Every forklift needs tires. Without tires to keep trucks moving, warehouses would not be nearly as efficient as they are. Yet as ubiquitous as tires are in today’s industrial environment, they remain a bit of an enigma to those not directly involved with their production or installation. Where do they come from? How do they get there? What happens to them after they’re used up?
Where Do Your Tires Come From?
The distribution channel for forklift tires is not as straightforward as it may seem to the uninitiated. One forklift distributor describes it as a “spider web,” and it can be difficult to follow. Even Bill LeMeur, executive vice president at Superior Tire & Rubber, says the tire market “can be confusing.” In his words: “Not only am I selling to equipment distributors and tire dealers, I am also selling to the distributor’s OEM, who also sells to the distributor. So I sometimes find myself competing against my own products as well as those of other manufacturers.”
It’s no secret that manufacturers in many segments of the industry are starting to go direct and bypass the distributor. Particularly as the economy has downsized, the distribution channels have become pressured as manufacturers go into survival mode. In the tire market, new competitors are emerging that are further impacting margins and changing the distribution channel. What does this mean for material handling distributors? Let us know by reading and leaving a comment on “New Competitors Change the Tire Market,” exclusively in The MHEDA Journal Online at www.TheMhedaJournal.org.
Still another convoluting factor is the presence of national accounts. National accounts mean different things to different companies, but as described in the words of one tire manufacturer, “They could be a way for manufacturers to disguise selling directly to the end-user.” What could happen is that the manufacturer sets up a deal with a large end-user—Walmart, for example—whereby they guarantee a set price to that end-user through a local distributor. “The purchase price on those accounts is pretty aggressive,” the tire manufacturer continues. “The dealer lives with it, because he theoretically makes up for that business on servicing the trucks, changing the tires and doing service work.”
The Distribution Channel
In the tire world, that’s just the way it is. As LeMeur explains, “It’s necessary because any single channel cannot guarantee me maximum volume. For example, despite the fact that I sell a lot of product to large forklift distributors, they can’t guarantee me their whole polyurethane programs because they have to buy a lot of product from their OEMs. Understanding that, I try to sell to as many OEMs as possible because their volumes are much higher. No tire dealer or equipment distributor or OEM or wholesaler can guarantee me 100 percent of their volume. Consequently, to grow my business, I have to work all the distribution channels available.”
Such a strategy is sound business-wise but makes for a disjointed distribution channel. The chart on page 25 illustrates seven different ways that a tire can get from its manufacturer onto the truck at an end-user location. It’s unclear how many tires go through each channel, but it is clear that all the channels are common.
|“To grow my business, I have
to work all the distribution channels available.”
What Happens To A Replaced Tire?
Industry reports say that more than 1.5 million tires are removed from service each year, just from material handling equipment. All those tires are essentially chucked into landfills, where they sit forever or until they are burned in one of those tire fires you occasionally see on the news or on an episode of The Simpsons.
At least that’s what used to happen. Now, distributors remove customers’ tires from service and send them to a recycler. Components from the tires can be reused to make new tires. One tire manufacturer leading that push is Solideal, who introduced a tire recycling program for material handling customers in the fall of 2009. Since that time, Solideal’s tire recycling program has prevented more than 10,000 press-on and nearly 5,000 resilient tires from ending up in landfills.
Solideal takes back all press-on tires as long as the steel band is undamaged, as well as resilient tires that meet certain requirements. The tires are collected and shipped back to Solideal’s plants in Sri Lanka, where they are broken down and reused to make new tires. “It’s not necessarily a money maker for the company, but it’s something that we have decided to do globally to become more sustainable and reduce our carbon footprint,” says Mike Ross, vice president of aftermarket at Solideal.
In addition to the green benefit, the company is saving costs on raw materials and can also sell the remanufactured tires at a lower price. Rick Gatlin, Solideal’s rubber tire product manager says that the tires made from recycled components are used as a budget line of product.