This is Transmission, a twice-weekly newsletter built to chronicle the seismic shift in auto supplier networks as the industry goes cross-border and electric.
Delivery van shortage
According to Bloomberg, FedEx and UPS are running into a van shortage amid a record surge in parcel volumes. As the number of packages increases during the holidays, the carriers are finding themselves without vans to make final mile deliveries.
Typically, FedEx and UPS call upon leasing firms to secure rentals for the holiday rush, but this year is a different story. The shortage of vans, like the rest of the automotive supply chain, started during COVID-19 shutdowns. Manufacturers of these box-like vans halted production altogether back in the spring while e-commerce orders soared. And even with production levels back to normal, automakers are at risk of experiencing future production pauses due to potential outbreaks affecting suppliers.
Daryl Adams, CEO of Shyft Group Inc., a personalized automobile supplier, mentioned that the company is feeling the heat from leasing firms calling for urgent order fulfilment. Adams also mentioned that Shyft’s backlog rose to $282 million in October, an increase of about $225 million compared to last year.
“If there’s a cargo van out there, we’re trying to buy it,” said Brendan Keegan, chief executive officer of Merchants Fleet, which leases vehicles to package delivery companies. Companies are dipping into the used market and are being urged by carriers to use any van they can find.
While the amount of vans currently available has dipped, delivery capacity won’t be hindered. The growing question is whether or not this demand will be short-lived. Companies may be stuck with a large roster of vans for years to come.
CHEP’s sustainable solution
CHEP is a global leader in supply chain sustainability and solutions, providing manufacturers and suppliers with the resources to reduce transportation, eliminate waste, and use fewer natural resources. Utilizing its circular business model, CHEP aims to transform how life’s essentials are delivered by creating regenerative supply chains.
Automotive supply chains across the globe have been pressured to deliver in a world facing rising demand for electric vehicles, a growing call for sustainability legislation, and more recently, a pandemic that has hit assembly plants and consumer spending simultaneously. In order to meet these changes, heavy investment has to be made in new equipment and new mobility models. One of the ways to eliminate some of these costs is by focusing on non-core capital expenditures.
Through CHEP’s “pooling” model, companies can share and reuse resources that would increase sustainability and lower costs of packaging goods, such as recycled pallets and reusable containers.
“Switching to a pooling service helps our automotive customers streamline their supply chain, and cut all the costs associated with owning packaging equipment,” said Murray Gilbert, VP of CHEP Automotive. “They no longer need to buy – they share instead.”
Digitalization and dealerships
Due to the pandemic, the automotive retail model has seen an accelerated shift towards a buying process with more digitalization. McKinsey surveyed car buyers in multiple countries and even shadowed a few during the vehicle purchasing process.
While the offline touchpoints, the amount of times a consumer doesn’t use the internet for research (i.e dealership visits), remain important, digital touchpoints are becoming increasingly dominant throughout the car buying experience.
The average amount of touchpoints a consumer makes during the buying process involves 23 touchpoints, 18 of which are digital. 70% of potential buyers consider the dealership a major touchpoint, most of them ranking that the No. 1 factor influencing purchase decisions. However, as noted before, not all touchpoints are made offline, with 80% of respondents reported using online sources with fears that salesmen were not providing them with the information they needed.
The traditional automotive retail model that has long been in place is beginning to dwindle. The push for digitalization, in all industries, has accelerated during the pandemic. According to the study, buyers are comfortable with not only researching vehicles online, but they’re also willing to finance the vehicle online as well.
For now, it looks like dealerships still play an important role in the purchasing process, but if trends continue, purchasing a vehicle completely online may become the new norm, with all the new expectations for product selection and inventory availability e-commerce entails.
Industry News
- Nikola and GM have announced a restructuring of the deal made back in September, which saw GM receive a portion of equity in exchange for providing Nikola with fuel cells and other important automotive components. The new deal eliminates the stake in equity and as well as plans for building Nikola’s electric pickup truck.
- Ford has picked its German plant in Cologne to build a mass-market electric car. The automaker picked this plant over the one in Craiova, Romania even though Craiova has lower labor costs.
- Digital license plates are on their way to Michigan, and could be available in early Q2. The metal alternative allows messages such as amber alerts and “I’m Stolen” to be presented.
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