The effect of supply chain disruptions on the cash management of car dealerships

Abstract

Purpose: The last two years have caused significant slowdown in many different industries. This slowdown has been observed due to disruptions in supply chains. The automotive industry, in particular, has been heavily affected by these disruptions. In Malta, there are no car manufacturers (CMFs); only car importers and car dealerships (CDs). Hence, the researcher sought to evaluate how disruptions in the supply chain have affected CDs. The recent semiconductor microchip (SM MC) shortage has caused delays in the distribution of cars to dealership showrooms, and is mainly due to the COVID-19 pandemic and the Russian/Ukraine war. Other disruptions, namely natural disasters (ND) (like the Tohoku Earthquake), the 2008 financial crisis (FC), and Brexit (BXT) are also investigated. The study aims to analyse how car dealerships have adapted their cash management practices when these disruptions hit their operations, and what courses of action they adopt to relieve themselves. Design: The research objectives are tackled using open-ended, semi-structured interviews with 13 different car dealerships operating in Malta. Findings: Although the majority of CDs have been affected by many supply chain disruptions (SCD) over the years, they are still portrayed as adopting a reactive approach towards the management of cash. Adapting their cash management practices when the shortage of SM MCs hit has been a lengthy process. Notably, not all CDs have been affected the same way; while some have been minimally impacted, others are still experiencing complications. The most common courses of action taken by CDs are an enhancement in the monitoring of daily cash flows and budgeting. Conclusions: CDs are more aware of the fact that cash inflows and outflows should be monitored actively rather than passively. The most relevant part relating to cash inflow and outflow related to the buying and selling of cars; thus, CDs should also aim to keep track of their inventory levels and focus on implementing strategies whereby cash and stock are managed cooperatively. Value: This study provides added value to CDs operating in Malta. This in view of the fact that the industry has not been researched from this point of view within the local context. The study covers how dealerships should implement decision-making solutions at a faster momentum, and how cash should be efficiently managed to ensure smooth recuperation from negative situations caused by supply chain disruptions.