Vehicle procurement woes are nothing new for fleet managers. Over the last three and a half years, public sector fleets have had to adjust to delayed vehicle delivery times due to parts shortages and industry disruptions.
The delays have been caused by a myriad of issues, including temporary plant closures during the early days of the pandemic, semiconductor and other parts shortages, labor shortages, and other supply chain headaches.
Government sales representatives from each of the Big Three — Ford, GM, and Stellantis — addressed these concerns at the 2023 Police Fleet Conference at GFX in Dallas, in a session titled “Police Vehicle Procurement Problems and Solutions.”
OEMs: The Feeling is Mutual
Fairfield, California, Fleet Division Manager David Renschler, CPFP, moderated the panel. He shared that two years of order cancellations for Ford Police Interceptor Utility vehicles have forced his department to adjust. Because the department has had to maintain older vehicles, the fleet team has increased its operational safety inspections to be done every 3,000 miles, as opposed to 5,000 miles, to ensure the vehicles are working properly for officers.
When Renschler asked how global supply chain issues have affected new vehicle orders and deliveries from an OEM perspective, right off the bat, GM Government Sales Manager Cindy Towe wanted attendees to know that fleet customers are not the only ones feeling the pain — the OEMs are as well.
“This has been painful for the OEMs as well as all of our customers. And it even extends beyond all of you in this room as government customers. It's affected the rental industry, it's affected B2B, and it's affected retail, it's across the board,” Towe said. “I would argue that you sitting here are probably our most important customers, because you are out there doing the bidding of the American people. You are out there doing what's needed to serve and protect our communities. I do bring that argument back everywhere I go.”
Oscarson touched on the PIU order cancellations.
“It’s not just microchips. It’s labor issues, logistics issues, geopolitical issues, and there's a war going on right now where we get some of our supply. So all of that has affected where you're seeing the delays with our PIUs. And what's unfortunate is that we have all this demand, and I think all three of us can say we really do want to support our law enforcement partners. And it's not that we don't want to build it for you. It's that sometimes we just can't.,” Oscarson said.
Bockhorn believes things are taking a turn for the better.
“We all face the same problems. I will say that…it’s gotten better. Our order-to-delivery average on law enforcement vehicles is down by two months [compared to] a year ago. So things have improved, but we still have issues out there,” Bockhorn said.
Hearing from Government Fleet Professionals
One attendee said that while she and her officers are thankful for the support they have received from the OEMs, the government customers still need additional support.
“We've been dealing with order cancellations since 2021. And the prices increase with each order cancellation; that hurts the customer. I have yet to hear how the manufacturers are going to support the foundation of a fleet, which is emergency police government fleets, in supporting and purchasing…You keep canceling the order and then the price goes up that impacts our budget, which also impacts the taxpayer. So what tangible support can you give, not just to myself, but the other fleets here in the room that support Ford, GM, and Dodge?” the attendee asked.
The reason for the price increases, Oscarson said, is the state of the economy.
“The culprit is this inflation that we're dealing with where all of our imports and our material costs have gone up dramatically. So unfortunately, we've made a painful decision at Ford to not price protect model year over model year. And on top of that were all the cancellations. So it's like a double whammy hitting all at once,” Oscarson said. “But unfortunately, that's kind of the world that we see we're in right now. We're hoping that we get back to a very minor model year over model year price increases, and then it's a whole lot easier to price protect and build orders. Ideally, we don't have any unfilled orders. In a perfect world, we build everything in the order bank, and it's not even an issue of having to carry over to the next model year.”
Another attendee noted that he can’t order equipment from upfitters because they require VINs, which fleet managers can’t get if they don’t know whether their order will be canceled. Oscarson also admitted that the process of closing order banks quickly enough to avoid order cancellations has been tough.
“We've got to turn it off once we hit our maximum. And I'll be the first to admit that I don't think Ford did a very good job of doing that. I think we'll be more conservative when we go out for 2024; we'll build in a cushion. And there's a possibility that we'll reopen that order bank halfway through the year,” Oscarson added.
