Understanding Order-to-Delivery Key Considerations
Order-to-delivery delays can often be a source of frustration for many fleet managers. We sat down with LeasePlan USA operations experts Tim Martin and Elizabeth Kelly to uncover the factors affecting order-to-delivery times, and how to cope with the issue.
Shifts in the Industry
The automotive industry is experiencing some of the highest seasonally adjusted annual rates in the last decade. This, along with the ramp-up of new models, has created production capacity constraints on manufacturers that did not anticipate these rates to increase so much, so quickly. The problem, put simply, is that in many cases the demand for vehicles has exceeded supply.
Why the Delay?
Many transportation delays are associated with increased demand for rail cars to ship more than 17 million vehicles across the country. There is also a limited supply of bi-level rail cars that are large enough to ship popular vehicle segments like trucks, vans and SUVs. This creates bottlenecks in the rail system and competition for rail allocation from other commodities experiencing significant growth.
Quality holds associated with product launches can also pose a challenge. Though there were no significant delay issues for 2015 models in terms of quality holds, it is always a factor to consider. When manufacturers completely change the body of a vehicle or announce new models, production slowly ramps up to full capacity in order to make sure vehicles leave the plant with the highest initial quality possible. Increased public and governmental scrutiny after recent, massive vehicle recalls have put more pressure on manufacturers to deliver higher-quality products.
The globalization of the OEM production and the increased number of vehicles —particularly in the light commercial vehicle segment— that are being shipped from Europe and Mexico mean longer waiting periods for deliveries. Stepping a decade back, it was rare in the fleet industry to see models come from Europe. Now, many vehicles are being assembled in other countries and then brought to the U.S. It is normal for these vehicles to take longer to arrive.
Finally, unpredictable variables such as weather conditions and worker strikes can also lead to delays.
Solving the Issue — A Team Effort
Long order-to-delivery time is an issue that affects all players in the fleet management business.
The government’s role is to manage the infrastructure of the rail system and to manage investment in what is an aged process. Private industry has to work in tandem with the government to improve the current structure. OEMs are now lobbying as an industry to encourage investment with some success. Both government and private industry investment in improvements are forecasted at $15 billion in 2015. That represents a significant increase over previous years, but much more is needed to support the system going forward.
Aside from the significant lobbying for improved infrastructure, the OEMs are looking for alternatives to rail transportation when it is financially feasible. They are beginning to ship vehicles by truck to the dealers for distances up to 500 miles to avoid rail delays, as well as trucking vehicles around rail bottlenecks near some plants to reduce delivery times.
Specific to fleet orders, OEMs prioritize fleet vehicles for transport higher than vehicles shipped for retail inventory that are not sold orders.
LeasePlan continues to invest in its order management process to alleviate order delays. The operations team has implemented several system enhancements over the past year to help provide clients with better estimates to the vehicle’s arrival at the dealer. New updates to some OEMs’ electronic status files have been integrated into LeasePlan’s operation system.
As the industry adapts to the ongoing changes, a team effort involving the government, manufacturers, fleet management companies and fleet managers will help overcome these obstacles and evolve toward a timely and efficient order-to-delivery process.