The K.I.D. blog written at the start of the coronavirus pandemic, “Keep Calm and Carry on with Humanity” is a message that still resonates nineteen months later. Maybe even more so today. Back when we began physical-distancing and hunkering down in our homes, we didn’t know what would happen. The semiconductor shortage was an issue on the horizon and diesel prices were less than a loonie a liter as the Saudis and Putin were in a stand-off over production limits. No one predicted the supply chain problems were seeing now or they would get worse before getting better.
Our industry is familiar with operating pressures and persistent challenges with driver and tech shortages, technology adoption and increasing legislation. Now for maybe the first time, the entire economy is sharing our front row seat at the intersection of container shortages, a tight labour market, rising costs and the pandemic still ongoing. While were experiencing consumer demand at staggering levels, we’re also dealing with parts shortages and rising fuel costs with crude oil reaching $ 86/ barrel this week. Trucks are parked – losing revenue over back orders on NOX sensors, ECMs and fuel filters. Downtime and waiting on parts are estimated to cost fleets $ 800 – $ 1,000 per day. With every day of delay, the backlog gets deeper.
Reality is higher prices
Supply-chain disruption is part of broader fears about rampant inflation. There are fewer people employed than before the pandemic began and the average hourly pay rose by 4.6% year over year in September. The consumer price index is over 4% higher (5.4% in US) and exceeding forecasts. With growing freight demand, driver shortages are made worse by an aging workforce, drivers leaving the industry over pandemic-related health concerns, new entrant training regulations and licensing backlogs from pandemic shutdowns. The lack of available drivers means those that are on the road are commanding premium rates, which translates into higher costs for shippers and consumers.
The global pandemic is delivering radical shifts in buying patterns, higher cost of service and sharp increases in commodity prices. In the last year, steel is up a staggering 215% in the and the trucking industry is experiencing unexpected parts shortages. It may have started with OEMs having trouble sourcing computer chips and components for their assembly lines but it’s become an issue in the aftermarket. Fleets have unseen wait times for standard replacement parts needed to complete routine service, maintenance and repairs.
Lead times for parts that used to be a few days can now drag on for weeks. It’s common to see items on back order for longer stretches of time with no expected delivery date given. Some suppliers are raising prices to ration supplies. Relative to input costs, American manufacturers are increasing their prices more than firms in any other country. Some companies are hoarding parts and keeping more months of inventory, which is leading to higher prices. While the overall trend has been improving, customers still have shorts with every order.
Good suppliers help
Unprecedented shortages require an assertive approach to sourcing parts. Dependable service providers build their business on good relationships with their suppliers. More than ever, these relationships are helping customers to minimize downtimes with commercial repair facilities increasing their safety stock levels to compensate for extended lead times to secure parts. Reviewing order histories so customers have regular items and being persistent in finding availability within networks, they make the necessary arrangements to have it delivered.
As a member of Truck Pro, K.I.D. Truck & Trailer Service has access to the largest network of aftermarket parts, which secures our ability to deliver cost-effective service. In business over 30 years, we maintain close and collaborative relationships with industry partners that increases our exposure to available inventory. But the real truth is our team members are spending more time talking to people and tracking down parts.
The ongoing microchip and various parts shortages have created an unwelcome trend. OEMs are being more stringent in terms of vehicle warranty support. Knowing the age of vehicles, miles driven per year, warranty coverage and repair intervals allows fleets and service partners to determine parts inventory needs. Increasingly OEMs require manufacturer-recommended Preventative Maintenance to ensure units were properly serviced to support warranty recovery claims. Access to an online, cloud-based platform means proactively tracking service on customer fleets and staying ahead of necessary PM requirements. Included with their fleet service, our valued customers are offered a powerful fleet-management software application that captures all relevant data regarding vehicle service. Be forewarned, OEMs are employing PM compliance documentation to enforce warranty restrictions and reign in servicing costs.
Companies are warning shareholders about rising costs related to supply chain disruptions and flagging potentially lower earnings. These challenges are expected to last as freight rates remain high with ongoing congestion at receiving ports. The transportation industry has proven itself flexible by leveraging relationships to ensure supply stocks are as minimally impacted as possible. The long-term upside is that higher prices for shipping and tech components are necessitating capital expenditure to expand capacity. This investment boost will ultimately translate into higher volumes and increased productivity. In the meantime, good suppliers remain committed to providing the best value for your return on fleet maintenance investment.