MTD 100: Market Forces Push Dealers Into Uncharted Waters
Top Execs Discuss Tough Decisions They're Making
The labor shortage is a near-universal problem. But tire dealers are grappling with other challenges, too.
Jamie Ward, CEO and president of Cincinnati, Ohio-based Tire Discounters Inc., cites supply chain complications as a major problem.
“We’ve always been agnostic when it comes to waving a specific flag or banner,” he says. “We’ve always tried to have direct programs with all of the manufacturers - oftentimes container programs, where the tires come straight to our warehouses.
“For us, the challenge has been container shortages. It’s been expensive, whether it relates to what the per-can costs are - having a (container) unloaded in Los Angeles and transported to our warehouse in Cincinnati or another warehouse.
“The costs have been a killer. The delays have been a killer. We’ve been seeing poor fill rates. But we outpace that by over-work and also by looking at (different) brands to fill in when others have fallen short.
“The problem is, we have certain agreements with certain vendors for commitments at certain volumes. In order for a new supplier to come in, they’re going to have to be able to fulfill those volumes. If they can’t come in strong enough - with enough of their inventory - we can’t do a deal with them.
“There was a brand a few years ago that tried changing its program and we said, ‘Sorry, we’re going to have to let you go.’ It was really disappointing because it’s a brand we had done a lot of business with for a long time.”
Ward says Tire Discounters has had to raise its own prices in response to the escalating cost of new tires and other items necessary for operation.
“The average cost of goods has skyrocketed with all the price increases (tiremakers) have been pushing out. And it’s not just that. Every single piece of business has spiked from a cost standpoint. We’ve been forced to seriously look at our pricing and raise prices as necessary. That’s a critical part of survival right now.
“We’ve seen supply chain shortages before. We’ve seen rising prices before. We’ve seen all kinds of things. But this year, we’re seeing it all - every single piece coming at us. All the darts are (hitting) at once. We’re succeeding, but it’s been a bear.”
Don Mead, CEO of Callaghan Tire, which is based in Bradenton, Fla., says supply has been “a huge challenge. But our team has done a great job and we’ve received great support from our suppliers.”
Inflation has put pressure on daily operations, says Mead. “We’re getting price increases every three months. This year, in some categories, it’s been 8%, 10% or 12%.
“I understand the need for the increases. Our job is to make sure we don’t have a lag between the time we experience (increases) on incoming products” and when Callaghan Tire passes those hikes to its customers.
Fuel price spikes have been problematic, as well, he reports. This past May, the dealership - which runs a fleet of road service trucks - spent $50,000 more in fuel than what it paid during May 2021. “We’ve done more service calls. We’ve spent more money moving tires around. We’re putting more miles on. But that’s still a crazy number.
“In a way, you almost have to re-budget every month. One thing I do every month is ask, ‘Where’s our break-even?’ That’s a key piece of information.”
Walt Dealtrey, CEO and president of Service Tire Truck Centers Inc., says his company is adding surcharges to road service calls and deliveries in order to counter the high cost of fuel.
“We go in with an hourly rate to do the work, so rather than raising our hourly rate we just do a surcharge. The customer knows if the price of fuel ever comes down, at least (we won’t charge) a higher hourly rate. “It’s a matter of telling them - not asking them - via letter, saying, ‘Here’s our surcharge.’ And they’re still calling. We’re still busy.”
“We’ve had to raise our service rates 15% or more over the last year,” says Jon Langerak, chairman and CEO of Wonderland Tire Co.
“We just started a fuel surcharge. We’ve gotten some complaints and we try to work with the customer. But they’re experiencing this themselves and have had to take similar actions, so I would say overall, our customers have been good about it — understanding that their own costs have gone up.”
The 2022 MTD 100 can be viewed here, starting on page 34.
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