Forklift tires can be both a profit producer and a sales differentiator.
Our company, Material Handling Inc., has an up-and-down history in the tire market. Many years ago, we provided tires as an aftermarket product offering. In fact, one of my first jobs when I began working at the dealership was driving the mobile tire press around to customer sites and changing their tires. That was a learning experience—it taught me about hard work in a hurry, which is probably why my dad put me there.
However, by the late 1980s to early 1990s, tire manufacturers opened retail stores that drove pricing down so far that it was difficult for a distributorship like ours to make money with tires. We eventually got out of the business and outsourced our tire business to those same retail stores.
We’d been out of the tire business for about 15 years, during which time many customers told us that they were unhappy with their tire provider. We always knew we could serve them better, but the model just didn’t make it profitable.
In 2009, Clark Material Handling Company, one of our primary suppliers, decided to become committed to an aftermarket tire program. Clark was able to secure a high-quality product at a price that lets us compete with the tire manufacturers’ factory-owned stores. Clark has negotiated pricing with the tire manufacturer such that we are essentially getting factory pricing. And the tires are of good quality. There are lots of cheap tires out there, and we would rather not sell somebody something than sell them product that we think is of inferior quality, no matter what the price is. But we now have a competitive offering. Combined with our level of service, it has been a winning formula for us.
We invested in a new tire press and a vehicle to transport it to customer sites. We built up a little bit of tire inventory and got back into the tire business. For now, we’re running it out of our parts department and not as a standalone business. We service hundreds of forklifts, including our own rental fleet and customers’ trucks. As part of our full maintenance agreements, tires are now included. Just by internally handling the tires on our rental fleet alone has saved the company lots of money, on top of the revenues we’ve received from working on customer equipment. It makes us more of a one-stop shop, which our customers definitely appreciate.
Perhaps the biggest benefit has been something we didn’t necessarily anticipate. We’ve used our tire service as a door opener into some large target accounts. We’ve worked deals with some local fleet users who previously weren’t using our trucks, service, parts or rental, but were unhappy with the local tire guy. We went in and offered better tire service. We delivered, and that has led to business in other areas of our company.
We’re still refining the whole process and getting everything exactly how we want it, but the first year was good for us. It’s a relatively low-margin product for us, but we do see it as a potential growth area down the road.
Getting into the tire pressing business is not for everyone. There are substantial upfront costs that include purchasing a tire press if you don’t have one already and investing in a vehicle to move it from place to place.
Another big problem is finding the right person for the job. Tire pressing requires a lot of strenuous labor. It requires wrestling the tire off the truck, placing it onto the press, pressing the tire, getting it off the press and bolting it back on the truck. On some of the 10,000-pound cushion-tire trucks, those wheels could weigh 100 pounds. So it’s very physically demanding. Whoever is out there doing it must be very strong and resilient.
For us, the downsides of tire pressing are outweighed by the benefits. It is a profit center and it has helped us break into a few accounts that we wouldn’t have otherwise gotten into. Here in Nashville the tire market was rife with opportunity. I know of maybe eight forklift distributors in this market, and I’m aware of two others who have any type of real aftermarket tire program. Depending on the competitive environment in your market, the tire business may be a venture worth taking.
|Meet the Author
Michael Sain is vice president of Material Handling Inc., based in Nashville, Tennessee, and on the Web at www.mhiusa.net.
An Effective Tire And Wheel Partnership
|An effective tire partnership comes down to a very basic philosophy. Either one believes that the current distribution channels for material handling equipment bring maximum value to the end-user or they do not. It is really that simple. That belief either lines up with your company’s strategic vision or it does not. A company cannot play both sides of the fence.If a company firmly believes in the supplier-distributor relationship, then it also believes that the distributor can add value to delivery of a product to an end-user. The value delivered by the dealer includes sales, inventory availability and service support. An effective partnership brings long-term market share for both parties and increased profitability.On the other hand, if the manufacturer of a product believes that all the parties within the distribution channel are merely an unnecessary cost, then that will lead to a completely different perspective and strategic vision. Neither perspective is wrong. Each is based on how one views the market and the most effective way to service the end-user.If a manufacturer decides to circumvent the distribution channel, this process is called disintermediation. Disintermediation has been occurring in some areas of material handling, but the long-term growth of it is up for debate.It is true that a manufacturer can sell direct to the end-user, but does the end-users’ level of received service fall precipitously? Due to the inability of the manufacturer to provide immediate local service that is the trademark of a local distributor, it is intuitive to believe that the end-user receives less support. Since the end-user must be a willing par-
ticipant in the disintermediation, they must determine if the savings are worth the risk of losing that local support.It is true that all parties in the distribution channel want to “control their destiny” to achieve maximum results. However, each party must remember that success depends on how effectively the end-users’ needs are met. This is still a process of communication and understanding. While not perfect, the current arrangement has proven to be the most effective way to the market in the world. Once parties within the channel start dictating products or business practices to one another, or circumventing the current system, the relationship will break down over time.
To be the most effective, each party in the system must perform their respective duties to deliver maximum value to the customer. If this occurs as needed, everyone in the system succeeds and profits grow rather than shrink.
— Reggie Collette