The semiconductor chip shortage has wreaked havoc on automotive production for the better part of a year now, proving difficult for automakers to overcome. Ford CEO Jim Farley recently said that he expects the problem to last through 2023 at the very least, though the crisis may also prompt FoMoCo to make some more permanent changes to the way it does business. That includes a shift toward a more build-to-order paradigm, which is already in motion as Ford’s retail orders have surged in recent months. It also means that dealer lots will stock far fewer vehicle configurations than before, according to a dealer memo seen by Cars Direct.
The memo refers to what Ford calls “inventory reframing,” which involves slashing available vehicle configurations by a whopping 70-80 percent. Dealer stock will consist of vehicles sporting the company’s better-selling configurations, based on regional sales data, for nine different models – the Ford Escape, Ford Bronco Sport, Ford Edge, Ford Explorer, Ford Expedition, Ford Ranger, Ford F-150, Ford Super Duty F-250, and Ford Mustang. These changes will begin taking place with late January or early February’s wholesale allocation, according to Ford.
In addition to sales data, these configurations will also be based on dealer input. According to Ford, this change will positively impact business in a variety of ways, including speeding up inventory turns, reducing old inventory, lowering floorplan expenses for dealers, improving profitability, making forecasting a bit more predictable, and making it easier to manage inventory.
Meanwhile, customers that still want specific features or option packages will be able to custom order a vehicle with those items, but those that prefer to purchase vehicles from dealer lots will have far less to choose from moving forward.
We’ll have more on Ford’s shift to more of a build-to-order strategy soon, so be sure and subscribe to Ford Authority for around-the-clock Ford news coverage.
Comments
This will be an interesting experiment to watch unfold. But this is bad news for those of us that like to haggle. The best deals are always for the cars on the lot…and the longer they have been there, the better.
That’s pretty much what they and their dealers have been doing all along. All the Explorers and Escapes are black or grey, all the Rangers are SuperCrew only, none or maybe one 5.0L F-150, all the Mach-Es are the base model. what’s an Edge? Every interior is black regardless of what else might be available. There are exceptions, of course but they are pretty rare.
All this hubbub about conditions under the pandemic and the “chip shortage” will change once market conditions return to normal (might take several years). I’m REALLY tired of hearing about it!
These changes have been a long time coming. All of the OEMs and the dealers have known that this would reduce their costs and improve margins, but both they and consumers were addicted to rebates, price haggling, etc. as the “way it’s always been done.” But those ways have been a bad trade-off financially, and Wall Street has punished the OEMs because of it. Now, despite the deep reductions in total sales volume, profitability is the best its ever been, stock prices are nearing (or above) records, and board rooms are noticing. These changes are here to stay for now.
This is the Honda model. Every Accord EX is exactly the same except for the interior and exterior colors. Every Civic EXL is exactly the same except for colors. I sold Hondas for ten years and no one ever custom ordered a vehicle. Assembly has to be less problematic versus 1 million possible configurations.
First thought … Ford I’d think would make available to the dealers all the “configurator” data that show what buyers are thing about in their area. Two options I’d like to see available on all trim levels from the Humble Work truck to the King Ranch … nav/sat radio system. Hyundai offers it on their 19K Venue … so why not for a say $28K Work Truck.
Ford as far as “inventory reframing” is already doing that with the Maverick. Id say that’s pretty much the model. 3 Trim levels with matching interiors, Deluxe or not and you can order a sunroof 🙂 If they can do something about the “Allocation” structure which shouldn’t matter in a customer order situation then they might have something. ADM on dealer stock vehicles should be addressed by Ford Corp as well.
Where’s my Maverick XLT?
Thanks for the time, hoping all production is going well.
“You can have any color you want, as long as its black.” What is old is new again.