OEM Material Shortages Will Affect Vehicle Orders Well into 2021
You’ve heard of saving for a rainy day, but what about order planning to combat vehicle delays? For the second time in less than a year, automaker operations around the globe have had to significantly scale back or stop their production lines. Looking at the big picture, each OEM is expected to produce tens of thousands of fewer vehicles this year.
Are you ready to go the distance to get the kinds of vehicles you need to keep your fleet running?
Make the best of what’s at hand
Have you already faced accelerated cutoff dates for your MY2021 orders? Ironically, you could end up facing the classic “hurry-up and wait” as ongoing shortages could push those orders back to the MY2022 batch. While in limbo, you can use best practice cost containment methods to bridge the gap.
- It’s inevitable. You will wait a long time for factory orders to arrive, which means you may need supplemental vehicles. Anticipate extreme difficulty obtaining stock purchases and rental vehicles. Remember the rules of supply and demand – you will likely overpay for a vehicle that doesn’t look quite the way you want or do exactly what you need. It’s best to limit this costly option and reserve the route for only your most crucial vehicles.
- With rentals and stock purchases, you may have to settle for vehicles that will generate higher fuel and maintenance costs than what you budgeted for. This may be the case even if you did get your MY2021 orders in because, due to the shortages, OEMs were forced to make last-minute changes to their selectors. If you find yourself in any of these scenarios, work with your fleet management company to predict the operating costs of these alternative vehicles.
- If you will be keeping older vehicles in service longer, strictly adhere 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.
Start planning now for MY2022
We won’t try to say that anything this year is going to be predictable. From which vehicles will be the obvious choices for replacement to anticipating how all of this is going to affect the used vehicle market. Rely on tried-and-true best practices during the uncertainty while also allowing room for flexibility as actual conditions become clearer.
- 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.
- 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.
- 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.
You can always check our Updates & Projections webpage for changes to production information and delays. You can also subscribe to The Morning Brake, for once- or twice-weekly e-news from us, the fleet and automotive industries, and more.
Get a refresher on supply chain best practices through our whitepaper: Leveraging the Power of Visibility in Supply Chain Management. And as always, feel free to contact us with your questions or to request support.