We just wrapped up another great Fleet Safety Conference in Chicago. The technology, the ideas, and the energy in the sessions was greater than ever. But, despite all leading-edge technology and bleeding-edge regulations that are being thrust upon the fleet market, there is a gaping hole in many fleet plans. What to do when a vehicle, or a whole bunch of vehicles, are suddenly not available?
This isn’t an end-of-the-world scenario, or a one-in-a-billion chance kind of thing. There are fleets out there right now with vehicles subject to recalls. There are fleets out there with lots of diesel vehicles that they can’t use, because they don’t meet emissions requirements. And, to add insult to injury, in most cases you are at the mercy of your suppliers. You can’t just take vehicles out of service, drop them off at the auction, and bring in a brand new replacement fleet at a moment’s notice. If your fleet vehicles are under recall you can’t sell them, or, at a minimum, you shouldn’t sell them. You’ll either be violating motor vehicle regulations or you’ll end up getting crushed in the wholesale market, because no one wants a vehicle that is under recall.
The sad reality is that in this era of just-in-time inventory and a near monopoly for many part suppliers, getting replacement parts is a months-long journey in many cases. When the Fukashima meltdown happened, it didn’t just affect the Japanese OEMs, it affected every OEM on the planet. When the recent air bag issues came about, we found out that just about everyone was buying air bags from the same supplier. No fleet manager in his or her right mind is going to send out drivers with knowingly defective air bags. But what’s the alternative?
The reality is that, in most cases, the OEMs are moving heaven and earth to fix these problems when they occur. Unfortunately the reality is also that these companies are massive, complex, and in the best of times they move at a glacial pace. They just aren’t positioned to make your problems go away in a day or two.
You need to have a plan in place to deal with the potential grounding of large chunks of your fleet. Your FMC probably won’t be able to help you. The OEMs will want to help you, but they are limited in what they can do by supply and regulatory constraints. But you can do some things to protect yourself. You can have a plan in place to find alternative vehicles. Short-term rentals or long-term rentals are an obvious solution. You can park the vehicles and immediately order replacements, but that’s awfully expensive and risky. Especially if you don’t know how long those vehicles are going to remain parked.
You can also protect yourself by making sure there are contractual protections in place if you find yourself with an out-of-service fleet. Parking those vehicles and finding replacements to keep your business running is an expensive proposition. And those same financial and regulatory constraints that might keep your suppliers from coming to your rescue might also prevent them from making sure you get compensated for your problems. That is unless you have an agreement in place to make sure that you are protected.
The time to negotiate these terms is when you purchase your vehicles. Trying to work it out after you have had to ground your vehicles is definitely less than optimum if (and this is a crucial “if”) you want it to be done on your terms. Take time to develop a backup plan. And talk to your suppliers about what they will do and what they won’t do in those one-in-a-million situations that seem to happen more and more frequently. Channel your inner Eagle Scout and always be prepared.
If you disagree, let me know.
Originally posted on Automotive Fleet