RING OF FIRE MANAGEMENT: Supply Chain Nightmares and How They Can Affect Your Dealership - AutoSuccessOnline

RING OF FIRE MANAGEMENT: Supply Chain Nightmares and How They Can Affect Your Dealership

So why should a new car dealer in Duluth or Toledo care about earthquakes in Japan? Supply chain disruptions, that’s why. April’s twin earthquakes that struck Japan’s Kyusho island — killing dozens, destroying buildings and displacing thousands of local residents from their homes — also disrupted parts supplies to a Toyota/Lexus plant and caused a two-week halt to production at Honda’s Kumamoto plant and Nissan’s Kyushu plant.

Further back, who can forget the images of the earthquake-spawned tsunami that hit Japan in 2011? That single event caused a supply “chain reaction” that lead to bulletins like these:


Read our entire issue – Click here

General Motors will suspend production at its Shreveport, Louisiana assembly plant starting Monday because of a parts shortage stemming from the earthquake in Japan. The move appears to mark the first North American assembly plant to be idled because of the Japanese disaster. The plant makes the Chevrolet Colorado and GMC Canyon compact pickups

While exports from pan-Asian countries can greatly affect manufacturing and service operations worldwide, an equally devastating effect on the automotive industry would be felt with any disaster on the opposite side of the “Ring of Fire.”

The Ring of Fire is the largest and most active geologic fault line in the world, stretching from New Zealand, all around the east coast of Asia, over to Canada and the U.S and all the way down to the southern tip of South America.

There have been numerous deadly earthquakes this year alone across the Ring of Fire, including in Japan, Peru and New Zealand and the discovery of a massive tear above it will only increase fears that a huge tremor is on its way. NOAA and researchers from Australia are growing more concerned about the increase in seismic activity. As I write this article, Australia’s Northern Territory experienced yet another 6.7 magnitude earthquake.
The South Pacific is not the only portion of the Ring of Fire with recent activity. The San Andreas Fault, which runs 800 miles through California, could zip open for the “Big One,” according to a recent article published in The Wall Street Journal.

Experts say should a powerful earthquake strike, it would cause extensive damage to millions of homes and commercial buildings along its path. But the risk depends on where and when a building was built. Such a “state side” disaster would cause more than supply chain issues — nevermind ports being shut down and rail and roadways coming to a halt. The bigger risk for the North American dealership not directly effected in this scenario would be access to capital and an overall economic slowdown.

While those of us in the risk management and insurance business can help our clients consider the need to keep their own facilities covered for such a direct loss (through products such as business interruption insurance and earthquake coverage), there is no real insurance product out there to offset supply chain disruptions due to far-off disasters. There are four key points that all dealerships should consider when contemplating “Ring of Fire” risk management.

  1. Are your facilities correctly insured for catastrophic earth movement (earthquake) coverage? I am not just speaking to those of you in California. The Midwest’s New Madrid fault is thought by experts to be way overdue for a large earthquake that could affect cities like St. Louis, Missouri and Memphis, Tennessee. Talk to your insurance professional about the earth movement or Earthquake “peril” on your building policy(ies). There are fault lines under Wilmington, North Carolina and around the Great lakes that are a risk, as well.
  2. Review your business income coverage —This is a time-element coverage that “does for the business what the business would have done for itself had a loss not occurred.” You probably have this coverage now for fire, weather or other disaster, but does is cover the peril of earthquake? Also, do you have an available endorsement for “off-premises power failure”?
  3. Have a plan for global events, not just a disaster plan for a disaster that affects your area — What if the supply chain is greatly affected (western ports, rail, etc.)?Does your management team have a plan to slow or shutter facilities and to maintain employment opportunities for staff affected by a slow down?
  4. Round out the P & L – Consider your operation and its fixed versus variable operations. How well can you maintain your business with few or no new cars or access to parts? Do you have the ability to “switch gears” and acquire enough inventory to sell more pre-owned?

Many dealers in coastal areas have had to think about a catastrophic hurricane and how to handle the potential of a disaster in their area. With the recent seismic activity, it is worth a discussion with your insurance professional and management team even if you are not in an earthquake-prone area.

You May Also Like

Identifying Gaps in Digital Retailing Solutions & 5 Easy Fixes

Inconsistencies slow the purchase process, erode consumer trust and eliminate the willingness to purchase.

Identifying Gaps in Digital Retailing Solutions & 5 Easy Fixes

I was recently talking with my friend and industry expert Brian Pasch about the automotive industry and its many growing pains. We discussed how the market continues to evolve and push further into a digital retailing-first approach, despite many dealerships simply not being ready for the change.

The adoption of digital tools has certainly brought about numerous benefits — including a more data-driven approach to turning leads into sales — but it has also exposed certain gaps that need to be addressed. Among the most glaring issues are the lack of personalization and consistency across digital retailing solutions. In this article, we’ll explore these gaps and discuss why they are crucial to the success of car dealerships in the digital age.

The SMS Paradigm: Reshaping Customer Engagement in the Automotive Industry

By reaching out through SMS, we have tapped into the potential of a less invasive, yet highly effective, method of communication.

The SMS Paradigm: Reshaping Customer Engagement in the Automotive Industry
Don’t Be ‘Nice’ to Your Team — Be Caring

Here are four steps to take to lead a team that minimizes critical actions and will put our team members on the path to success.

team leadership
The Top 3 Reasons You’re Missing on Used Vehicles

As front-end profits tighten, misses on used vehicles hurt more. To tighten up acquisition and pricing, you need a different way of operating.

The Top 3 Reasons You’re Missing on Used Vehicles - AutoVision
Is a Vehicle Test Drive Still Relevant Today?

An important part of the process, the test drive is the strongest opportunity to build the customer’s positive emotions around the vehicle.

Is a Vehicle Test Drive Still Relevant Today?

Other Posts

Is Marketing Both the Problem and Solution for the EV Market?

Marketing can answer consumers’ questions and demystify the EV buying journey.

Is Marketing Both the Problem and Solution for the EV Market? myAutoIQ article
Closing the Appraisal Gap

A new OBD II enriched with VIN-centric reconditioning cost data, not estimates, is now integrated into workflow software to eliminate intentionally overlooked or ignored yet authentic reconditioning exposure at appraisal.

Closing the Appraisal Gap - Rapid Recon
Everyday Actions, Monumental Outcomes

It is in the quiet moments of consistent work that our skills are sharpened and our goals are realized.

True success is the product of a daily grind, forged from focus, dedication and perseverance.
Bridging the Communication Gap: Dispelling the Opt-in Text Myth in Dealership CRMs

There are common misconceptions harbored by some CRM providers in the automotive industry that are hindering dealers’ communications with their customers.