AKRON — Stock Keeping Units (SKUs) — product codes for keeping track of inventory — have boomed within the tire industry.
Greg Ring, director of training and development for K&M Tire Inc., told dealers at the recent K&M Dealer Conference, held in Dallas, that 625 SKUs cover 80 percent of the tire market today. Less than 20 years ago, that number was around 267, covering the same percentage of the market, according to Mr. Ring.
In fact, Rich Kramer, Chairman, CEO and president of Goodyear, said in a recent speech that if a dealer has two full sets of tires under each SKU, and if he has 10 stores, he would need to keep 50,000 tires in his stores every day.
How has the proliferation of SKUs affected tire wholesalers?
Overall, it has pushed small and mid-sized tire dealers to rely heavily on regional and national distributors for their product needs, according to Brian Gollub, director of purchasing and distribution for Taunton, Mass.-based Sullivan Tire Co.
"We know it's very common for a retailer to have several distributors' websites open on their computers all day long as they look to source the specific tires necessary to meet customer expectations," Mr. Gollub said.
"It has also forced distributors to focus on supply chain management, as speed to market and multiple daily deliveries become the standard in urban and suburban geographies," he said.
The proliferation of SKUs is one of the things that separates a wholesaler from a distributor, according to Brian Finkelstein, vice president of sales at Astoria, N.Y.-based Max Finkelstein Inc.
"For our business, the proliferation of SKUs has been a very good thing," Mr. Finkelstein said. "Although it poses new challenges, it makes us think progressively and fosters continuous improvement across all business channels."
To Joe Inchiostro, CEO and owner of St. Louis-based St. Louis Wholesale Tire Inc., the growth of SKUs presents a balancing act for wholesalers.
"It's a balancing act between having a complete line of products and not competing against yourself," Mr. Inchiostro said.
Mr. Inchiostro described St. Louis Wholesale Tire as the source for the "oddball, hard-to-find tires" serving specialty markets such as sports and leisure, mining, forestry and agriculture, with unusual sizes and tread patterns.
Those kinds of tires comprise maybe 10 to 20 percent of a large wholesaler's inventory, but about 50 percent of the inventory at St. Louis Wholesale Tire, he said.
"This is a competitive advantage for us," Mr. Inchiostro said. "When we offer more SKUs, we can compete against the big-box wholesalers. Also, having a broader product mix is a convenience factor for customers."
Mr. Gollub said the proliferation of SKUs has created a complexity to wholesaling that in itself creates a barrier to entering the wholesale tire business. This is a benefit to existing wholesalers, he said.
"Manufacturers want their distributors to go deep, not just stocking A and B numbers, but also the slower-moving C and D numbers to meet the needs of the marketplace," he said.
"We don't necessarily feel that more SKUs increase business overall in any given region, but a well-stocked distributor can enhance their share of the pie," Mr. Gollub said.
The people and systems Max Finkelstein has in place allow the company to execute an inventory stocking and replenishment strategy that can handle the complexity of thousands of new SKUs, according to Mr. Finkelstein.
"We also have the proper infrastructure and equipment to handle these changes," he said. "Distributors that aren't up to speed with technology will have a hard time keeping up, especially as the market continues to require higher service levels."
Having more SKUs requires quicker inventory turns and replenishment cycles, as well as better inventory allocation, larger capital investments and dealing with space constraints, according to Mr. Finkelstein.
"Everyone struggles at some point, and it certainly can be a challenge for distributors with many brands or locations," he said. "Vision and execution don't always go hand in hand."
The growth in SKUs hasn't been across all markets, according to Mr. Inchiostro.
"The passenger market exploded with new sizes about 10 or 15 years ago," he said. "That's unlike commercial sizes. Ten sizes cover 90 percent of the market, and that's pretty static."
Along with benefits, the growth of SKUs has created a multitude of challenges for wholesalers, according to Mr. Gollub.