What big fleets want from dealers: 'Take us out of the tire business!'
From simple tread depth checks to lifetime tire tracking, an ever-growing number of fleets are placing their tire responsibilities squarely on the shoulders of independent tire dealers. The practice will continue as trucking companies continue to streamline their budgets.
Fleets, both large and small, are facing "increased costs of wages, fuel and insurance and freight rates that have risen 37% less than the cost of inflation," says American Trucking Associations (ATA) President Duane Acklie.
More than 3,000 trucking companies filed for bankruptcy last year, according to ATA records.
Even more are expected to go under before the end of 2002. Skyrocketing insurance premiums are a major factor, according to Bob Costello, the ATA's chief economist. "For primary insurance, the average premium increase in 2001 was 37%." Some have risen 300% to 500%, he says. Trucking companies experienced an additional 87% spike in secondary, or "umbrella," insurance premiums last year. "Escalating insurance premiums will be a constant challenge for carriers everywhere."
"I have two priorities: reduce our costs and find ways to improve service," says Jim Cade, vice president of fleet maintenance for Ryder Systems, which purchased more than 500,000 new tires and retreads in 2001. "The best way to do that is to maximize vehicle up-time. I place a high value on suppliers who help us with that effort."
"Fleets are out-sourcing everything they can that isn't related to their core business," says Wade Lucas, director of maintenance for Ideal Lease, which runs more than 14,000 tractors, a comparable number of straight trucks and 450 trailers out of more than 470 locations throughout the United States, Canada and Mexico. Lucas -- along with David Williams of Knight Transportation and Carl Tapp of P.A.M. Transport, two national, multi-million dollar trucking firms -- revealed what they expect from commercial tire dealers at Bridgestone/Firestone Americas Holding Inc.'s BizCon dealer meeting in New Orleans, La., this year.
"Commercial dealers are our number-one expense," says Lucas. Ideal usually forms "partnerships" with independent commercial dealers in each of the company's markets. "We require weekly yard checks and consistent pricing across multiple locations."
The fleet places a high premium on services like tire rotations, air pressure checks, balancing, alignments, and -- most importantly -- road service. "It's not about the lowest price on any given day."
Consistency from one location to the next is crucial, according to Tapp. "Responsiveness is equally important, whenever and wherever we operate. You can't afford not to properly train your employees."
"The first and most critical step is communication," says Williams. "(Dealers) need to understand our business -- our economic model and what drives it. They need to understand the role they play in the cost structure of my company. It's important for both of our companies to keep our cost structures in line."
Williams expects dealers to help Knight Transportation "implement logistics solutions," which, he admits, "is easier to say than to do." He also demands fast and efficient road service. "When our equipment is in a tight spot, we expect someone to get us up and running quickly."
Tapp advises dealers to expand their yard service menus to include "extras" like wheel stud replacement and mud flap installation. "Think outside the box."
That applies to Internet services as well, according to Williams. "We look for dealers to provide as much as possible on-line" like inventories, work orders and invoices. "The successful tire dealer will always look for opportunities to save my company money."
Up to the challenge
John Snider, president of Charlotte, N.C.-based Snider Tire Co., saw the truck tire out-sourcing trend start to develop years ago and wasted no time in implementing programs to fit his customers' needs. "We do full out-sourcing programs, mounted tire programs, single-source supply programs," he says. "We've developed proprietary computer software" that tracks tires and retreads and then provides reports to fleet managers.
Fleets are more service-oriented than product-oriented, says Snider. But it's hard to service large fleets without "the infrastructure and the facilities" to handle national accounts. Snider Tire has locations in South Carolina, Texas, Ohio and several other states.
The dealership's services are evolving to keep up with trucking companies' changing demands. "We're doing a pilot program on preventative maintenance" involving oil changes and other procedures. And Snider has hired a company to design software that will guide fleets through the preventative maintenance process. "We're looking at other directions that will bring us closer (to customers)," Snider says.
Rich Hudson's fleet customers take full advantage of the mounting program launched at his dealership, Hudson's Tire Centers, in 1999. Hudson's Tire Centers is located in Ardmore, Okla., halfway between Oklahoma City and Houston, Texas, two cities that see plenty of line-haul traffic. "I'll load up the tires and wheels, take them to my shop, do the work and deliver them back to the customer," he says.
The service saves fleets money. "We can do it more cheaply than they can because that's all we do." It also reduces their exposure to potential accidents and lawsuits since the majority of his customers' tire and wheel-related mishaps occur in their own garages. Hudson also has two dedicated techs who do nothing but alignments at his single-location shop.
Strategies that work
Offering more services also makes it easier to win new accounts, says Ron Flood, vice president of Tirecraft Commercial Inc. in Toronto, Ontario. "We pursue new business with a total management program: mileage tracking, cost-per-mile -- which is the biggest aspect -- reporting, maintenance and retreading." Tirecraft has four retread plants, all in Ontario. "At the end of the day, they have to lower their costs. We give them the facts" that will help them achieve that.
Half of Tirecraft's fleet customers base their buys strictly on price, according to Flood -- a mindset he's working hard to change. "The biggest thing is going in and putting the facts in front of them. Some listen, some don't."
If price-conscious customers want to jump ship to get lower prices, "we explain to them what we've done for them." Flood never writes off ex-customers. "We'll keep going in and showing them how we can lower their costs."
Nearly 20% of Tirecraft's fleet customers ask the dealership to routinely tweak their service programs, "especially the bigger ones. The smaller (fleets) are still getting educated."
Hungerford, Texas-based Strouhal Tire Recapping Inc. offers fleets a wide range of services like spin balancing, 24-hour road service, and access to retreads (the company retreads 300 truck tires a day out of two plants, according to Modern Tire Dealer statistics). The dealership also performs truck alignments at six of its nine locations. Within two years, all Strouhal facilities will be equipped to perform alignments, according to Dan Wells, manager of Strouhal's Buffalo, Texas, outlet.
"A lot of fleets are hiring people who know nothing about tires -- and some don't want to know!" Wells says. "You have to teach them." Strouhal has dedicated employees who service specific fleets in specific areas.
As big fleet consolidation continues, don't assume that what works for a parent company will work for the firm it acquires, Wells says. "You have to make sure you can service the acquisitions. That can be a big problem."
Tri-State Tire in St. Louis, Mo., services 300 to 400 commercial accounts out of one building. Many of them are construction companies. "Their trucks will never be down -- we guarantee that personally," says owner Dan Puricelli. "If a customer calls us, we'll send a guy out in a minute."
Regardless of size, all fleets are looking for personalized service, according to Puricelli. "I like customers to know they're dealing with a person.
"Anyone can sell price. Price isn't what they're buying from me. They're buying a company and the quality of my people."