Turn, turn, turn: Three dealers reveal how they manage their inventories
Turning tire inventory may be the biggest key to turning a profit. But there are many ways to manage it.
Steve Shannon uses his computer system to keep tabs on stock at his wholesale warehouse and eight retail stores. Brad Schmucker also relies on a computer, but more for its ability to print farm tire reports that he can take with him anywhere he goes.
Rudy Zacharias doesn't own a computer, and turns the inventory at his one-store operation a dozen times a year.
The one thing all three independent tire dealers have in common is hands-on management, which includes double-checking invoices and physically counting inventory at least once a year. With them, the personal touch makes all the difference.
Rudy Zacharias can break down his tire sales just about any way you want in a matter of minutes. How many brands did he sell? What percentage did each brand represent of the total, either in sales or units? From whom did he buy the tires?
His spread sheets tell the tale at Zach's Tire Co. Inc. in Irving, Texas. No computer, just a calculator and a thorough understanding of inventory management.
Zacharias stores tires throughout the 5,800-square-foot building. "I used to carry 2,000 units in my warehouse. But I used to get special pricing and terms."
He averages about 350 tires in stock; about half are displayed in his showroom. And he turns his inventory "more than 12 times a year."
As a member of the Bridgestone/Firestone Affiliated Dealer program, he gets special 30-60-90 day terms, so those are the tires he inventories the most. "I have never in 33 years as an independent tire dealer missed a 2% cash discount," he says.
If he needs tires, he can get them quickly. For Bridgestone and Firestone tires, there are three Firestone Tire & Service Centers within 7.2 miles of his store. "The store managers work well with us, but they are our competitors, too."
He also sells Goodyear, Michelin, BFGoodrich and Uniroyal tires, among others. He orders them through a number of local wholesale distributors such as Kauffman Tire Inc., Reliable Tire Co., Big State Tire Supply, TreadXpress and Gateway Tire of Texas. Other suppliers include Goodyear's Dallas distribution center and TCI Tire Centers. He even orders from The Tire Rack if he can't get the tires anywhere else.
Some of his tire purchases don't even see the storage area. "They're not inventory. They're bought and sold when I pick them up."
It works for him. "If I have a customer's car on a lift and I don't have the tire, 99% of the time I can still get the customer out of the store with new tires within an hour."
Zach's Tire racks up more than $1 million in annual sales (Zacharias also wholesales to car dealerships and body shops). Last year, almost $95,000 came from tire-related services such as wheel balancing, flat repair and used tire sales.
"You need to add that to your tire business. That's a lot of profit. Patches don't cost that much, wheel weights don't cost that much. Used tires don't cost anything. That's almost all profit. And I made a profit on the tires."
A former Firestone Tire & Rubber Co. management trainee in the mid-1960s, Zacharias took over a gas station in 1972 and turned it into a tire store. He moved to his current location with the help of a small business loan three years later.
Zacharias is vice president of Zach's Tire. His wife, Tijuana, is the company's president. She says she is looking at adding a computer system.
Her husband thinks it makes the dealer-customer relationship less personal. But she is the boss, he says.
Until she does buy that computer, Rudy will stick with his spread sheets and calculator -- and 44 years of experience.
Steve Shannon, president of Steve Shannon Tire Co. Inc. in Bloomsburg, Pa., wants to know where his tires are at all times. He buys the Bridgestone, Firestone, Delta, Kumho and Nankang brands direct; he uses 10 different wholesale distributors to get him Michelin, BFGoodrich, General and Goodyear tires. "We try to stock anything OE," he says.
Between daily and "hotshot" deliveries to his 7,000 wholesale customers and eight Steve Shannon Tire and Auto Centers in northeast and central Pennsylvania, Shannon is constantly juggling tire supply.
"When you're in the business, you get a feel for what moves," he says. "It's always changing, and you're always monitoring it. Inventory management is the hardest part of the business."
That's especially true when dealing with tire shortages or overseas orders. A shortage of tires "makes you stock heavier because you're afraid you'll run out or won't be able to get them again."
It takes Shannon an average of 60 to 90 days to get his overseas orders filled. "We have a container or two in the water at all times," he says.
Shannon relies on his MaddenCo computer system to control his inventory, accounts receivable and accounts payable. "Computers are expensive to have but time saving. They let you sleep better at night."
It also keeps his stores connected. The system keeps inventory up to date following order entries, and automatically generates "pick tickets" for the retail stores on a daily basis.
Shannon started his business in Bloomsburg 16 years ago with a two-bay gas station and four employees, including himself. Today, 30 of the operation's 100 employees work out of the 43,000-square-foot warehouse alone.
Shannon takes a physical inventory twice a year -- in February, "the slowest month of the year," he says, and September. "But we're always checking it. If the computer says we have eight or 10 tires but they are not there, we stop what we're doing and try to track down the tires. It could be theft, it could be human error."
Shannon says he plans to keep expanding in Pennsylvania. He is getting ready to break ground on his ninth store in Mountaintop, Pa. He also is adding 100,000 square feet to his warehouse.
Like many dealers who sell rear farm and large OTR tires, Brad Schmucker keeps much of his inventory outside. In his case, he stores up to 2,000 tires, predominantly the Firestone brand, in neatly arranged, fenced-in sections.
"It maxes out in April," says Schmucker, president of Millersburg Tire Service Inc. in Millersburg, Ohio. "That's when I get nervous seeing all the tractor tires outside."
But the demand always takes care of the supply. Millersburg Tire turns its inventory between eight and 10 times a year. Schmucker says the big sizes always sell in the spring.
"Ideally, I like to be down to 700 to 800 tractor tires. It takes some real knack and know-how to make sure you don't lose any sales but keep enough (inventory) on hand."
Millersburg Tire's ASA computer system helps manage the inventory. Schmucker particularly likes the reports it creates for him. "I'm always looking at reports. Geez, the backorder report is seven pages."
Millersburg Tire's fiscal year runs Sept. 1 through Aug. 31. "We try to whittle the inventory down because we take a physical inventory at the end of August, says Schmucker. "I pay personal property taxes on the tires otherwise."
With the help of his ASA computer system, he keeps track of not only his outside inventory, but also his inside stock of more than 40,000 consumer and commercial tires. "If we find a discrepancy, we correct it as we go. But we work hard not to make mistakes.
"Once we invoice (the tire sale), the system deducts the quantity. I go through the invoices every night. I can tell when you need to order something."
He says he learned about the business from his father, Sheldon, who started it with his brother-in-law, Art Miller, in 1953.
Despite strong demand, ordering inventory remains difficult without a crystal ball, according to Schmucker. The key is always to have the tires on hand.
"We're committed to the farmer, so we have to have the tires."