Disruptions Continue to Hamper Supply Chain Strategy

During the best of times, the logistics necessary to keep the automotive supply chain in sync is nothing short of remarkable. The OEMs produce a consistent supply of vehicles that flow seamlessly into shipping systems, arriving at upfitters who transform these vehicles into sophisticated vocational tools, and then they’re delivered to fleet operators across North America who are ready to put them into service. This seamless coordination between various stakeholders throughout the supply chain is truly impressive.

However, these are far from the best of times. The automotive industry as a whole continues to deal with the lingering effects of the pandemic and the resulting supply chain disruptions. Just like any supply chain, when one link in the auto manufacturing process is broken, the whole industry and other industries that touch it suffer.

It appears as though the entire fleet sector will be navigating numerous challenges for the foreseeable future. These disruptions are impacting the upfitting segment of the industry as well. Upfitters are working to navigate limited chassis availability as well as component shortages and price increases.

Why is there a vehicle shortage?

Let’s rundown the variety of challenges currently hampering the automotive supply chain: an ongoing shortage of microchips, backordered parts, labor shortages, constraints on ordering pre-fabricated parts, and increasing prices related to raw materials.

Looking forward, you can expect continued delays around new car production, leading to reduced supply on the market in the future. Because of this, current vehicles are a hotter commodity than ever before, so current prices of new vehicles are rising. With that in mind, it is even more critical that you be proactive in your acquisition planning and budget allocation; in all likelihood, it is going to take much longer to source vehicles, and they’ll cost significantly more across nearly every segment of the industry. Also, for units that require upfitting, there will be additional delays because of the limited availability of certain components and production backlogs.

To help you craft a comprehensive fleet ordering cycle, here are a few key factors to consider:

• Simplified Vehicle Specifications

For some fleet operators, it may be beneficial to simplify vehicle specs to increase the number of units available across various manufacturers. While traditionally you may consolidate your orders with a small number of manufacturers, under these circumstances you may benefit from embracing multiple OEMs to maximize your options and minimize the impact of potential unforeseen delays.

• Streamlined Upfit

Likewise, when it comes to upfitting, most fleet operators will be best served to streamline specifications, creating more simplicity and consistency in vehicle design to mitigate supply chain risks and allow vehicles to move through the upfit process more quickly.

• Early Order Placement

Even though it seems like it was just yesterday that you submitted your newest orders, there’s no time like the present to prepare your next batch and get them at the top of the OEMs’ production lists.

• Proper Replacement Cycling

To ensure you order the right vehicles, you need to know which ones you’ll be replacing. Between last year and this one, your vehicle usage stats could be way off from earlier projections. More frequently than in past years, you should be studying your fleet data to know which vehicles’ operating costs are higher than the revenue they’re generating. Replace those first.

• Budget Mindfulness

Most importantly, keep a constant eye on your budget. Acquisition and operating expenses may not align with monthly forecasts. Be transparent with your finance and accounting teams about how funds may need to be reallocated quickly to beat order cutoffs. Learn about a variety of financing options in case you need to be nimble when opportunities appear.

Setting Vehicle Delivery Expectations

The effects of the ongoing supply constraints aren’t just limited to the fleet industry; consumers are also feeling the impact. Most dealerships across the country are struggling with record low inventory, and this is hampering stock purchase availability. You should limit this option to only immediate/emergency vehicle orders and expect fulfillment to be very difficult and extremely costly. Accept that you will likely settle for a vehicle that:

• Doesn’t look quite the way you want or do exactly what you need.
• Will generate higher fuel and maintenance costs than what you budgeted for.

Solutions for Uncertainty & Supply Constraints

We at Holman have been studying the production and delivery timelines and building resilient solutions that can help you mitigate the risk around slowed and costly vehicle acquisition. Our integrated supply chain teams are prepared to present you with options to help keep your fleet moving and manageable despite delays or cancellations:

• Understanding your most urgent vehicle needs, identifying applicable vehicles, and then pinpointing them for you; avoiding dealer stock purchases whenever possible now that prices have escalated above MSRP and inventory levels are at a record low.
• Reevaluating your replacement cycling and establishing a plan to control operating costs for vehicles with extended lifecycles.
• If you will be keeping older vehicles in service longer, helping you adhere strictly to preventive maintenance schedules and prioritize functional and safety repairs. Basically, keep your older vehicles in top operating shape so they remain reliable while also keeping their operating costs in check.

On your own, you can always check our Updates & Projections webpage for changes to production information and delays. Learn more about effectively managing the supply chain to avoid silofication with this video.

In the grand scheme of things, this vehicle supply chain situation may continue to hold your fleet, and thereby your entire organization, in a precarious position. Do not hesitate to contact us for help.