Fleet lifestyle costs have always meant juggling various elements. The global pandemic has created shortages of essential automotive components, increasing the strain on supply chains, and contributing to extended automotive lifecycles.
CAF talked to three experts in fleet management, who all agreed that current strategies need to revolve around vigilant vehicle maintenance and vehicle reassigning, consideration of lease extensions, and keeping a close watch on build cycles.
Maintenance and redistribution
Greg Grant, general manager at EMKAY, comments that product shortage has extended vehicle delivery times to some unforeseen levels, and forcing fleets to review how to maintain and manage what they have in their fleet. "That means being extra diligent around preventative maintenance schedules, ensuring the work is done on a timely basis," he says. "That's probably the biggest thing along with minimizing increase in potential maintenance costs."
Louise Clune, Fleet Consulting Manager at Wheels adds that clients are not choosing to extend cycles times, but are forced to do so because of order delays resulting from the supply chain disruption, along with decreased utilization from the past year.
"They're more concerned with increased maintenance expenses, and loss of technological and safety features, than chasing increased resale values," she says, and recommends monitoring preventative maintenance schedules and compliance, focusing on age, not mileage. "Even though fleets aren't accumulating mileage as fast, certain components like hoses, belts and fluids are also impacted by age," she adds.
Greg recommends redistribution of high- and low-mileage vehicles within the fleet and allocating assets accordingly: "It's about managing with what you have if you can't get product. Short-term rentals are excessive but the strong resale market creates an opportunity to take advantage of more supply in used vehicles. I'm not saying it's a great alternative, but something to consider."
Louise agrees: "Monitoring utilization and rotating vehicles to other routes/projects is a good strategy to ensure more even mileage accumulation. Although strong resale values are not providing as much benefit because fleets cannot sell vehicles they are unable to replace due to availability.
"It's a huge disruption," agrees Brent Addison, president at Addison Fleet. "We're also educating our customers about the increased importance of our maintenance programs, making sure vehicles are maintained correctly, and on time."
Brent comments that if a lease has expired and the vehicle still has a lot of life in it, then it might be best to extend the lease until the vehicle shortage comes back to normal: "At the same time, if the vehicle's not fully utilized, then it's a good time to remarket your underutilized vehicles as the price for used vehicles has increased dramatically."
"We're being proactive about delays," he adds. "It's tough if you need vehicles out of stock right now as our customers are not used to paying high markups on used vehicles."
Greg comments that build cycles are a moving target: "New orders going forward are at expected levels of six months. And that could be longer. Also, the cost of goods is more expensive for the OEMs, and we're all feeling the effects."
"This vehicle shortage isn't going to be solved within months," agrees Brent. "Maybe the end of the year, although we're hoping it starts to come back around by the Fall."
Louise recommends evaluating alternate manufacturers: "Manufacturers will address supply chain issues at different rates. Be open to changing to a manufacturer that can provide a vehicle to meet your needs."
Brent adds: "Being proactive and getting orders in now minimizes the risk if there is a delay. If you've ordered 20 vehicles and five are cancelled, you still have 15 vehicles. If you wait until you need them, you might be looking at seven months."
And as Greg comments: "The OEM's primary focus when we get back online is replenishing dealer inventory, but we'll still be paying more for vehicles out of dealer inventory just to make up for the shortage."
Ongoing industry challenge in 2021
Louise believes in the importance of staying focused on long term strategic goals: "If your goal for this year was to improve safety/decrease crash rate, remain focused on training, driver abstracts, and driving behaviour."
Brent believes there'll be an eventual correction: "The world is very adaptive at finding alternate solutions that can get these products and services to the manufacturers, and to the customers. It takes time to develop those things."
And as Greg concludes: "This is an industry challenge, not specific to one OEM or fleet management company or dealer. It's a juggling act, replacing assets as necessary and being as proactive as possible."