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The New Realities of Fleets

fleet vehicle production supply chain
Vehicle production disruption, caused by a global chip shortage is just one issue impacting fleet operators at present. PHOTO Stellantis

A recent Motive Powered by Holman podcast focused on the current issues regarding fleet production, deliveries and the supply chain and how to effectively tackle them.

The podcast, moderated by Peter Nogalo, Marketing Manager at ARI, discussed “The New Realities of Auto and Fleet Production and Deliveries” and featured Holman’s Chief Procurement Officer, Frank Carbone and ARI’s VP of North American Supply Chain, Edward “Ted” Davis.

The podcast aimed to provide an overview of some strategies fleet managers can use to effectively tackle risk, redundancy and also resiliency in these interesting and often uncertain times.

Semi-conductor shortage

While major disruptions continue in the automotive sector, including supply chain challenges and semi-conductor shortages that are severely restricting new vehicle production and driving up demand for used vehicles, many fleet managers are finding themselves dealing with a very unique set of circumstances.

Nogalo noted that according to a Car Global Report, wholesale values are approximately 23% higher today than they were a year ago yet demand for vehicles has continued to prove strong. In April, J.D. Power forecasted 1.3 million units, which was double the number in 2020.

This high demand yet contrasting low supply means that in many cases there just simply aren’t enough vehicles to go around. For fleets, this often means major changes in procurement, disposal and maintenance practices. Many are having to postpone equipment purchases and spend more on maintaining an ageing vehicle pool.

Some are simply trying to do the best they can with the few assets currently available. Rental vehicle operators in particular have been one segment of the fleet industry that’s faced acute inventory shortages, in fact, as Nogalo pointed out, in some markets such as Maui, renters have been forced to use U-Haul trucks for transportation simply due to a lack of rental cars available.

Frank Carbone noted that since the onset of COVID-19 and the need for social distance—stay at home orders and the migration to online retailing, has created significant pressure on supply chains, not only from the death of orders but also in that in many cases there are simply not enough people around to facilitate the movement of goods from manufacturing centres in places like China to distribution hubs in the West such as shipping ports.

“If you look at the impact of all of this,” said Carbone, “inventories on the ships have been pretty high, but warehouse supplies and stocks have been low.”

Logistical challenges

Carbone also added that for those goods that did make it off ships or those that were produced domestically, there were (and still are) complications in getting these goods to their final destination, including finding enough drivers for last-mile delivery.

Ted Davis provided an overview of ARI’s supply chain and why identifying customer needs is so critical to successful implementation across the entire journey. Davis noted that in ARI’s case, not relying on third parties for much of the logistics means it can exert greater control over both processes and outcomes.

“A great example of that,” said Davis, “is when you take ARI and you combine it with the [Holman] Auto & Truck Group and Cargo Masters in-house engineering design and manufacturing competencies.

“It really allows the whole supply chain to act together as one. It allows us [at ARI] to spark innovation. It drives flexibility, and ultimately increases our customers’ overall supply chain experience.”

Davis added that by reducing complexity across the supply chain and controlling as much of the process in-house, an organization is often far better equipped to deal with disruptions when they come along, whether it’s a blocked containership in the Suez Canal or, a power outage in Texas.

Additionally, by harnessing the power of data available to fleet operators today, management companies like ARI can formulate concise business plans that can allow them to mitigate potential risks.

Effective communication

Yet a key part of doing that effectively is not only being able to leverage the information available at your disposal but ensuring it gets sent through the right channels and that communication remains open.

In summarizing the discussion, Frank Carbone said that being dialled in “to the daily changes that are taking place in the business, and in the market, as well as engaging with sales and finance type functions, is key to understanding the demand and  being able to stay ahead of it.”

Carbone also said that reviewing expensive or underutilized assets and creating plans to bring value to the organization by addressing these issues is also essential.

“Working with the supply base to get creative and find those win-wins by maintaining strong relationships with suppliers, pays off by allowing you to have those difficult conversations when you have to have them and obtaining information that is important to support your business operations.”

That’s where he said, working with a partner like ARI can help fleet operators understand what’s actually possible, and knowing about potential pitfalls before they actually happen.

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june, 2021

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