When the Power Went Out…

Toyota’sPlan Kept the Supply Chain Moving

At Toyota Financial Services (TFS), every emergency event teaches us new lessons, helps us improve our emergency management program, and lets us evaluate how we can best protect our associates and better serve our customers. And Hurricane Ike, which slammed into the Texas coast on Friday, September 12, was no different.

TFS has a sales finance office in Hous­ton that supports local dealerships with financing and provides retail and lease financing, as well as various additional products such as vehicle service agree­ments, for consumers through the dealerships it supports. While officials were not calling for a mandatory evacu­ation in Houston, our Property Manager advised that they would be shutting down the building at 6:00 PM on Thursday and it would not reopen until the hurricane had passed and a damage assessment had been completed.

The few hours of advanced notice we were given provided just enough time to backup our data, provide external communications to our dealers, protect our work-in-progress, and communicate plans to our associates. Any notice is a luxury and this short time frame empha­sized the importance of having detailed shut down procedures in place and asso­ciates well trained on the process. We knew the office would be closed on Friday and we speculated that we would probably be closed on Saturday; we never anticipated being closed for six days and certainly not for a power failure.

Our emergency operations center was notified that power failed in our Hous­ton office at about 1:00 M on Saturday morning. Neither TFS nor building management maintains a backup gen­erator sufficient to support full normal business operations but we anticipated power would be restored in several hours at the most. What we learned on Saturday morning, however, was that the entire Houston metropolitan area was without power and it was anticipat­ed it could be up to four weeks before full power was restored to all locations.

By Saturday afternoon the brunt of the storm had passed but Houston was experiencing torrential rains. Since our management had electronic home phone systems and no personal generators, and cell phone service was congested and intermittent, communicating was extremely difficult. On Sunday, our local manager drove to the office to determine if there was any damage and then drove by a number of dealerships to determine if they had incurred any damage. These efforts were confounded by the fact that you could not buy gas or use an ATM or get groceries due to the lack of power. Our manager relied upon a neighbor’s generator to recharge his cell phone and laptop.

By Sunday afternoon our emergency management team was able to initiate more normal communications with our local manager and, with the aid of local news reports, we began to gain a better understanding of the scope of damage in southeast Texas. We determined there was no evident damage to our build­ing although security would not allow us back in until power was restored. We also learned, over the course of the next two days, that our distributor had incurred wind and water damage to several of its buildings and that several of the dealerships the office supports had experienced moderate to significant damage to their facilities and to their inventory of vehicles.

We were also able to contact all of our associates and determine only one asso­ciate had incurred any damage to their home and all were safe. We also knew from news reports that many of our customers had lost or incurred damage to their homes or their workplace, many had been displaced, and some may have lost their vehicles as a result of the storm. We were also surprised to learn that our Cincinnati office was without power and closed due to a regional power outage caused by remnants of Hurricane Ike sweeping through Ohio.

TFS was able to reroute work from our Houston office to other sales finance offices and our local focus was to sup­port dealerships, customers and the community. Our distributor, despite its own facility damage, provided virtually every dealership with a portable genera­tor to support basic business operations and dealerships began opening for busi­ness as early as Sunday. Surprisingly, business was brisk and TFS responded with special financing programs for cus­tomers who were located in impacted areas. In addition, our customer service centers were notified to provide special assistance to any customer calling in who indicated they had experienced any hardship from Hurricane Ike. And finally, the local distributor and various Toyota entities contributed a total of $1 million to local relief efforts.

Power was finally restored to our Houston office on late Wednesday after­noon and normal business operations resumed on Thursday morning. Many associates remained without power at home for several additional days and were happy to come to work to escape the 90+ degree weather without air conditioning.

TFS experienced some surprises and valuable lessons learned from Hurri­cane Ike. We were not anticipating an extensive and prolonged regional power failure and the communication challeng­es this created are something we want to address going forward. We currently have the ability to work remotely with laptops, Blackberries, and cell phones but we have to ensure our ability to eas­ily recharge these tools over a prolonged period of time. Communications during and immediately following an event are often challenging and we found that expanded call trees and personal cell phone numbers, especially for support staff outside the local area, are crucial to maximizing our ability to contact indi­viduals and assess the situation.

Also, thorough shut down procedures are essential when given advance notice to ensure system integrity and effective communications with customers and other stakeholders. And in addition to promoting associates maintaining emer­gency supplies and provisions at home, we’ll also reinforce that they fill up with fuel and stop off at the ATM when given advance warning of a pending event since those services may not be available immediately following the event.

Finally, the “supply chain” of business for Toyota Financial Services is critically important for our ongoing business operations. To protect our own business continuity, we need to ensure the abil­ity of our ports, our distributor, and our dealers to maintain ongoing business operations and provide vehicles and related finance products to consumers. Developing an integrated and compre­hensive response among all stakeholders is essential.

For many in southeast Texas, it will take a very long time to recov­er from Hurricane Ike. Fortunately, Toyota Financial Services was able to weather the storm and recover business operations as quickly as possible with minimum impact to our customers, our associates, and our dealers.