The seemingly never-ending COVID-19 pandemic has wreaked havoc in all areas — including fleet management — as shortages have made procuring new vehicles a longer and more challenging process.
One of the biggest reasons for the vehicle shortage is due to the shortages of semi-conductor chips. According to an article in Tech Monitor — “Here’s what we know about the global chip shortage” by Matthew Gooding, July 2021 — the shortage was precipitated by an increase in demand for electronics as businesses and consumers began buying new laptops and servers in order to work and attend school virtually.
That article stated sales grew 6.5% in 2020 and by July 2021 had grown 26% higher than 2020. A principal analyst at a tech research company reportedly said it was the worst shortage he’s seen in his 30-year career.
Most chip manufacturing is done by two companies in Taiwan and a drought — the worst it’s seen in 50 years — was affecting the process as water is necessary for chip manufacturing. Reportedly, automotive companies also scaled back production at the start of the pandemic thinking it would cause economic devastation, and Gooding’s article stated this pushed them to the end of the line for chips when they ramped up production again.
Adding to it all is the labor shortage, supply chain issues and demand growing from those receiving stimulus funds to purchase new cars.
Randy Fuss, director of government accounts for Doosan Bobcat and Bobcat Company in North America, said, “Manufacturing, in general — whether vehicle or equipment — is struggling with supply chain constraints due to very high demand as the economy tries to pull through and get past the pandemic.”
He noted, “The challenge is demand, which is increasing significantly, and the supply can’t keep up — labor shortages and outside of that the offshore issues with the ports is (contributing). The combination of all that makes this the perfect storm.”
Fuss added, aside from the microchips, “Everyone is competing for raw materials — steel, wiring, electrical components and other materials.”
Impact to cities and towns
Fuss said the shortage has impacted cities and town’s budget cycles. “Cities and towns have planned for specific budgets and received quotes; in the manufacturing industries, prices have gone up. This has caused them to have to go through the approval process again with the increased prices.”
The lengthy process of getting council approval has also made it more challenging.
Tom Morgan, chief deputy sheriff of Union County, Ohio, said he started talking to the company his department had purchased its cruisers from in August and September 2021 about the orders for 2022 — asking them about the delivery times and what hurdles they might have to go through.
“Many of our equipment purchase orders have a disclaimer on them to expect delays of 120 to 180 days,” Morgan said. “That’s pretty typical now for equipment purchases.”
Morgan said the county commissioners approved purchasing the 2022 vehicles in 2021, and with a purchase order system, the county wouldn’t be billed until this year.
But he said the problem extends farther than the vehicle itself to all the equipment that needs to be installed — consoles, cages, data terminals, etc. — are all affected by the supply chain issues.
He reported that he’d recently heard the police cruisers he ordered in October would arrive at the end of January.
“We may get the cars in at the end of the month, but to get all the equipment needed and (have it all) installed pushes it back even farther than we’d like,” he said.
The department experienced the same thing in 2021 — the cars it hoped to have in use by July or August didn’t get on the road until December because of installation delays.
However, getting the approval to purchase the six Ford Interceptor SUVs ahead of time definitely helped.
“We got a jump on it early, and it turned out surprisingly well,” Morgan said.
The city of Spokane, Wash., also received approval to purchase vehicles ahead of time. Fleet Services Director Rick Giddings said, “The process was taking four weeks, and often by the time we got the quote on the vehicle and got approval, the vehicle was gone in some cases.”
Fleet services received prior approval last year to purchase vehicles for this year. Giddings noted the 2022 budget wasn’t approved until recently, and by the time his department was ready to order last fall, the ordering bank was closed. It was able to get some vehicles, however.
Giddings said that approval was for a limited time — until the end of 2021 — so he’ll have to redo the process this year.
Giddings explained the process, stating his department compiles a list of the vehicles it needs, inventories available vehicles and comes up with a target vehicle and an alternate.
“What complicates things for us is the city’s clean fuel goals that demands any replacement vehicles be clean fuel or electric,” he said.
So fleet services focuses on purchasing vehicles that meet the needs of the city’s various departments but are also clean — that fact, along with total cost of ownership, “narrows the options for us.”
Giddings said fleet services have a priority purchasing plan where it shows the council its first, second and third choices. If the department can’t find a vehicle that meets all its needs, it leases until one becomes available.
Multiple factors have created the problem, but COVID was the start. Giddings shared he was told by one of Spokane’s manufacturing vendors that they usually allocated 300 manufacturing spaces, and this year they only allocated 70 spaces.
“The demand keeps piling up, and the supply is not getting any better. A lot of factors went into this,” he said. “It was a comedy of errors that led to this shortage.”
Giddings said it’s taking 60 to 90 days now at least to get a police cruiser, and the timeframe for heavy equipment is much worse. Like Morgan said, by the time Spokane receives the chassis, that’s only half of the vehicle. It could be a year to a year and a half before customization is completed.
Spokane has a fleet of 1,700 vehicles, and in order to maintain the fleet, he estimates his department probably purchases on average 100 vehicles a year. He said it also tries to find used vehicles that meet its needs.
Giddings said Spokane uses state contracts whenever possible, and he visits WA.gov website to find vehicles. He believes doing so speeds up the process. Spokane’s fleet services likes to buy local, but it’s not always possible. Still, Giddings noted the city encourages local dealers to participate in the pre-competitive state contracts.
“But a lot (of local dealers) choose not to because it is a complicated process. We always prefer to buy local if possible, but it does double the length of time,” he said.
Changes and solutions
All three men agreed a change to the fleet purchasing practices will probably be long term.
Morgan said when he drives by any dealerships in his area, there are “no new cars there.”
According to him, production currently leans toward special orders rather than extra inventory sitting on lots.
“In order to be able to get the type of vehicle you need to accomplish what you need to do to continue serving the community, you’ll need to get your order in,” Morgan said.
Fuss of Doosan Bobcat said communication is key. Now more than ever, it’s vital for municipalities to communicate with vendors about what their needs are going to be.
“Doosan Bobcat’s leadership has done a superb job of managing delays and ensuring all of our customer types — including government — are being thought of,” he said. “First and foremost, realize that industry is your partner in this. (Cities) have to communicate now more than ever, sharing intentions with their budgets and what they want to buy and when, so industry can provide solutions. Communication is very important between government and industry.”
Giddings said, “I think this is the way we are going to be purchasing vehicles for quite a while — we’ll have to identify needs way ahead of time.”
Dan Giese, assistant vice president Enterprise Fleet Management, said they expect a little relief this year. “According to Wards Automotive, we do expect to see some improvement in availability in 2022, but it will still be less than pre-pandemic averages. In light of these challenges, now more than ever it’s important that municipality fleets are proactive when planning out their vehicle needs to ensure those needs are met, and also be open to exploring alternative options that are available. In addition, being disciplined and having a preventative maintenance plan and schedule in place are critical as this will help keep higher mileage vehicles safe and up and running longer while waiting for new vehicles.”
Giese said despite the challenges, Enterprise is working hard to work closely with manufacturing partners and customers to meet their needs.
Giddings advises other cities and towns to “identify needs early — like a year ahead and start the process as quickly as possible.” He stated, “Think outside the box — maybe a used vehicle would work or a slightly smaller or larger vehicle that you might not have considered in the past but may meet your needs — so be flexible.”
Fuss said, “Everyone’s short-handed — government offices and industry — so this traditional bid process in a lot of scenarios is somewhat antiquated.”
He suggested municipalities consider Sourcewell or other cooperative purchasing companies to speed up the process and to understand what they can do with government accounting like encumbering funds and issuing purchase orders today with the knowledge there will be delays.