How Supply Chain Challenges Will Impact Upfitting in 2021

For any fleets hoping for new vehicles, the start of 2021 has not been rewarding. Last year, the pandemic closed factories and tightened purse strings. Then in December, almost every company and organization in North America that had been putting off ordering new vehicles all year simultaneously decided to put those orders in after all.

The OEMs never saw the tidal wave coming. They were overwhelmed and under-stocked. Now we’re back to where we were last April with rolling factory closures and fleets scrambling for solutions.

In February, experts at IHS Markit predicted production of a million vehicles will be delayed in Q1, and the shortage for semiconductors will stretch into Q3. If your fleet needs aftermarket equipment designed, manufactured, and installed, your challenges are even more complex as the relevance of timing and availability is compounded.

Here are five things to consider and discuss with your fleet management teams:

  1. Don’t get your hopes up too high for MY2021.
    Pending vehicle orders placed in December and January could still be cancelled by the OEMS, or they could roll them into MY 2022. If your orders do get bumped, know for certain the MY2022 vehicles will be more expensive. They will also likely have different specs and package options. You could end up paying more for a vehicle that doesn’t entirely match your needs.

  1. If you end up getting a comparable vehicle from a different OEM, will that change detour the ship-through logistics of getting the vehicle to the upfitter?
    Some upfitters are strategically located within close proximity of OEMs’ transportation lines for seamless vehicle transfer. If you switch platforms because it is the best option for your fleet, make sure you account for potentially longer delivery times and higher transportation costs as you may need additional vendors to supplement the transfer connections.

  1. At the time you ordered the vehicle or truck body, you also got the chassis, equipment, and branding. What do you do about those?
    This might be the biggest juggling act yet. Do you cancel the other orders until you get build confirmation on the vehicle or chassis? Do you get them anyway because you know eventually there could be a shortage on those too? If you move ahead with those orders, where do you store them when they come in, and how much will that cost you?

  1. Steel Market Update says steel prices in February reached a new record high.
    The price of vehicles increases hand-in-hand with the price of steel. They say the steel prices should top off soon, but that’s what they said in January, and also before that in December.

  1. One more issue is tying up traffic – backlogs at major U.S. ports, mainly on the West Coast.
    Transport Topics said in February that 60 containerships were anchored in San Pedro Bay waiting to enter the Los Angeles and Long Beach ports. At today’s pace, port staff expect to get through them by mid-summer.

Now more than ever – find the experts

The best tool to have in your pocket right now is a multi-tool of experts. Supply chain disruptions are happening way faster these first three months than in past years. You’re going to need a new level of consultation to get through the next few order cycles.

To start, here’s what the integrated Holman supply chain teams at ARI, Auto Truck Group and Kargo Master suggest:

  • Watch your budget – Keep an eye on the cost data your fleet is producing. While you’re waiting for the impact of your looming acquisition costs, the operating costs of your aged and high-mileage vehicles that would have been taken out of service by now will be increasing. Put it all together, and you’re probably looking at a lot of re-budgeting.
  • Keep vehicle design evergreen – Don’t look at spec development as a once-a-year task taken up to address the next model year. You should be constantly assessing vehicle and driver safety and performance so your vehicles are always delivering the work you need done.
  • Make your supply chain frictionless – Remove obstacles, eliminate redundancies, and streamline communications. Once the vehicles start rolling off the OEM production lines, your upfitter may be working at max capacity. Work with your supply chain team to prioritize your needs, set reasonable expectations for completion, and most importantly, a method to receive accurate status updates regularly.

We can help you set priorities, anticipate changes, and implement alternative solutions. Contact us. Also subscribe to The Morning Brake for twice-weekly updates on all these challenges.