Automotive Logistics — 2023-05-13
Automotive Industry
Giving the end customer an accurate date for the delivery of their vehicle has taken on greater importance since the Covid pandemic.
Disruption to manufacturing, low dealer inventories and transport capacity constraints have pushed the lead time on deliveries up considerably. As a consequence, managing expectation on these deliveries has become more important to retain customer loyalty. But there is also a greater focus by the customer on an accurate ETA when that customer has ordered the vehicle directly online from the carmaker, a trend that increased over the pandemic.
Christine Krathwohl at FreightVerify said accuracy in ETAs is a scorecard of how well a finished vehicle delivery network is running
At 2023’s Finished Vehicle Logistics North America conference in California, carmakers and their logistics and technology providers talked about transparency in the outbound network what they had to do to fulfil customer expectations on vehicle deliveries, and how much information needed to be shared.
“We used to have a line of sight two weeks out of what was coming out of the plant and now we have 48 hours,” said Anu Goel, executive vice-president of aftersales and services at Volkswagen Group of America (VWGoA). He said disruption to the inbound supply of parts was having an impact on production and those in finished vehicle logistics were working to make up the delay.
“It can take 85-100 days to get your car and some delays are up front in the supply chain, so we try to make it up in the back end,” said Goel. While 85% of cars are still being delivered to customers as planned Goel said it was the 15% that created the angst. It is a basic fact a longer the lead time creates a breeding ground for disruption.
While inventory levels are recovering in the US, dealers are still working hard to turn their inventory over and everyone is fighting for market share. There has been no drop off in the importance of timely deliveries with accurate ETAs and the accuracy that has been maintained has created an expectation that has to be met.
Managing expectations
Accuracy in ETAs is a scorecard of how well a finished vehicle delivery network is running and most customers want their initial ETA to be as perfect as possible, said Christine Krathwohl, vice-president global business development at FreightVerify, which provides transport visibility software and services.
Those networks are not just affected by the production volatility that Goel outlined, there is currently a shortage in Ro-Ro capacity that has resulted in a focus on vehicle imports through ports on the US west coast and the establishment of a land bridge for shipments to the Midwest and further east. That coincides with a shortage of railcars for vehicle shipments on the Class 1 railroads.
Krathwohl said that in the current situation service providers in the outbound sector and their OEM customers had to acknowledge the diversions that were happening every day, accurately track those vehicles in real time, and adjust ETAs to manage customer expectation. Krathwohl said the initial ETA that is so important to the customer could see as anything between 100 to 1,000 subsequent ETA calculations as the vehicle was diverted or delayed by current disruptions.
There are also disruptions to outbound shipments that have always been part of the business, such as damage to vehicles in transit. That can throw an ETA completely out if a carmaker is unable to verify the time it will take to source and delivery a replacement part to resolve the issue.
“When an exception happens and I don’t know what the resolution time is, that ETA disappears from the system and goes blank. So what do you do then?” asked Goel. The answer is that someone in organisation knows the answer but traditionally the different parts of the organisation have not communicated that information. Or the data available is not accurate.
The question then is, just how much of that information does the customer actually need to see?
Jim Pang, vice-president of new services development and product innovation at TrinityRail pointed to customer feedback indicating a preference for ETAs that were ‘clean’ of constant updates. That cleaning up of excessive updates has to be balanced with the ability to fill in the gaps where there is no data at all, according to Pang.
“You are not going to get 100% or 90% [input] because there are going to be a certain number of lanes and shipments that won’t have an ETA, and won’t have one for a good part of the journey. Then it is up to you to fill in the gaps, put smarts in and come up with the best estimate.”
Online purchasing
As mentioned, that includes estimates for customers that have ordered their vehicles online directly from the carmaker, a purchasing trend that increased over the pandemic.
“Traditionally, most vehicles sold in the US were bought off the lot and dealer traded and less than 5% of all sales were truly [directly] ordered by a customer,” said Krathwohl. “However, [through the pandemic] there was a big increase in customer orders and that has made ETAs is more important.”
On the plus side, Krathwohl said that the pressure on providing those more accurate ETAs to the customer helped carmakers drive out inefficiencies, turn inventory and sell from vehicles that were in-transit.
“It also allows dealers to protect their revenue,” she said. “If they know a strong ETA they can commit that sale to a customer and maybe not have to give money off the sticker. It completely helps your allocation.
On the other hand, according to Ananth Ranganathan, senior manager for supply chain strategy and digitalisation at Nissan North America, for a new generation of customers, accurate ETAs may not be as important as the flexibility enabled by online purchasing.
“From a finished vehicle standpoint the customer isn’t looking for minute by minute updates, but they do want flexibility for last minute customisation,” he said.
Dealer pick ups
One other recent trend that is helping the dealers manage customer expectations on ETAs is the ability for dealers to go and collect the customer order from the plant, port or vehicle distribution centre.
“Dealer pick up gives the ability to save OEMs money, improve customer satisfaction, its saves on floorplan and transportation, but also helps dealers on allocation too, and supports the customer,” said Krathwohl.
To support that Freight Verify has helped develop a service that completely automates the dealer pick up.
“It provides transparency to everybody in the supply chain for the dealers to go in and request the pick of a VIN, and yard operators or carriers can go in and approve it, then the dealer comes in and collects it,” explained Krathwohl. “You don’t realise the impact you can have and while there is no silver bullet these nice little nuggets along the way can support the goal of staying efficient and keeping the inventory where it needs to be.”
However, if not managed properly, ”knee-jerk” dealer pick ups can hinder load building and further delay other deliveries, said Darren Acker. director of vehicle logistics operations at Glovis America. Acker said Glovis’ carriers plan well but if a vehicle is pulled out for dealer pick up they have to pull the whole load for that carrier and start again.