No one is arguing that tire supply was an issue in 2010, but there seems to be some disagreement as to what the market will face in the coming year.
By most accounts, with demand for tires increasing faster than production would allow in 2010, many manufacturers had trouble supplying dealers with all the tires they needed. However, most are going into 2011 with cautious optimism about continuing improvements in fill rates.
“We had very high demand for our products, and consequently we couldn't meet every order 100 percent,” said Fred Koplin, director, marketing communications, for Fullerton, Calif.-based Yokohama Tire Corp. “The good news is more people wanted our tires than we were able to produce. The bad news is no matter how hard we worked on matching supply to demand we weren't 100 percent successful with everybody.”
Koplin said contrary to many tire manufacturers, Yokohama did not cut back on its capacity when the global economy contracted. Demand for the company's products simply has outpaced the tire maker's capacity.
As for 2011, he said he doesn't see back orders getting any worse than what they are.
“We're going to improve our production scheduling, improve the flexibility at our plants, increase the capacity at our plants and increase our sourcing outside our U.S. plants to ensure back orders are reduced and not allowed to get worse,” he said.
“That's really just a matter of being a good business partner and work- ing harder to be in sync with our customers.
Dick Wilkerson, chairman and president of Michelin North America Inc., also weighed in, saying that the company has experienced a “marked increase” in demand for its products in 2010.
He said that since early spring, the company's facilities have been running 24/7 to maximize production to meet the demand.
Wilkerson said much of the supply problems in 2010 came from wholesalers, retail tire dealers and manufacturers reducing inventory during the economic crisis in order to help cut costs and overhead. When the markets rebounded, this put pressure on those low inventories.
Heading into the coming year, Wilkerson said the company is “cautiously optimistic that markets will continue to recover to pre-crisis levels.”
However, some tire deal ers are not so optimistic.
Andy Chalofsky, who is co-owner of Chalfont, Pa.-based Network Tire Inc., described 2010 fill rates in one word: “Horrible.”
“Really, we could not get enough product to fulfill the demand we had,” he said. “Although our business is up … there were times we just couldn't get our hands on tires.”
Chalofsky said there were points during the course of the year—which he called an all-time low for fill rates for his distribution company—when Network Tire had more tires in stock than one major tire maker.
He added that although fill rates have improved throughout the year, there is still a long way to go before they're good.
“To go from a 20-percent fill to a 30-percent fill, yeah, we've improved 10 percent, but you're still only filling 30 percent, so it's not that great,” he said.
Chalofsky doesn't expect the situation to change much in 2011 either.
The tire dealer said he believes that while inventory reduction from manufacturers contributed to poor fill rates, most of the supply problems stem from higher demand in countries such as China, India and Africa.