Chip shortage – What’s your contingency plan?

Published in August 2021 Fleet Affiliation

The past couple years have been a roller coaster ride for companies needing to procure chassis and electric windows. One big challenge impacting the ability to deliver these goods is the lack of raw materials – mainly semi-conductors that power the vehicles and the window regulators. As vehicles become more complex and automated, they require more computing power. This climate – the lack of resources paired with the need for more technology to power vehicles – has put the automotive world in the perfect storm. Vehicles cannot be completed without the necessary computer chips, and demand has outpaced supply.

Most fleets have fine-tuned their replacement programs that consider the most beneficial time to retire an asset (parameters might include mileage, corrosion, or suitability of task). However, we are currently operating in an abnormal environment. It may be beneficial to take a look at the playbook, and temporarily adjust it. While things will start to shift back into a more normal space, we are not there yet. The current state of the industry may require organizations to make some modifications to their operations.

Does it make sense to take a step back?
Earlier this year, the chip shortage plagued the car market, and then worked its way to the light-duty truck segment, and now it’s into the medium- to heavy-duty markets. The supply chain is at a bottleneck, and following the law of supply and demand, pricing for new vehicles is at a premium. Like many other organizations, yours might be running things much differently than as in normal times. You might find it beneficial to take a short-term look at your operations.

  • Look at current utilization
    Start by looking at current utilization.  Fleet professionals generally have a good understanding of lifecycle cost analysis. However, it might be time to reexamine and apply additional variables. Work with your suppliers to confirm if the right components are available. Some organizations are changing their vehicle platforms based solely on availability. While this may be a short-term solution, it could create additional problems down the road. This is one scenario where it might make sense to extend vehicle lifecycle. Before considering this, though, look at the associated implications and costs.
  • Review equipment reliability
    Next, look at equipment reliability. One of the most expensive elements to a fleet is unplanned downtime. While supply chains continue to try to meet demand, it might be some time before a full recovery is possible. Having additional options is important for short- and mid-term planning. Vehicle lifecycle can only be extended so far, before an asset becomes unusable or unsafe to operate. Preparation is your first line of defense.

It is still important to have a replacement cycle and plan, but the current climate has dictated longer lead-times. Fleets should be prepared to adjust their operations in the meantime. Looking for more fleet insight? Contact Chris Lyon, NTEA director of fleet relations at