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Labor and parts shortages raising risks for fleet owners

Supply chain challenges are driving up claim costs, downtime

Save the Date!
February 24-25, 2021

By: Stuart Braun, Adjuster and Maintenance Manager, Fleet Response, Roger Cervenka, Vice President of Client Services, Fleet Response, and Jeffrey G. Fender, Vice President of Sales & Marketing, Fleet Response.

For fleet owners, the longer a vehicle remains out of service, the more money the owner stands to lose. Because automobile accidents continue to happen, fleet owners are accustomed to sending vehicles out for repair. What many fleet owners are not used to seeing, however, is protracted downtime and long backlogs in the repair process. Shortages in labor and automotive parts are increasing fleet risks — and raising claim costs. Fortunately, fleet managers and insurance professionals have options to mitigate these trends. 

Before the pandemic, a relatively simple repair for auto physical damage — a fender-bender, for example — might have taken a week to schedule and about five days for the repair shop to complete the work. In current market conditions, that same repair job is taking longer to schedule and may take seven to 12 days beyond that, if parts are already on hand. If parts must be ordered to complete the repair, the repair timeframe alone could easily extend to 24 days or more. For revenue-generating vehicles, as many fleet autos are, every tick of the clock in downtime represents additional expense to the owner. At the same time, repair costs are rising due to higher prices for replacement parts.

What's causing this problem 

What factors are driving these trends in fleet claims? There are three main causes:

  • Labor shortages. Fleet owners are well-acquainted with the ongoing shortage of qualified drivers. A similar labor shortage is occurring among repair technicians. Repair shops are struggling to retain experienced technicians, which means they must constantly recruit and train new staff. Technicians with less experience often take longer to perform repair jobs to meet quality and safety standards, even when they have all the components necessary to complete the job.
  • Supply chain disruptions. Global supply chains have experienced significant disruptions during the pandemic, and those include supplies of replacement automotive parts. With steady demand for parts and dwindling supplies, prices inevitably increase. Shops are looking for alternative sources to obtain parts so they can deliver safe, drivable vehicles back to their customers.
  • Shrinking shop capacity. Space limitations at repair shops mean they can accommodate only so many non-drivable vehicles. Finding shops with the capacity to complete repairs promptly is a challenge as many vehicles remain onsite and out of service while shops wait for parts.

Risk mitigation steps

Fixing global trade problems and economic inflation is beyond the reach of fleet owners, risk managers and insurance professionals, but they can take steps together to mitigate risks and minimize the local impact of these trends.

One step is to give careful thought to triaging repairs and scheduling needs. If a vehicle is damaged but drivable and still safe to operate, the owner could defer the repair. On the other hand, a fleet owner might consider operating a damaged revenue-generating vehicle to hurt its brand perception. In that case, scheduling a repair as soon as possible might take priority. To find a repair shop with available capacity, it's prudent to work with an expert partner that has a broad network of repair facilities.

Amid parts shortages, another step is working with expert partners to determine the cost-effectiveness of repairing vs. replacing damaged parts. Repairing existing components, if doing so doesn't compromise safety or quality, might be a better option than ordering replacements. Knowledgeable automotive industry partners can assist in identifying alternative suppliers when replacement is necessary. There are three general categories of replacement components: original equipment (OE), or parts that are identical to those used by or recommended by the vehicle manufacturer; automotive aftermarket, or parts made by other vendors that are designed to fit specific vehicles; and like kind and quality (LKQ), which may include salvaged, reconditioned or remanufactured parts.

To minimize downtime on fleet auto claims, working with an experienced claims company can also make a difference. Thorough initial inspections can provide more accurate evaluations at the beginning of the claim and reduce surprises during the repair process.

Accidents will happen, despite fleet owners' best efforts to prevent them. Mitigating the risks of costly downtime and avoiding prolonged repairs is possible by choosing the right partner for fleet claims.

For more information on managing fleet risks and reducing vehicle downtime, visit https://www.fleetresponse.com/.

Fleet Response is a Hudson, Ohio-based company specializing in third-party administration for automobile claims. Fleet Response offers claims, safety and compliance solutions to fleet managers, risk professionals and safety teams. Its services include first-party auto, third-party property, customized general liability claims management and subrogation services.

 StuartBraun.jpg Cervenka_1 (1).jpg Fender_1.jpg

Stuart (left) joined Fleet Response in 2006 and serves as Adjuster and Maintenance Manager. His responsibilities include managing the collision repair process, maintenance department and vendor procurement, implementation of standard operating procedures for both accident and maintenance management. Stuart spent his previous 15 years working for a large auto dealer where he worked as technician then as Body Shop Manager. Stuart is ASE Certified and an I-Car Platinum training recognition. 

Roger (middle) joined Fleet Response in 2016 and serves as the Vice President of Client Services. His responsibilities include oversight of the day-to-day operations and personnel of Fleet Response's Client Services Departments, with a focus on increasing the effectiveness of standard and customized client specific operating procedures within the Call Center, Claims, Adjusters/Maintenance, Subrogation, and Salvage. Prior to joining Fleet Response, Roger spent 14 years with Progressive Insurance where he held numerous leadership roles within Subrogation, Salvage, and Field Claims.

Jeff (right) joined Fleet Response in 2003 and serves as the Vice President, Sales and Marketing. He is responsible for overseeing the sales team as well as the marketing strategy and position of Fleet Response products and advertising, Throughout his tenure, Jeff has experienced success in a variety of roles, including National Sales Manager and Director of Sales and Marketing. He has his Property and Casualty Insurance License and is an active member of the National Association of Fleet Administrators and Risk and Insurance Management Society. 

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