AKRON—Hoping for improved fill-rates and more on-time deliveries, Goodyear is revamping its North American distribution system, consolidating tire shipments to 18 regional ``logistics centers,'' operated for the most part by contracted shippers. The project, begun in earnest three years ago and scheduled to wrap up in about two years, will eliminate overlaps among Goodyear, Goodyear Canada and Kelly-Springfield distribution systems and result in cost savings as well, said Richard P. Adante, vice president overseeing logistics.
It also could mean increased business for independent wholesalers.
Starting from a base of 46 warehouses in 1990, Goodyear shrunk its wholesale distribution network to 29 sites at year-end 1998, and intends to close 11 more this year in favor of three new logistics centers.
By the end of 2001, the company expects to be down to 18 regional centers, Mr. Adante said. A site search for a new warehouse in Florida is under way.
``The changing dynamics of tire distribution patterns are driving this revamp,'' Mr. Adante said. ``Deregulation of trucking played a role as well, offering increased reach, improved delivery technologies, enhanced information flow and product flow, etc.
``A primary goal of this project was to streamline the delivery process,'' he continued. ``We also wanted to create a flexible system in order to be prepared for the future.''
Flexibility in this case includes allowing dealers to use a variety of ordering methods—online, fax, phone-in etc.—whatever the dealer already is comfortable with.
In most cases, Goodyear is outsourcing the operation of the centers to logisitics specialists, like Excel Logistics or CTI.
``This (outsourcing) allows our people to focus on the job at hand—serving the customer,'' Mr. Adante said.
``Despite having fewer facilities, we're actually closer to the customer because each logistics center will be handling the entire product range,'' said Kevin D. Johnson, logistics network rationalization project manager.
``Dealers won't have to wait for shipment of certain tires from a second warehouse, for example.''
Goodyear's consolidation coincides with changes by the mass merchandising industry to streamline their ordering and shipping procedures, Mr. Johnson said, adding weight to the need for the tire maker to clean up its system.
Goodyear's network of 46 warehouses was a result of decisions made in the 1950s, and was perpetuated over the years by the autonomous nature of distribution by Kelly-Springfield and Goodyear Canada, the two logistics executives said.
Along the way, Goodyear took advantage of building new facilities to revamp the physical layout and internal workings of warehouses to make them more efficient, Mr. Johnson said. One specific change was to step up cross-docking—the ability to move tires from an incoming shipment directly to an outgoing truck, bypassing the warehouse entirely, Mr. Johnson said.
The new system also ties into Goodyear's import/export efforts, a distribution element with increasing importance as Goodyear turns to its Asian and Latin American subsidiaries for lower-cost tires, Mssrs. Adante and Johnson said.
Goodyear has spent or budgeted an average of about $20 million for each new center opened recently or scheduled to open this year, according to Goodyear data. These centers replaced 14 Goodyear and/or Kelly warehouses that previously served their respective regions.
One of Goodyear's earliest changeovers, at the Southeast Region center in Atlanta, proved to be a major challenge when the logistics provider selected—Roadway Logistics—went through trying times of its own and forced Goodyear to mend fences with affected dealers.
The problem caused some disruptions in deliveries from late 1995 through early 1997, but the reorganized Caliber Logistics—now owned by Federal Express—eventually straightened out the situation.
Goodyear's restructuring may mean more business for independent wholesalers.
``Anytime a manufacturer goes to fewer distribution points, it's good news for us,'' said George Pehanik of East Bay Tire Co. in Fairfield, Calif., a major West Coast wholesaler of commercial tires. ``They obviously can't service everyone. We see the manufacturers' consolidations as a conscious effort to concentrate their attention on their larger customers.''
East Bay moved into its 386,000-sq.-ft. warehouse in Fairfield a few years ago when the previous occupant, Michelin North America, vacated it in favor of a 1 million-sq.-ft. center near Reno, Nev.
``It doesn't matter to us where our tires come from, because we order by the truckload,'' said Harold Finkelstein of Finkelstein Tire in Astoria, N.Y. ``If this allows Goodyear to reduce costs, all the better for everyone who handles Goodyears.
``We don't expect Goodyear's moves to affect us measurably in any way. We already serve most of their small independent dealers in the Northeast anyway,'' Mr. Finkelstein said.
Finkelstein, which operates six warehouses and a fleet of 55 delivery trucks, claims a 98-percent fill rate.