SAN FRANCISCO, Cal. - The need to embrace more integrated relationships with fleets and deal with the threat of competition from offshore tire manufacturers require a different approach to the tire bu...
SAN FRANCISCO, Cal. – The need to embrace more integrated relationships with fleets and deal with the threat of competition from offshore tire manufacturers require a different approach to the tire business. How to get there was a hot topic at the Bridgestone Firestone commercial tire business conference, Bizcon 11, held in San Francisco. The conference attracted more than 900 dealers and sales representatives. We caught up with Singh Ahluwalia, president, Truck and Bus Tires, Bridgestone Firestone North American Tire after his address to the conference for an exclusive interview.
TN: In your address to Bizcon you spoke about the Internet and how it is leveling the playing field in business at a rate “faster than anyone could imagine,” to use your own words. When you bring that down to the dealer level, how exactly is the Internet changing their working reality?
Ahluwalia: The Internet has leveled the playing field because of its connectivity. When you go back to when we were just using the phones, a lot of times you were not aware of what was happening in other parts of the world, your country or even your region because you didn’t have the necessary access.
Now all of a sudden the Internet has connected so many people around the globe into business opportunities anywhere, and people are now looking for that. It has made the world flat. From the dealer standpoint, they are looking at the Internet to improve efficiencies to their operations. Going paperless, for example. Anything that can take cost out is what dealers should be looking at.
TN: At the same time I assume, from the customer point of view, it has made it a lot easier for customers to be able to check prices and make sure they really are getting the best price for a product. That poses a real challenge for dealers.
Ahluwalia: Absolutely. Right now you can Google search anything you want. You can find out anything you want about any product and that’s what people are doing.
The Internet has given the fleet customer the ability to be able to connect to the product, the service, the offering, dissect it and basically do their own analysis. The fleets are getting very technical in their decisions because they can get all the information. Before they even make the call to the dealer they already know much about the product.
TN: In your address you also really emphasized that what the Internet cannot do is replace the value the dealer brings to the equation through the service offerings he provides. A lot of the dealers in Canada are smaller dealers. What kinds of services do you want your dealers to offer in order to differentiate themselves and how can that be possible for the smaller dealers?
Ahluwalia: From a manufacturer’s standpoint we can make products anywhere in the world and that’s what’s happened. But from the dealer’s standpoint, it’s a very local business and service is a huge advantage against outsiders coming in. The only competition a dealer has is another dealer in the area. Service is basically his product and business. A manufacturer overseas 8,000 miles away can’t replace that service. The fleets know that and the dealer should make sure that his services keep on improving to be the best in the area.
TN: We have already touched on how the Internet is changing the fleets and how they run their business and also how they buy. One of the things you mentioned in your address is that fleets are increasingly looking to outsource non-core competencies of their operations. You spoke about the total tire package. Can you elaborate further on what you mean?
Ahluwalia: Fleets are under the same pressures as any other business, whether it’s a tire manufacturer of anything else. Their product is trucks. They deal with service, which is hauling freight. Their core business is hauling freight.
Traditionally a lot of fleets would have their own maintenance terminals and maintenance people. The dealer was basically just used only when needed. But the world has changed. Logistics has become connected thanks to the Internet. Companies that ship products are able to search and examine a lot of different services.
The process has become transparent and there is a lot of competition. So fleets are saying they just want to haul freight because that’s where they make their money; that’s their core business. They don’t want to be involved with all the tire business and the maintenance and all this other stuff because it costs money and it’s not what they are best at. So the dealer has an opportunity to step up to the plate and provide a total tire solution, which takes a fleet out of the tire business.
Every dealer should be able to take a look at their service offerings and go to the fleet and say I will do all that for you and I can do it better, cheaper, faster.
That’s the value of what the dealer can do for the fleet. It would be very hard for the fleet to switch once you do that because the fleet is now reliant on you to perform all those services.
TN: We are talking about a much closer, more integrated relationship. It touches on some of the other points that were stressed at this conference such as trust and communication. We are looking essentially at creating a much more sophisticated dealer network, are we not?
Ahluwalia: We have to have a trusting relationship with our customers and the dealer has to have a relationship of trust and open communication with their customer, the fleet, and also the supplier.
I think that goes a long way in the supply chain towards helping deliver service. It’s very important to have that because after all people still sell people.
TN: There has been quite a bit of talk at this conference about the impact that offshore tires are having on North America. This emphasis on service that you’ve talked about, and on the total tire solution, do you see that as the best defence against the offshore products and the threat they pose to the North American marketplace?
Ahluwalia: There really is no easy answer to that. The dealer has to look at his business first and say do I have a retread process in my business or not? Because that’s a huge investment. When you do retreading, you’ve invested in a lot of equipment and machinery to provide a service to your customer.
If offshore products come in and become a threat to the dealer because their pricing is so low that the fleet looks at it and decides I don’t want to retread, I just want to drive a new tire to destruction and that’s the end of it, it may affect the retreader’s ability to retread tires and make a profit.
There are 40 to 60 different Chinese and Indian manufacturers that make tire products and ship them here, some in small, some in huge numbers. But the moment these foreign companies want to increase their market share and have to increase their volumes, they will add cost to the equation.
They may have to have a warehouse and salespeople and customer service and logistics. All that is not free; it costs money to invest in those products.
So the question is what will they do when maybe the demand is a little softer? Will they back out? Will they continue to invest? Will they put the technology and knowledge in there? Will they build infrastructure? We don’t know the answers to those questions yet but we are monitoring and trying to gauge what they are up to all the time.