Chapter 7 -
Vehicle assembly, acceptance and warranty administration

After you award the bid and establish timetables, schedule the targets and milestones. Because an efficient replacement process requires timely delivery, monitoring the project’s progress is key. Lead times can vary significantly from manufacturer to manufacturer and from year to year. Whether you own or lease, it is important to be familiar with manufacturer lead times so you can take delivery of vehicles when you need them. Place your order based on production lead times and then closely monitor the situation.

Have a contingency plan in case business volumes increase earlier than anticipated or unforeseen delays occur in production of new vehicles. Another alternative is to negotiate a short-term rental program with local equipment companies. This alternative is expensive, particularly when rental demand is high, but it is better than buying equipment that does not meet your specification.
Planning acquisitions can be especially difficult if your company’s business volume has seasonal peaks. To relieve peak pressure, consider arranging short-term rentals or contracting with owner-operators.

If you are replacing a certain portion of your fleet each year, take equipment out of service as you enter your slack period. Add new replacement equipment as business starts to rebound.

Timely replacement allows you to remove old vehicles before the maintenance department performs unnecessary, money-wasting repairs to them. Work with the supplier to resolve any delays caused by material unavailability, labor deficiencies or unexpected events to ensure timely delivery of the replacement vehicle.

Inspecting the vehicle
When the vehicle is assembled and tested, inspect it in its unpainted condition to ensure that the manufacturer’s work is acceptable and that any special instructions (such as wire routing) were followed. Inspecting an unpainted vehicle helps you identify questionable areas and resolve problems at that time, reducing delivery delays. This inspection is especially important when you are purchasing more than one vehicle of the same type. Correcting problems on the first vehicle ensures that the subsequent units will meet your requirements. If you wait to identify a defect until the vehicle is in service, the cost of repairing each vehicle in the remainder of the order would be extremely high for both your company and the manufacturer.

After problems found during the pilot inspection are corrected and the first unit is painted, inspect the delivered unit. Depending on the severity of the preproduction problems, the inspection can occur either before or after shipment.

The goal is to accept the new vehicle at the time the old vehicle is scheduled to be replaced. The in-house garage or chassis dealer should prepare the new vehicle for service. Then the old vehicle can be retired.

When the new vehicle is delivered, sign for it only as confirmation of delivery. Attach a note stating that delivery does not constitute acceptance. Accept the vehicle only after a detailed inspection of its assembly and operation.

Placing the vehicle in service
Within one week, inspect the unit, using the prepaint letter as a guide to verify the corrective actions made by the manufacturer. In addition, your company should perform an in-service inspection before signing a final acceptance.

If a vehicle has 15,000 parts and the manufacturer is 99 percent efficient, there still are 150 items in the 1 percent error factor. You must operate the unit to verify that all components work. The final test is putting the vehicle in service for 30 days.

If all is well after 30 days, you can initiate the payment process. If any problems occur during the 30 days, require the manufacturer to correct them. If the manufacturer does not correct these problems in a reasonable time (such as 60 days), withhold payment. You may consider reducing the price paid for the new vehicle because of extra maintenance and operating costs incurred on the old vehicle. Complex vehicles require complex acceptance terms and a strategy for applying leverage. The vehicle should fully meet expectations before you pay for it. If the vehicle is not what you expected, the manufacturer must adjust it to meet those expectations or reduce the price, as outlined in the liquidated-damage requirements.

The key personnel in the acceptance process are the driver and the shop staff. The driver must be trained to operate the unit correctly. The shop staff should be trained in the unit’s preventive and diagnostic maintenance requirements.

To accept the vehicle, both the driver and the shop staff must state their approval. As a final step before payment is authorized, the driver must relinquish the old vehicle and the shop must accept the new vehicle.

Administering the warranty process
Whether you accept the manufacturer’s warranty or define your own, warranty terms should be clear before you accept a bid. Upon delivery, the terms and conditions must be known, and you should be prepared to follow up and enforce them. Manufacturers make mistakes, and buyers need to be compensated for manufacturer deficiencies.

Establish a warranty-reimbursement target for the first year of vehicle life and base this target on past experience. A vehicle may exceed or fall short of this target, depending on the model year. It is important to set a target and measure performance.

The warranty is a procedure whereby the buyer attempts to recover some (or all) repair costs from OEMs, suppliers or rebuilders. Every time you determine that a component or system failed because of faulty manufacture, material or construction, you must invoke the warranty. A vendor expresses its confidence in, and knowledge of, the product in the warranty terms it extends. A warranty is a representation of the quality of engineering, assembly and product knowledge that the manufacturer presents to the marketplace.

Buyers should evaluate the manufacturer’s published warranty as a statement of confidence that the vehicle is built to specifications and operates satisfactorily, with reasonable care and minimal repair requirements. The warranty should give the buyer protection against high operating costs due to premature parts failure or poor assembly workmanship.

Suppliers generally offer the same vehicle and component warranties to anyone who purchases their products. Depending on your company’s philosophy, programs, procedures and size, warranties can become specifically tailored contracts.

Warranties are available from original equipment manufacturers, component manufacturers, replacement parts suppliers and rebuilders, and can be divided into three categories:

• Standard warranty. A standard warranty is an offer extended by original equipment, parts or tire manufacturers to cover faulty manufacture, material or construction of the product. It carries a specific time limit, engine-hours limit or mileage limit, whichever occurs first.
• Extended warranty. An extended warranty is a mutual or purchased agreement between the manufacturer and the buyer that extends the standard warranty policy in time, mileage or both. Extended warranty contracts include extended service plans, special vehicle-optimized contracts, corrosion-service contracts, environmental protection plans and fleet service plans.
• Policy warranty. A policy warranty is a mutual agreement between the buyer and the manufacturer or supplier that covers chronic failures, latent defects and problems that occur over and above standard or extended warranty coverage. Policy warranty programs include owner-notification programs, goodwill adjustments and service recall programs. These types of warranties are seldom available to the public, because they involve unique trade situations and are contractually established on a one-to-one basis by OEMs. Some full-service lease fleets have successfully negotiated extended-service warranty agreements with manufacturers and body fabricators.

In Summary
When soliciting a bid on a new vehicle, define warranty terms, expectations about handling of any defects and the process for liquidating damages. Evaluate bids based on how well they conform to your specifications, the manufacturer’s/dealer’s support capabilities and price. Once you award a bid, closely monitor the vehicle-assembly process. Accept the vehicle only after approval by your shop and the driver.