FINISHED VEHICLE LOGISTICS
FVL NORTH AMERICA conference review
Seeing is believing in vehicle logistics
Low inventory and a lack of capacity in the outbound sector is putting renewed focus on more accurate ETAs, investment in digital tools and some hard thinking on driver recruitment. Marcus Williams reports from this year’s Finished Vehicle Logistics North America conference
In the midst of continuing disruption to the automotive supply chain from a variety of causes there has never been a greater importance attached to getting finished vehicles to market on time.
That is certainly true in the US where consumer demand for vehicles is high but inventory is at a historic low and capacity for deliveries is constrained.
According to data from market analyst firm Eaton, US vehicle inventory is currently around 1.1m units, equating to a 25-day supply, and it is unclear what the ‘new normal’ will look like going forward. Supply is down 25% year-over-year, and 70% from pre-Covid levels.
Speaking at this year’s Finished Vehicle Logistics North America conference in Huntington Beach, California, which was held in June, Ray Mikicuik, senior vice-president of sales at Volkswagen Group of America (VWGoA), said that 100 of its retailers in US sold down to zero new cars in their inventory in May this year, with turnover rates on the lot up to 75%.
In the face of these inventory pressures, carmakers and their transport providers are working harder than ever to distribute the cars that are produced to the dealers and end customers as quickly as possible. However, delivery times are longer than they have been for years and that is testing the patience of car buyers.
The ability of the customer to purchase a vehicle and run it is also being tested by inflation and rising fuel prices. The average transaction price (ATP) for a new vehicle in the US stood at $46,000 in the first quarter of this year. Recognition of customer concerns is putting a stronger focus on being able to inform the dealer and the end-customer of exactly where the vehicles they want are in the delivery process and, most importantly, when they will be delivered. It has also meant that sales and logistics teams are now working a lot more closely.
Dealers looking for data
In turn, a more accurate estimated time of arrival (ETA) at the point of handover depends on better visibility in the outbound supply chain and there are major challenges in achieving this.
Mikicuik said tracking ETAs and ensuring VW and its dealers knew when the cars were coming off the production line, and how they were getting to the dealer network, was a difficult task at the moment.
“The customers are concerned and the dealers are looking for more data, said Mikicuik. “We are at a point now where every car has a team adjusting ETAs twice a week.”
Over at Nissan North America, Chris Styles, vice-president of supply chain at Nissan North America, said the company was monitoring and tracking every vehicle it built because, right now, those vehicles were being sold before they have arrived at the dealer.
“The pressure from the final customer side is immensely different,” he said. “It is now much more a build-to-order model versus the old build-to-stock. Figuring out how we are going to get better visibility is really increasing as a priority.”
The same is true over at Kia America. Steve Center, chief operating officer and executive vice-president at the carmaker said the outbound industry had changed entirely.
“This is a part of the business that you never used to worry about,” he said. “You had a fixed distribution plan, the car showed up and you had a huge buffer of inventory, and the customer was not looking for a particular vehicle.”
According to Center, vehicles are now being sold directly out of the pipeline to customers of the Amazon generation who want to know exactly where the car they have chosen with custom specs is, and when it will arrive.
At Ford, Michael Arnold, operations supervisor for North America vehicle logistics, said there had been an increase in demand for information on the location of vehicles and his company was feeling the pressure. It is something that is driving an increase in dealers arranging their own transport for vehicle pick-ups. In response Arnold said there was now an intense focus on providing more accurate ETAs for the customer and minimising the number of revisions to those ETAs.
Those carmakers are responding well to the demand for greater visibility. Toyota Motor North America (TMNA) has just completed the rollout of a new outbound pipeline tracker under Project ETA, which is designed to more accurately trace the movement of its vehicles from the assembly plant to the dealer network. Importantly, the company is sharing that information with its dealers and training them in its implementation.
“We are able to track the specific lifecycle and logistics milestones from order-to-delivery in near real time,” said Kevin Austin, vice-president of demand and supply management at TMNA, and head of Project ETA. “The visual pipeline tracker provides a view of each vehicle’s identification number (VIN) through its end-to-end journey. It marks completed milestones and highlights its current status.”
However, there remain issues for carmakers in North America because of visibility problems further upstream caused by disruption to the manufacturing of the vehicle in the first place. Like Toyota, that is something Nissan is working to address.
“The visibility [on vehicle delivery] has to start with the vehicle being ready to be shipped,” said Styles. “There are so many factors that can come into play between production and the car actually going on a truck, train or boat. Once it is moving, we are getting more accurate on expectations and delivery time but it is everything before that point that can create frustration with the dealer and customer.”
Darren Acker, director of logistics operations for logistics provider Glovis, said accurate production forecasts tied into allocation rates were essential when managing ETAs and matching a consistent throughput of vehicles. The delivery of vehicles through the vehicle processing centres (VPCs) is currently about knowing how to manage exceptions and having the labour force and technology to do so. Glovis has also developed an app for finished vehicle carriers to more accurately track where the vehicle is in the delivery process.
In fact, the disruption the automotive industry has experienced over the last few years has accelerated the adoption of digital technology in finished vehicle logistics, a sector that has typically been criticised for lagging in its adoption of technology designed to improve visibility, and provide more accurate data on quality and delivery times.
Ed Jones, chief commercial officer at vehicle inspection expert DeGould, noted there had been a definite shift in attitude within the sector, and OEMs were looking for support and services to make the delivery of their cars more efficient and transparent.
