Strategies for Car Storage Before Sales to Dealerships

Car manufacturers employ various strategies to manage the storage of vehicles before they are sold to dealerships. Understanding these strategies can provide valuable insights into the car industry's logistics and financial operations.

Post-Production Storage and Distribution

Before cars reach dealerships, they undergo a series of processes, including post-delivery inspections and are typically stored in large warehouses or lots adjacent to manufacturing plants. These storage facilities are equipped to handle the influx of vehicles that come periodically from assembly lines.

One common storage method involves using a large lot beside the factory, where cars wait to be loaded onto trains or other transportation methods for delivery. This arrangement is particularly useful when sales of a specific model are slow. In such cases, manufacturers can continue production while awaiting new marketing strategies or the resolution of issues like train strikes.

For instance, a friend of mine ordered a car just before a train strike. His vehicle, like thousands of others, was part of a large storage inventory at a factory waiting for conditions to improve. It took several weeks post-strike for his car to finally be delivered.

Storage Facilities in California

In California, there is a significant storage facility in Mira Loma, where vehicles from all Southern California dealerships are dropped off after being unloaded from trains. From this location, these vehicles are then transported to individual dealerships.

This transit and dealer lot system is crucial for managing inventory across the state. If sales for a particular model are slow, or there are logistical issues, dealerships are often incentivized to take more cars, reducing the need for storage at the factory. This approach helps manufacturers to optimize their supply chain and minimize inventory costs.

Just in Time Manufacturing

To mitigate the risks associated with unsold inventory, car manufacturers increasingly rely on Just in Time (JIT) manufacturing. JIT emphasizes producing goods only as they are needed, thereby reducing storage costs and minimizing the risk of inventory depreciation.

At the manufacturing plant I worked in, the process was straightforward: cars were built, then immediately passed through a post-delivery inspection before being shipped to dealers by truck. This minimized the time cars spent in storage, reducing the risk of price erosion due to depreciation.

Despite the benefits of JIT, car manufacturers still face challenges such as the 2008 recession, which resulted in a significant drop in car sales. Managing production levels in line with demand is a complex task, and aligning with market changes can be difficult.

Dealer Pressure and Incentives

Dealerships also play a significant role in managing car inventory. Dealers are under pressure to sell as many cars as possible to meet targets. Undersold inventory means that customers can often negotiate better prices, leading to increased competition.

Manufacturers, in turn, offer various incentives to buyers to reduce unsold inventory, including discounts and trade-ins. These strategies help ensure that dealerships maintain a healthy stock of vehicles and that customers are willing to purchase them at acceptable prices.

Conclusion

Car manufacturers strive to avoid over-storage and over-production to prevent unsold inventory, which can lead to significant financial losses. The combination of post-delivery inspections, optimized distribution using transit lots, and Just in Time manufacturing practices helps them stay flexible and responsive to market demands.

Understanding these strategies can provide valuable insights into the intricacies of the car manufacturing and sales process, offering both consumers and industry professionals a clearer picture of how new cars make their way from the factory to dealerships and eventually to your driveway.