This article will explore the current trends that are influencing the upfitting market and their impact on those fleet operations whose vehicles require the installation of specialized auxiliary equipment, which runs the gamut from service bodies, to van interiors, ladder racks, cranes or aerial lifts, to name just a few. In many ways, the upfit market in calendar-year 2022 is really a continuation of what we’ve experienced in 2021 and for that matter, calendar-year 2021 was a continuation of what was experienced in 2020.
Sure there are differences between each of these years, but fundamentally for the past two-and-half years there have been a series of multi-year challenges that have impacted the upfit channel primarily triggered by ongoing supply chain disruptions and changes in upfitter work processes prompted by the COVID pandemic. And kudos to the upfitting industry – it’s done a remarkable job in coping with these challenges, along with a host of other issues. But the reality is that most of these forces are beyond the control of upfitters such as external pricing pressures, which have caused upfitting to become much more expensive.
Another example of market forces that are beyond the control of upfitters is the inconsistency of chassis deliveries from the OEMs, which has caused more than one fleet managers to say the upfitting process nowadays has become a major headache for them. So let’s examine these key challenges that are impacting the upfit industry in more detail.
Inconsistent Chassis Deliveries
As we start the 2023 model-year, there is lot of uncertainty about the timeliness of deliveries of 2023 model chassis that are earmarked for upfitting. And rightly so. Many fleet manager still have fresh memories of the inconsistent delivery of chassis to upfitters during the 2022 model-year. In fact, delayed chassis deliveries was the primary reason attributed to the longer order-to-delivery times experienced by most fleets. And the question is: Will this chassis shortage and inconsistent delivery schedules continue into the 2023 model-year?
As we start the model-year, there continues to be a strong demand for trucks in both the retail and fleet markets, which promises to continue to impact chassis availability .
And over the past two years, upfitters have experienced inconsistency of chassis deliveries and fleets have seen lead times increase as a result. When you can’t depend on the vehicles showing up as expected, it makes upfitters hesitant to order parts in advance. Ideally, the ordered auxiliary parts and upfit components should arrive when the chassis arrives.
In recent years, it has been difficult for upfitters to maintain a production schedule when vehicles are not arriving consistently. The delivery of a chassis and the delivery of parts are often not in synch due to these supply chain issues. In some cases, upfitters have had to downsize their workforce – which is already constrained -- due to the interruption of work, resulting in employee downtime because of unexpected chassis delays.
Supply Chain Delays
Next key challenge has been ongoing supply chain issues that have impacted not only the upfit industry, but the entire global economy. These supply chain disruptions have had a dramatic impact on vehicle throughput at upfitters.
In today’s market, upfitters are being buffeted by having to back-order parts, constraints on ordering pre-fabricated equipment, and inflationary price pressures for the raw materials used to manufacture the various auxiliary equipment.
During the past two years, upfitters have experienced a multitude of other miscellaneous supply chain disruptions involving a variety of material shortages, such as rubber, wood, steel, seat foam, glass, etc. All of this has created bottlenecks in the upfit process contributing the slippage in delivery times.
But there are also other complications occurring during the upfit process. For instance, a growing number of fleet managers are complaining that getting custom service bodies built with all applicable equipment has been a challenge due to these supply chain delays, which has caused these custom installations to take much longer to complete than in the past.
Upward Cost Pressures
An ongoing challenge has been upward cost pressures -- across-the-board -- on chassis, pre-fabricated equipment, component parts, and raw materials in general, such as aluminum and steel. How do you control this? And when an upfitter passes along the cost increases, you understandably get grumbling fleet customers. In fact, higher commodity prices have contributed to additional delays as fleet managers now need to get their management’s approval for these after-the-fact cost increases.
Ongoing Labor Shortages
The upfitting industry has been hard hit by ongoing labor shortages. In today’s job market, there what is known as the “Great Resignation” that has created challenges in hiring and retaining quality employees in all industries, including upfitters.
Although upfitters have sought to hire additional employees to meet the increased work demand, many have found it difficult to find qualified candidates to fill these additional positions. And as a consequence, many upfitters are working short-handed because they are struggling to hire skilled employees.
And it is not just a shortage of skilled employees, it is employees in general. These labor shortages have contributed to the longer timeframe to complete upfit work.
Another consequence to the churn of employees at some upfitters is that fleet managers complain that there have been an increase in errors made during the upfitting process, which they attribute to new hires or what they call – “no hires” -- when an upfitter is understaffed.
The COVID pandemic has caused upfitters to modify work processes to minimize exposure to COVID by adopting social distancing in their work environments. While these modified work processes have improved employee safety, it oftentimes results in less-efficient work flows.
Lastly, transport constraints is another area contributing to delivery delays for upfitted chassis.
Upfitters are at the mercy of transport companies not only for the delivery of the chassis for upfit – bringing the chassis from the factory to their facility -- but also to return the upfitted chassis to the ultimate end-user. Although upfits may be completed in a timely manner, order-to-delivery delays will occur if there is a lack of carrier transports available or if there is a shortage of railcars.