Digital vehicle inspection systems, such as the ones DeGould offers, are automated and run on AI software and computer vision. DeGould’s Auto-compact vehicle inspection module, to take one example, features an array of digital cameras that capture ultra-high-resolution images to detect and analyse any vehicle damage. Vehicles can drive through the module, helping to increase throughput and save time.
As well as speeding up the inspection process, the technology has the potential to improve the quality and efficiency of the damage detection process, and remove the potential for human error.
“What we are seeing now is a massive shift in attitude,” he said. “People are more and more coming to us and asking how quick we can get these things in. Despite all the headwinds, it has accelerated the need for this technology.”
Hamed Bazaz, director of business development at Seoul Robotics, agreed that services based on the latest digital technology were getting a lot more attention from the finished vehicle sector.
“In the last few years there has been a lot more interest and a lot more investment behind that. It is changing and is changing quickly,” said Bazaz.
Seoul Robotics makes 3D perception software which amalgamates information from different types of 3D sensors and presents it in one scenario that enables users to accurately and safely manage the autonomous guidance of a vehicle in a variety of situations.
Vivek Sinha, managing partner, at Sphere, which also provides vehicle inspection and monitoring technology, said customers in the automotive sector were asking for more support and it was that demand that was driving its continued innovation.
“They are asking and pushing for more technology to overcome the gap and the challenges of today’s market,” he said. “The market is definitely ready and we see customers engaging companies like us to innovate, and innovate faster.”
Sphere provides customisable vehicle inspection and yard monitoring services. Its Prism inspection pod, which has been developed in the last two years, is custom built according to the environment in which vehicles need to be inspected, providing flexibility for the customer.
All in all there is now a lot of opportunity for the finished vehicle sector to embrace the software at its disposal and for OEMs to collaborate and explore more of the potential of the technology with its providers.
One of the other major obstacles in getting vehicles to market on time and finding the necessary capacity to do so is the shortage of labour, something that is critical in US road haulage.
Wage stagnation, rising living costs and a lack of satisfaction in employment are all factors in the exodus of workers from their jobs since March 2020, but the vehicle haulage sector was already suffering a shortage before the impact of Covid. The exacerbation of that shortage has resulted in it ranking as the second biggest challenge facing the industry in North America after rising fuel costs, according to a recent quarterly survey carried out by finished vehicle logistics provider RPM and Automotive Logistics. To solve it, there are a number of issues that need to be addressed.
Speaking at FVLNA, RPM’s president and CEO, Sergio Gutierrez, said drivers frustrated at not being able to fulfil their scheduled pick-ups because of delays out of the factories, railheads for vehicle distribution centres (VDCs) are moving out of the vehicle haulage sector.
“Reducing inefficiencies and maximising driver time is what we must all focus on and as players in the industry, we are all responsible for keeping the drivers engaged,” said Gutierrez.
Pay and conditions
Mark Anderson, president and CEO of United Road, one of the biggest vehicle haulers in the US, said the sector had lost 30% of capacity for good because of the exodus of drivers. Those drivers are doing a physically and mentally demanding job but at the same time are seeing a shrinkage of the premium pay gap that used to exist between car haulage and general freight driving.
“We ask the car hauler to do so much more [than general freight does],” said Anderson, adding that inefficient vehicle yards that have drivers waiting around for hours, combined with difficulty in parking trucks to load safely, were just additional burdens that had pushed many out.
Many drivers are also looking for shorter hauls and fewer long-haul drop offs, and the industry is having to adapt to the demand for more flexible working patterns. Ford’s Michael Arnold, operations supervisor for North America vehicle logistics, said the company was looking at ways to work with the sector to reduce the number of miles a truck has to travel to deliver loads.
“We need to find the efficiencies where the truck driver is home at night… [.] How do we make sure that the driver is only doing one or two stops, or only going 150 miles on a round trip,” said Arnold.
Marisol Vasquez, senior manager of OEM Sales at logistics provider, Glovis America, said flexibility was a key point in making the job of hauling vehicles more attractive. “Wages are important but that is not always what seals the deal,” she said, adding that providing a good work-life balance was more important than ever but that it required some new and creative thinking.
Cost and efficiency
Despite these pressures, United Road has been able to recruit more staff thanks in part to its decision last year to extend its Guaranteed Pay Benefit scheme for directly employed drivers. That move followed a pilot scheme for first time drivers, which resulted in “a dramatic increase in driver satisfaction and retention”, according to Anderson.
However, it is not all about pay, and Anderson agreed with Gutierrez on the point of maximising time, making operations more efficient, and enabling drivers to move on and pick up additional loads, something in itself that would help tackle the current crisis in capacity for finished vehicle deliveries.
“[The drivers] want to haul their cars and be on to the next stop, and they have limited hours in which to do that,” said Anderson. “When you are waiting to get one or two exception damages approved, it is taking away 30-60 minutes, and those are the things that we have to work to improve.”
One other area that would help drivers maximise the vehicle loads they are carrying is securing regulation to increase the loaded weight of their rigs, something that becomes even more important when one considers the increase in the loaded weight when hauling heavier electric vehicles (EVs).
Arnold said it was imperative to continue to push government to regulate for the weight increase, which is equal to 10% or 8,000lbs (3.6 tonnes), and would take the loaded weight of a vehicle hauling truck to 88,000lbs (40 tonnes).
“We have been lobbying for it for many years now but we need to keep pushing that through before our network flips,” said Arnold, adding that Ford was already looking at between 40-50% of its outbound volumes being electrified.
Anderson said that while United Road was working with the equipment manufacturers on limiting the weight, the regulation on a loaded weight increase was critical.