The team at GM has also adjusted in an effort to prevent order cancellations when possible.
“Going forward, we have built a very robust model to manage our production allocation, manage where orders are going to be going, and the idea would be that you would work with your GM account executive, your area sales manager, or your dealer. They will know how much product they'll have available,” Towe said. “It's still a little bit of an iterative process, but that is our plan is that we're going to know ahead of time how many units we're going to have available. So you will know at the time when you go to order if you're going to be able to get those units or not.
Bockhorn told the attendee he understood the frustration.
“The last thing we wanted to do was discontinue price protection for any of us. But there's a point at which none of this exists unless it's a viable business case, whether it's at the retail level, the commercial level, or the government level,” Bockhorn said. “That's what forced the hard changes in the business process to occur. I think the cancellations are something we're all trying to address. And I won't tell you that it's not going to happen again, because it might. These random parts shortages directly translate into unfinished vehicles. And randomly, at least in Dodge’s case, we will have some months where we're all scratching our heads, and we will do everything in our power — not just for you — but for everyone in this room to avoid any painful level of cancellations. But some of those will continue to happen.”
Getting Creative When Possible
As the shortages continue, OEMs have had to find ways to keep the ball rolling.
“You have to get innovative, and you have to think of ways to keep production moving and to make sure you can fulfill orders, and even beyond just fulfilling orders — keeping our dealers stocked with units as well,” Towe said. “Some of the things we’ve been doing is widening our supply base. We may have only had one or two suppliers for a certain part; now we have 10 or 20. Being able to move and adjust quickly; if one runs out, you have another one that can back you up. We've been doing a lot of expedited freight too. We just move things as quickly as we possibly can.”
In the case of microchips, GM has also changed its approach. Previously, the automaker was building units without microchips and putting them on a lot as they waited for the chips. That created other problems for GM, like a backlog of vehicle deliveries. Now, the automaker is not taking that approach except in dire circumstances.
Ford has also made changes as a result of microchip shortages.
“When we identify something that can't be built because of a chip, we're trying to go back in and change the order guides and change the build instructions so that it can be built,” Oscarson said. “An example of this was that we had a rear auxiliary air conditioning, which required a chip. We were able to go out and put an edit to remove that from vehicles and make it an option [for buyers] and continue to build. So really thinking outside of the box and doing things that we never, ever had to do before is sort of how we are trying to mitigate this. But it’s a daily struggle. I think that the feeling [from others] is that we know what's really going on, and that we're not sharing. But in reality, these things pop out of nowhere, and they hit us with little advance notice.”
To put the demand for chips into perspective, Bockhorn reminded attendees that while there are 1,400 microchips on a typical vehicle, police vehicles have closer to 2,000 due to the added equipment.
The Effects of Absenteeism
The labor shortage has also put a dent in things.
“At certain plants, we will miss sometimes 50 to 100 units a day because we're short on workers. We bring new ones in, but they have to get acclimated to the different workstations,” Bockhorn explained.
Bockhorn encouraged fleet professionals to seek guidance from their dealers or sales reps.
“If vehicles are that critical to you, we'll give you options to take a second look at and pull off. Or in cases where you don't need, let's say, more than 10 vehicles in a given situation, check your local dealer inventory. All of us have reps that can tell you what's out there in immediate available dealer inventory,” Bockhorn added.
A Light at the End of the Tunnel?
The reps believe that things are looking up. They noted that they have seen increased inventories in dealer lots, as well as increased production numbers and product becoming more available.
“Every day is a new day. We have to come up with new solutions. I think we've done a lot to mitigate the production issues, but we know they're going to continue to happen. I think supply disruptions are really just part of our world anymore. You have to come up with another path forward,” Towe said.
Want to attend Police Fleet Conference at GFX in 2024 to attend sessions like this? Super early bird registration runs through Dec. 31, 2023. Check out the Government Fleet Expo website for more information.
Editor's Note: It's important to note that this session occurred before the 2023 UAW strike. OEM reps' responses to questions were based on the state of vehicle manufacturing and procurement in May 2023.