Ashok Vantipalli, Vice President of IT, recently spoke at ARC Advisory Group’s Supply Chain Forum. Mr. Vantipalli works for TireHub and discussed the company’s ongoing digital transformation efforts. They have implemented a variety of supply chain applications to build out the business model, with the mantra of “crawl, walk, run.” They are currently in the walk phase of their overall supply chain digital transformation, but have plans to move on to run, or at least jog, in the near future.
The following article highlights some of the key points made by Mr. Vantipalli. For a more comprehensive explanation of this digital transformation project you can view the video of the panel.
TireHub at a Glance
TireHub was founded in July 2018 with the idea to transform the wholesale tire industry. The company is owned by Bridgestone and Goodyear, two tire manufacturers who came together to form a distribution channel to make sure the customer could get the tire they wanted. TireHub sees itself as the Amazon for Bridgestone and Goodyear. The company has 70 distribution centers nationally, with plans to add another 5 this year. Their customers are mechanics and dealerships that get the tires for their customers. Depending on the region, they deliver anywhere from 4 hours to next day.
Business Drivers for TireHub
The wholesale tire industry is more complicated than one might envision. There are hundreds of brands and a significant amount of SKU proliferation, so it is really hard for retailers to stock the right tire at the right place. Additionally, most retailers do not have the warehouse space to stock these items, especially if it is not a fast-moving SKU. The retailer may not be able to get the specific tire the customer wants within a certain delivery timeframe, so they sell them tires they have in stock.
This is where Bridgestone and Goodyear felt the need to create a national footprint of last mile distribution to deliver the item just in time when the need actually arises and predict what sort of demand they’ll have in local marketplaces as well. This is where TireHub uses ToolsGroup. ToolsGroup is a global supply chain planning software company. ToolsGroup help companies maintain or improve target service levels while minimizing inventory. It calculates the probability of demand to optimize inventory and delivers service levels companies can commit to customers. It comes down to having the right product at right time and right place while consuming least amount of working capital.
TireHub’s Digital Transformation
For TireHub, it is all about having the right inventory in the right place, and reliably getting an item to people when they want it. When the company started, about 30 percent of business came through the digital channel, with the remaining 70 percent coming through other channels, such as call centers. So far in 2021, 85 percent of transactions come through digital channels.
Digital transformation goes beyond developing and opening a website; it’s the whole entire value chain or ecosystem. End-to-end transactions need to happen in a fast-paced environment. That is enabling the business in a way to conduct things digitally. TireHub sees three fundamental things that need to happen to make this a reality.
- You need to connect demand to supply in real-time. For this to happen, TireHub needs to be in major retailers’ POS systems so they don’t need to go to the B2B portal.
- You need to make sure the right product is at the right place at the right time. This is where ToolsGroup comes into play, especially with the seasonality of some SKUs.
- You have a 4 – 6-hour window to make a delivery. You need to know how to put the right logistics in place and deliver the right product at the right time and meet the SLA the customer has set.
Much like the majority of businesses out there, Covid has pushed more traffic to the digital channel. For TireHub. the target is to get 95 percent of transactions through the digital channel, and only 5 percent, which are exceptions or large orders, through other channels.
Supply chain planning technology is one of the main tools needed for TireHub’s digital transformation. However, the company has also invested in other necessary technology tools as well.
From a digital connectivity standpoint, they have the online portal for easy ordering. This is how they are driving the majority of their business. The company also has a number of APIs and microservices to connect to customers anywhere from 2 weeks to 3 months in advance depending on the size and complexity of an order. This allows them to integrate with legacy EDI transactions that happen through middleware. And finally, the company is using delivery and route optimization software to provide optimal routes and schedule the right stops for fuel savings and efficiencies.
TireHub’s mantra is crawl, walk run. When they started, they were on spreadsheets, which they couldn’t sustain for the long term. When they implemented phase 1 of ToolsGroup, they got the forecast accuracy three times over, and now the plan is to slowly increase with machine learning and other pieces in place.
Focus on the Data
Forecasts are better if you have downstream data; if you have POS data and access to what customers are actually buying, you can do a better job forecasting, particularly in the short term. Other data is also important. TireHub is trying to add other data sources for better business insights in terms of customer behavior, churn, or buying patterns.
TireHub has two types of business: direct sale and transfer. Direct sales are those that come in through the website or call in directly, while transfers are on behalf of Bridgestone and Goodyear from large retailers. Independent dealers is where they have significant seasonality or purchase pattern variance. The car parks, as they call them, in different regions sell different types of cars, and the tires that go on these vehicles are different. In its efforts to do auto-replenishment for these independent dealers, TireHub knows that pulling data from the car park in the geographic region will help with forecast accuracy. This is where machine learning comes into play.
Machine learning is important and can improve forecasts, but it is not a magic wand. There are two themes that TireHub looks for:
- is there behavior that the human eye or basic system automation not pick up on?
- is there a pattern or insight that we didn’t know, that by adding a variable can machine learning give us that insight?
For example, in Newark, NJ, lots of people buy a specific car and put custom wheels and rims on them. Putting on custom wheels and rims requires a custom tire. Based on car park data and user behavior, the company asks can we figure out the demand that we might not see with the naked eye. For this specific region, the answer is yes. Machine learning can help TireHub to understand the specific buying patterns around a certain vehicle, and make the necessary adjustments to inventory levels.
Benefits from ToolsGroup
Since its implementation, TireHub has seen some significant benefits from ToolsGroup. When looking at supply chain planning, it is about reducing the amount if inventory needed and the cash position to meet a service level. TireHub is a small fraction of the total Bridgestone and Goodyear business; the whole reason to create this business is to make sure the customer is on the tire they want and the experience is easy. In terms of benefits, it’s been an astronomical jump going from spreadsheets in terms of forecast accuracy in the first 6 to 9 months. The company’s growth has been much faster than if Bridgestone or Goodyear had continued to do it the old way.
With the digital connection, TireHub has provided access to new markets that Bridgestone and Goodyear never had before. Additionally, while Bridgestone and Goodyear are both great at manufacturing tires, TireHub is focused on supply chain logistics and last mile, which gives them the breadth, depth, and speed of how they want to grow the marketplace.