AKRON (June 21, 2002) — Kevin Roberts' situation was typical of the problem Goodyear faced with its smaller tire dealer customers.
“Goodyear was losing my business,” said the manager of the independent Brown-Powers Goodyear tire store in rural Brandenburg, Ky., about 30 miles southwest of Louisville, Ky.
Supply was the biggest problem. Delivery had dwindled to an every-other-week schedule and his order often would not be filled completely.
It had gotten to the point that Mr. Roberts often would request twice as many tires as he actually needed because “it might be a month to get them otherwise.”
He even took to ordering tires from Tire Rack as a last option so as not to lose a customer. “I can buy a tire from Tire Rack and pay the freight and a lot of time it would still be cheaper than what I'd pay Goodyear with free freight,” he said.
That was before Goodyear launched its G3 Xpress program for smaller dealerships Jan. 1 and S&S Tire Inc., an independent G3 Xpress wholesale distributor in Lexington, Ky., took over as Brown-Powers' supplier of Goodyear tires.
Now Mr. Roberts is singing a different tune.
“I love it,” he said of the tire maker's small dealer program. “It's been a godsend.” And the reason why? “Delivery is No. 1 and price is No. 2,” he said, not to mention the $40,000 reduction in his inventory expense.
Goodyear heralded G3 Xpress at its annual dealer meeting last November in Las Vegas. Its goal was to regain business it had lost with many of its smaller tire dealer customers as a result of delivery and pricing problems.
With assistance from the tire maker's own warehouses, the idea was to offer better, faster and more complete service, along with more competitive pricing and a larger assortment of tires to these smaller dealers by using independent wholesaler distributors, said Jim Vogel, Goodyear's vice president of consumer tires.
For Goodyear, trying to provide daily delivery to these small, often rural outlets had become cost-prohibitive. And its inability to fill all orders 100 percent of the time had forced many smaller dealers to buy up to 20 percent of their Goodyear products from non-authorized distributors. And since those purchases could not be counted as part of volume programs, the dealers' buying price went up as well.
To remedy this situation, Goodyear launched G3 Xpress, which takes advantage of an independent wholesaler's ability to deliver tires more efficiently and economically to these accounts.
To date, the tire maker has signed 41 independent wholesalers as G3 Xpress distributors—it's still looking to add a few more in the northwest mountain states and in North and South Dakota—and has 850 participating retail dealerships.
The program is open to Goodyear authorized dealers and associate dealers ordering less than $300,000, but more than $50,000, worth of tires from the company annually.
“We're trying to win back the share of account with each current independent tire dealer, and we think we can do that by using the services of wholesale distributors,” Mr. Vogel said.
Like Mr. Roberts, Pete Allan of Allan's Tire & Auto Center Inc. in Green Bay, Wis., also was experiencing poor delivery as a direct Goodyear dealer.
So when G3 Xpress wholesale distributor Schierl Tire and Service in Stevens Point, Wis., asked him to be a “guinea pig” and join the program, he quickly agreed.
“They promised better deliveries and said it would not affect my buying price,” said Mr. Allen, who now receives deliveries from Schierl Tire once a day.
“One of the huge advantages of the program is the ability of the independent tire dealer to reduce inventory because of daily delivery and a 90-percent fill rate,” said Tim Schierl, co-owner of Schierl Tire. He helped develop G3 Xpress with Goodyear and was part of the pilot effort begun in 1999.
Mr. Allen agreed. “You don't have to carry every tire in a line,” he said. “You don't have to carry as many numbers of tires and you don't to have to stock the oddball performance stuff that will fit only a few vehicles. So it's been good for me.” And having to inventory fewer tires has been a boon to cash flow, he added.
Schierl Tire operates six retail stores in Wisconsin, including Hartje Tire & Service in LaValle, a retail, commercial and farm facility in which it holds a 49-percent stake. It also has a 56,000-sq.-ft. distribution facility in Plover, Wis., that is 100-percent dedicated to the G3 Xpress program, and services a total of 63 G3 Xpress dealerships.
Mr. Schierl said he came to Goodyear with a proposal to provide better service to some of the company's dealers in the Upper Peninsula of Michigan, where Goodyear was having trouble. Working together, Goodyear and Mr. Schierl developed a concept program, which the tire maker approved as a three-year pilot.
“We felt we could provide better service than Goodyear could,” Mr. Schierl said of the 34 dealerships, including Allan's Tire, that initially took part in the pilot.
And the “test went excellent,” he explained. Goodyear's sales to these accounts grew at a rate of 12 percent over the three-year period vs. an annual growth rate of about 2 percent for the industry.
As a G3 Xpress wholesale distributor, Schierl Tire provides all the services that Goodyear had been giving these dealerships, including carrying of credit, Mr. Schierl said.
For S&S Tire, which operates six warehouses and 20 retail tire stores, joining the program as a wholesale distributor has brought additional business to the dealership—namely the 35 G3 Xpress dealerships the company now supplies, President Paul Swentzel said. “From Good-year's standpoint, we can distribute the small numbers of tires more efficiently and timely to the dealer,” he ex-plained.
“The only way this works,” he added, “is if all three of us win—the G3 distributor, Goodyear and the G3 dealer.”
While G3 Xpress dealers are no longer considered direct accounts with Goodyear, they will see no changes in terms of keeping their Goodyear signage or use of the company's Xplor Intranet, Mr. Vogel said. They also will continue to handle Goodyear national and governmental accounts as well as participate in any company programs they currently can access.
To communicate with its G3 Xpress dealers and distributors, Goodyear has established an electronic interface with them. The technology, which went live June 1, is especially important for national account and government sales. While these orders are placed directly with Goodyear, the system automatically transfers the information to the wholesale distributor, Mr. Vogel said.
For G3 Xpress to work in the marketplace, Goodyear instituted a program earlier this year to stabilize pricing on its products in the North American market. “We had to,” Mr. Vogel said. “Otherwise, the wholesale distributors couldn't competitively supply the dealers because there were so many conflicts in pricing.”
While this decision angered some of Goodyear's larger distributors, causing them to hold back on purchases from the tire maker, several G3 Xpress wholesalers expressed support for the effort.
“Pricing parity is a positive thing,” said Mel Shook, president of Big State Tire Supply in Lubbock, Texas, a G3 Xpress wholesaler with 10 warehouses in Texas, Oklahoma and New Mexico and 100 G3 Xpress dealer customers. “It's been difficult for them to control the price collected for the product in the market.”
Doug Muenster, team leader for Schierl Tire's distribution division, agreed. “It's a great program,” he said of Goodyear's effort to level pricing in the market. “Once it's cleaned up, it should add to our business.”
While G3 Xpress is still in its infancy, Messrs. Shook and Schierl would like to see it expanded from its current passenger and light truck tire offerings to include truck and farm tires.
“What we're finding is in rural markets the program needs to be consumer, commercial and farm,” Mr. Schierl said, an opinion seconded by Mr. Shook. While his Big State Tire already sells Goodyear's lineup of farm tires, “we need truck tires as part of that program,” he said.
Offering a broader line of products also would create an “ease of simplicity” for these rural dealers by eliminating the need for them to order farm and commercial tires from someone else, Mr. Schierl continued.
This, he said, opens up a great opportunity for Goodyear “because nobody in the industry is doing that right now.”
Goodyear, he added, is actively looking into a program for all products.
In assessing the future of G3 Xpress, Mr. Schierl said “the potential is unbelievable.”
“If they repeated in 50 states what we've done in one, you could target increases in the hundreds of millions of dollars,” he said.