TireHub is a young tire distributor that has is focused on delivering service excellence in order to grow very rapidly. Since their opening in July of 2018, TireHub has grown to 71 TLCs (TireHub Logistics Centers) with plans for more growth in 2020. In several ways, their business model is like Amazon’s, only their primary focus is delivering to business customers rather than consumers.
Interestingly, this company was formed by two competitors – Goodyear and Bridgestone. Executives from both Bridgestone and Goodyear, two well-known brands, realized that when it came to distribution of tires to the secondary market – the market for replacement tires – cooperation was more beneficial to meet customer needs.
I interviewed Ashok Vantipalli, TireHub’s vice president of technology, surrounding the company’s business model, supply chain, and how they are using technology to differentiate their offering in the tire distribution industry in the United States.
“We need to do three things,” Mr. Vantipalli explained. “We need to connect demand to supply in real time. We need to make sure the right product was in the right place at the right location. Then when we get the order, we need to deliver on time.” Technology is an enabler in all three of these areas.The tire distribution supply chain starts with a consumer that needs a new tire or tires. That customer may go to a big box store, like Costco, car dealerships, local mechanics, and local tire retailers. That retail outlet, in turn, orders tires from distributors. The distributors can carry 20 to 30 different brands from several different manufacturers. But, TireHub is more specialized than traditional distributors with a focus on premium Goodyear and Bridgestone brands.
Potential customers tend to ask for the brand of tires that are already on their car. However, if a dealer, or other retail outlet, is out that stock keeping unit (SKU), and they can get a similar tire from a different manufacturer more quickly, they often suggest the competing brand to the customer. The customer usually agrees. TireHub was created to provide broad and deep of service for dealers and retailers across America.
There are tens of thousands tire stock keeping units. This SKU proliferation makes it impossible for retail outlets to have all the tires they might need on hand. Making on site storage even more difficult is the fact that tires are bulky, they take up a lot of room. SKU proliferation also makes it very difficult for distributors to economically carry the right inventory.
The combination of Goodyear’s and Bridgestone’s distribution centers, and the decision to build additional warehousing in other metropolitan areas, gave TireHub “the breadth and depth” to compete on speed. An order that is placed in the morning can be fulfilled within a matter of hours. Because TireHub delivers up to four times a day, it’s feasible that a customer can place an order at 8 am and receive it by 10 am if the customer is located within 20 miles of the warehouse. Then the customer can often get their car back by the end of the day. The ability for TireHub to compete on speed will only increase over time. The company relocated or opened eight new TLCs in 2019 and hopes to meet or exceed that number in 2020 and beyond.
Initially, TireHub contracted with a logistics service provider to do the deliveries. They have brought that capability in house. The company now more fully controls their own destiny.
But to compete successfully, more than a broad network was needed. TireHub believed that technology would also be critical to their success.
Connecting supply to demand in real time meant building a B2B portal for smaller retail customers and independent dealers. TireHub created the B2B portal from scratch. This makes virtual inventory visible, a key enabler of fast and accurate deliveries.
For larger customers, they directly integrated into the customers point of sale systems using application programing interfaces (APIs) and microservices. This drove more seamless communication. Many dealerships use a third party to facilitate the buying process. TireHub also needed to integrate with these third parties to provide connectivity and convenience to their customers. TireHub customizes these integrations based on customers’ unique needs.
TireHub is focused on being customer centric. From the beginning, TireHub realized that growth was highly dependent on making it easier for companies to do business with them. At stand up, 60 percent of orders came in through the phone. At the end of last year, 35 percent of orders came from APIs, 35 percent from their portal, and only 30 percent now come in via the phone. While it is easy for people’s eyes to glaze over when APIs and integration are discussed, “growth has come from connectivity,” Mr. Vantipalli proclaimed. “We want to make partnerships with customers an ongoing (activity).”
Next, TireHub needs to ensure that the right inventory is available in the right locations. ToolsGroup has proven themselves to be a leader in service-driven supply chain planning. The solution involves demand sensing and inventory optimization. In sensing demand, machine learning is used to create a forecast based on demand signals originating at point of sale.
Demand planning in this supply chain is very difficult because of both the number of products (SKUs) and seasonality. The optimizer planning model considers seasonality. For example, snow tires are only sold in the winter. This is basic.
But the tool also uses point of sale data to track local demand. On top of that, it factors in the number and make of cars sold in local and regional markets. This allowed TireHub to build a model that automates many of the decisions surrounding replenishment of slow-moving goods. The inventory optimization thus allows goods to be stocked regionally, rather than in a national distribution center that is located far from where the goods will be needed.
The company is in the midst of deploying a sales pipeline management tool to get a 360 degree view of demand. Demand from different retail customers varies greatly. This tool will allow their salesforce to better track their opportunities using both new demand from customers and historical data. It includes a mobile application, so the salesforce can use the tool on the road. When fully deployed, this tool will provide new inputs that will further improve the demand forecast.
The final challenge is that once TireHub gets an order, they need to deliver on time. “We needed great route logistics,” Mr. Vantipalli declared. “We used a solution from Omnitracs for this.” When orders come through, route tickets are printed. The Omnitracs Roadnet Anywhere solution then determines the optimal route to deliver those goods. Those goods are then loaded into the truck so that the first goods in will be the last goods out of the truck. This makes it easy to unload the truck when it gets to the customer site in order to increase productivity and speed of delivery. Finally, the solution provides real-time notifications to customers on the status of their delivery. “It is 70 percent deployed. It will be finished by the end of the quarter.”
So how is the new business model working? What evidence is there that the expanded supply chain footprint and the investments in technology are paying off? “Well, we are a private company. I can’t give you the financials,” Mr. Vantipalli demurred. “That said, I can share certain metrics. We’ve grown to 70,000 points of delivery in 18 months. We enjoyed significant growth in 2019.”
Mr. Vantipalli concluded our conversation by saying, “We happen to deliver tires. But the crux of it is that we are a customer service company. We are proud of our technology. At the end of the day, we have succeeded when consumers are able to get the tires they love without fuss.”