. This is creating flat OTD times,” said Elizabeth Kelly, director, vehicle acquisition for LeasePlan USA. “We had one instance, in calendar-year 2016, where a plant was producing more vehicles than could be shipped out. As a consequence, the manufacturer took several months to get through and get back on track.”
Another factor has been the dramatic expansion of automotive production in Mexico, which has led to railcar shortages at plants south of the border looking to export production to the U.S.
“In general, shipping performance over the past two years has improved slightly in the U.S. as the industry has added specialty railcars and worked to improve congestion and bottlenecks; however, we did still see some railcar delays, particularly at the plants in Mexico,” said Krams of Wheels. “This resulted in some vehicles sitting for upwards of 30 days with no movement. With automakers moving more production to Mexico and adding additional shifts at existing plants, this may lead to longer lead times for MY-2017. Some automakers have already started shipping vehicles via sea vessels from Mexico to the U.S. to help alleviate delays and avoid the rail congestion.”
Most FMCs report that there has been no significant improvement in the past year in alleviating railcar constraints.
“There was no noticeable improvement in the rail transit system. Manufacturers are moving more vehicles, but the capacity of the rail system has not seen any infrastructure upgrades,” said Crocker of Merchants Fleet Management.
Many see this issue persisting into the future.
“There will be continued supply and demand issues for the industry as a whole. The auto industry makes up only 3% of all railcar business and the auto industry is growing at a much faster rate. The market continues to grow, so this will continue to remain a problem for the near future,” said Mark Donahue, manager, fleet analytics for EMKAY.
Tangney of EMKAY added: “Some OEMs even moved vehicles to other shipping hub locations where railcars where more plentiful.”
However, there were some improvements as one OEM invested in autorack railcars specially designed to transport high-roof vans.
“This had a positive effect. Presumably with the weaker domestic oil market, there may have been more available railcar capacity in general,” said Ghosh of ARI.
However, the size of high-roof vans continues to pose logistical issues due to the limited number of rail autorack cars that can transport them.
“There continues to be some challenges with hauling cargo vans with a mediumhigh-roof configuration but it has not been as challenged compared to MY-2015,” said Gomez of Donlen.
All manufacturers’ have increased their utilization of local truck carriers to expand their normal delivery radius to help clear out rail and shipping yards. However, there were also constraints with truck carriers. “Manufacturers tried to bypass some rail routes, but ran into a lack of certified carriers and equipment causing OTD delays,” said Vliek of EMKAY.
There have been some consequences to using alternative transport systems. “Although the timeliness has improved we’ve seen an uptick in damaged units due to the alternative methods of transporting vehicles,” said Nick Erculiani, VP of acquisition for Element Fleet Management.
Decrease in Quality Holds
In past years, quality holds were a bigger issue, especially when there was an increase in all-new model introductions. However, for the past two model-years — 2016 and 2015 — there has been a decrease in the number of quality holds.
“In general, quality holds were not a material factor for OTD with MY-2016. There were no major quality holds, and only a small number of parts shortages for many of the newer models that may have needed to be repaired,” said Ghosh of ARI.
Most FMC survey participants struggled to cite significant quality holds that impacted 2016 OTD. “I do not recall any noteworthy quality holds,” said Tangney of EMKAY.
Others also agreed with this assessment. “Overall, quality holds played a smaller role in the overall OTD times this year than they have in years past.
The one exception was the Chevrolet Cruze. “There were not many new-model quality hold issues for the 2016-MY. The biggest issue that we experienced were quality holds for the Chevrolet Cruze, which increased the order to delivery time,” said Gomez of Donlen.
Upfitter Bottlenecks Continue
One challenge for the past several model-years has been the increased volume of fleet vehicles going to upfitters, which has resulted in capacity constraints. The larger volume of vehicles shipped to upfitters has resulted in erroneous ship orders.
“We experienced vehicles that have mis-shipped and passed by the upfitter completely. It took several weeks for OEM’s to back haul vehicles to the upfitter which in some cases caused a substantial delay,” said Gomez of Donlen.
With the increasing demand and growth of the commercial truck and van segments — particularly among utilities and service industries — the percentage of upfitted vehicles is growing. Upfitters are feeling the pressure of increased demand. Huge influxes of vehicles needing upfitting have left some upfitters, at times, overwhelmed.
“We have seen the demand for upfitted vehicle increase, creating bottleneck issues when too many vehicles arrive at one time. This also presented some constraints on upfitting capacity,” said Kelly of LeasePlan USA.
This issue was also cited by other FMC survey participants
“As a general statement, similar to the OEMs, the upfitters were also challenged by increased demand, so they too had capacity concerns in certain situations. In addition, we are seeing some skewing toward a more sophisticated upfit, which may have stretched out OTD somewhat,” said Ghosh of ARI.
Upfits on high-roof vans are posing difficulties, especially with ladder rack installations. “We are experiencing delays pertaining to cargo vans and ladder rack installations. Due to various roof configurations offered, in some instances ladder racks cannot be pre-installed as part of the ship thru process,” said Gomez of Donlen. “This requires a dealer to perform additional installation which can cause additional delays.”
There were several other upfitter-related issues cited by Gomez that impacted OTD times.
“We also experience issues when smaller fleets have customized paint requirements. OEMs are less likely to create a special paint due to quantity restrictions, which may require an upfitter to outsource to a paint shop which creates additional delays,” said Gomez. “Another area of concern pertaining to upfitter-related issues is ensuring that if an upfitter opens a new plant that the continuity of the installation is universal.”
Railcar constraints not only impacted getting units to upfitters, but, likewise, delayed getting completed units back into the OEMs’ transportation system.
“Transportation is the primary cause for upfit delays. Once upfits are complete it is an issue re-entering the manufacturer’s transportation system. Significant backlog out of the vehicle distribution facilities in Mexico and Kansas City were also causing significant delays,” said Crocker of Merchants Fleet Management.
This concern was echoed by Tangney of EMKAY. “The competition for railcars and rail routes has made it extremely challenging for all OEMs.”
Another issue was that some manufacturers continued to miss the ship-thru upfitters in MY-2016, resulting in longer lead times to the customer.
“This was not only caused by the manufacturers trying to alleviate congestion by utilizing new truck carriers who are not as familiar with processes and procedures, but also by new ship-thru codes not being set up properly,” said Krams of Wheels.
Kelly of LeasePlan made a similar observation. “We have continued to see transportation issues impact vehicles’ ship-thru upfit and the upfitters. Most of these delays surrounded trying to get vehicles back into traffic after upfit completion,” said Kelly.
The length of some upfitter-related delays varied by region. “After the upfit was completed, we did experience delays with vehicles going back into OEM traffic with the biggest impacts in and around the Midwest and Southeast regions,” said Erculiani of Element Fleet Management.
FCA has established an ongoing relationship with its upfit community to support capacity requirements and identify upfit material availability. The automaker refined the Ram ProMaster ship-thru process that has led to a reduction in OTD by over a month.
“The ProMaster City transformation center at the Baltimore port has also gone through refinements and FCA has improved the coordination with the various upfitters that service the port. Ford has experienced some challenges at their Kansas City plant where the plant works more days per week than the upfitters do, leading to a glut of vehicles (Transits and F-150s) that in some cases need to be stored at off-site parking lots until they can be moved to the upfitter. Ford has been working with the upfitters to improve communication and traffic flow with the use of scanners and system alerts. The shortage of high level railcars for the Transit’s has also caused some delays,” said Tangney of EMKAY.
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