In many ways, wholesale tire distributors are the unsung heroes of today's retail tire business.
Without wholesalers supplying tires to retail tire customers, sometimes as frequently as four times a day, many independent tire dealerships and other retail sellers and servicers of tires likely couldn't remain in business for long.
Either that, or dealers would have to stock a lot more tires than they do today in their locations, and/or their customers would have to wait much longer to get their new tires installed.
What's propelled the tire wholesaler to this lofty position is the exponential growth in the number of tire SKUs (stock-keeping units).
Rich Kramer, Goodyear chairman, CEO and president, explained it this way in a recent speech: It takes 625 SKUs to cover 80 percent of the retail tire market, up from 267 SKUs in 2000. For a dealership with 10 stores to stock two full sets of each SKU, it would have to keep 50,000 tires on hand to remain well-stocked, he said.
That's a lot of upfront inventory cost, not to mention the warehouse space, equipment and personnel required to manage this inventory.
Instead, today's independent tire dealers basically don't need to stock any tires at their locations because they work with multiple wholesalers that can provide virtually any tire needed within an hour or two. That allows a retail dealer to provide same-day service and schedule other installations for times that work best for the customer.
One Ohio dealer with two locations explained that his dealership can receive as many as 16 tire deliveries a day from multiple distributors so that it readily can provide tires for its customers. The multi-day delivery service has made running today's multi-brand retail tire locations manageable, despite the size proliferation.
The exponential growth in tire sizes creates additional problems for wholesale distributors. In 2012, roughly 35 percent of replacement tires had rim diameters of 17 inches and larger. By 2022 that percentage is expected to double to 71 percent, according to a recent industry presentation.
Larger-size tires take up more inventory space, requiring wholesalers to adjust their warehousing and shipping operations.
Brian Gollub, director of purchasing and distribution for Sullivan Tire Co. in Massachusetts, said when 15- and 16-inch tires were popular a decade ago, 32 tires would fit on a pallet. Today, with 17-inch and larger tires becoming the norm, only 16 to 20 tires can be stacked on a pallet. The storage and delivery issues this presents for wholesalers are clearly apparent.
But independent tire dealers don't have to concern themselves with such inventory and warehousing problems. Today's wholesale distributors have fine-tuned their operations to provide the products dealers need when they need them. The value that provides is immeasurable.