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Fill-rate problems

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Fill-rate problems

The recession last year helped curtail demand. As a result, tire manufacturers reduced their inventories to historically low levels.

The imposition of Chinese consumer tire tariffs on Sept. 26 led to drastically reduced imports. Importers had brought in extra shipments in advance, but the stockpiles have disappeared.

You can guess what is happening now. Tire supply is not able to keep up with pent-up tire demand. And fill rates are terrible.

Even vehicle manufacturers are demanding more tires, which will make it even more difficult for tire companies to fill your orders for replacement tires.

How bad is it? The majority of respondents to our recent Web poll on www.moderntiredealer.com indicated their fill rates on consumer tires were at 70% or below. That is not acceptable by either dealers or tire manufacturers.

Two recent comments on Modern Tire Dealer’s Facebook page succinctly illustrate the problem.

Vicki Moyer Williams, co-owner of Williams Norwalk Tire & Alignment in Norwalk, Ohio, says lack of supply is quite evident.

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“I checked a size today — 20 different tire styles listed but only about four that I could actually order — and the cheapest was a Michelin,” she wrote on March 4. “The customer did not want to spend that much.”

Williams Norwalk Tire offers Uniroyal, Michelin, BFGoodrich, Mastercraft, Firestone, Goodyear General, “and more.”

“It’s only going to get worse,” wrote Alan Jones, owner of Tire-City Inc. in Bristol, Pa., in response to Williams’ comment. “The fill rate is so bad.”

Tire-City has been a family-owned business for all of its 51 years.

“We offer at least eight brands,” says Jones, “and they all have problems with fill rates now... and yes, it is worse this year. It will affect the whole pipeline.

“Conti General’s rate was good, but with the demand, they are now hurting. I have taken Kelly on to fill some voids.

“I think we must bring production back in the states to create more jobs here and supply our needs first.”

According to its Web site, Tire-City sells Cooper, General, BFGoodrich, Summit, Sumitomo, Goodyear, Dunlop, Pirelli, Bridgestone, Continental, Michelin, Carlisle, Deestone, Heritage “and many more tires.”

“I sell all the brands listed, also Carlisle lawn and garden,” says Jones. “I keep around 5,000 tires in stock at all times.”

His medium truck tire sales are predominantly made up of foreign brands “because of the pricing. I also have a large industrial and medium truck wholesaler within 15 minutes from me, so I don’t have to keep that many in stock.”

In defense of the tire manufacturers, annual original equipment passenger and light truck tire shipments have decreased each of the last four years, and replacement consumer tire shipments have dropped three of the last four years. According to Phil Caris, vice president of sales and marketing for Cooper Tire & Rubber Co.’s North American Tire division, service levels are more challenged than they’ve ever been.

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“You had a lot of manufacturers that were, in my opinion, pretty responsible with managing inventory,” he says. “They scheduled what I call ‘unplanned’ planned plant shutdowns. You also had manufacturers taking plants completely off-stream on a permanent basis.”

Caris says the moves were necessary. “Last year, capacity was relatively high in the early part of the year, and demand was off-line. In the middle of the year, demand started to pick up in certain segments, and in some OE segments as well, and the manufacturers couldn’t keep up with supply.

“Then, to compound the problem, the ITC (International Trade Commission) 421 ruling led to tariffs on Chinese consumer tires, which affected supply in October, November and December.”

That gave independent tire dealers, who reduced their inventory levels for similar reasons, fewer options when demand picked up.

Although Caris says the manufacturers couldn’t have predicted what turned out to be the perfect storm, it is still their responsibility to increase their supply and get fill rates back up to respectable levels.

If manufacturers can fill 100% of your orders 100% of the time, then they undoubtedly have too much inventory. That’s good for you, bad for them.

However, if they can’t fill your orders to your satisfaction, they not only lose sales, but run the risk of losing you as a customer. There has to be a balance.

Ultimately, it has to be the consumer who matters to you.

Tire-City’s Jones has the right attitude. He has been involved in the business for 40 years. His father, the late Wesley Richard “Boney” Jones, founded the dealership in 1959.

“Our customers are awesome, and they trust us with their tires,” he says.   ■

If you have questions or comments, please e-mail me at bob.ulrich@bobit.com.

 

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