SIDEBAR: Roadway outsources its tire management

A skilled tire man is adept at selecting, ordering, storing, mounting, inspecting, repairing, retreading, analyzing, inventorying, and disposing of those surprisingly sophisticated steel-and-rubber orbs. Having one on staff is a real blessing-and not having one, a massive headache.

Now imagine managing 250,000 tires for a single fleet. That was the dilemma facing Roadway Express, the massive less-than-truckload fleet with more than 10,000 tractors and 33,000 trailers. The company decided that when the focus should be on hauling freight, having to buy, maintain, and manage so much inventory was a major drain on manpower and resources.

So Roadway Express vice-president of maintenance Dick Deardorff called Iowa-based retreading specialist Bandag Inc. “He basically said, ‘It’s painful for us to be dealing with tires, given today’s competitive market for us as a carrier. We’d like to shift the whole process over to you guys.’ So we started working on that, and Tire Management Services Inc. was the result,” says Mike Tirona.

Tirona is vice-president of TMS, which Bandag established last fall to bring fast relief for those tire-management migraines. He believes more and more fleets are coming to the same conclusion as Roadway.

“We call such firms ‘phase-four’ customers, because they’ve gone far beyond just wanting good-quality retreaded tires, or even a full system of acquiring and inventorying them. They want somebody to come along and take over the whole tire-management function for them,” Tirona says.

Tire Management Solutions consists of just 18 personnel but is backed up by Bandag’s network of 1600 sales and service affiliates across North America. Tirona says the group can handle virtually every aspect of a fleet’s tire operation: tire selection by wheel position and application; mounting/dismounting; tire repairs; emergency roadside tire service; wheel reconditioning; inventory management; management reporting and billing/accounts-payable administration; pick-up/delivery of tire products; and scrap tire disposal.

“While individual Bandag dealers have handled tire management in various forms for local fleets in recent years, what’s unique about the contract with Roadway is that it involves some 70-plus dealers working together across the country,” Tirona explains.

With so many parties and so many tires involved, deciding just what TMS should do for Roadway and at what price was a calculating process.

“We had to do some very, very serious due-diligence work to understand where all their tire costs actually were,” Tirona notes. “Often, we’d see that tire costs didn’t just reside in maintenance, they’d extend into operations, human resources, and other departments.”

The reason: tire costs extend beyond tires alone.

“The traditional way of looking at tire cost is product-only: new tires, retreads, and wheels,” Tirona says. “But product is only half of the pie. The other half is tire-service costs: administration, warrantees, processing invoices, inventory carrying costs, labor for mounting and dismounting, transportation logistics. Roadway has more than 380 terminals across North America, and just think about all the times a replacement tire has to be transported from a main service garage to an outlying terminal.”

Once the full cost picture was in view and agreed to by both parties, TMS started to decide how to charge for its services. It arrived at a fee based on tire-miles generated on a monthly basis-the value of the contract is not disclosed.

The companies established very specific performance benchmarks, reportedly related to uptime. That gives TMS incentive to use high-quality components-tires, wheels, retreads, etc.-and maintenance practices. For Roadway’s part, “We have made very clear the degree of co-operation that will be required from the drivers when it comes to pre-trip and en-route tire inspections,” says Tirona. Roadway also owns the tires and wheels.

TMS developed an information-management system that addresses the three primary phases of tire management: acquiring tires, maintaining them, and recycling them through retreading or, ultimately, disposal (this will build on the extensive knowledge already developed by Bandag over the years).

TMS will do “scrap analysis” of worn-out or failed tires, and is also working on a “new means” of tire identification for each client, although Tirona declined to be more specific about this last initiative. A confidentiality agreement is in place to ensure that any operational-performance data TMS acquires is not released to outsiders.

TMS also took over Roadway’s emergency tire response. When a driver has a blowout, he calls TMS, not the fleet. Bandag’s dealers will even take responsibility for getting a vehicle back on the road in the event of situations such as wheel separation due to bearing failure or other causes. Not every tire-related job has been outsourced, Roadway’s Deardorff says. “We have 10 major linehaul maintenance garages, and the unionized mechanics there who handle tire maintenance will continue to function in that capacity,” he says. While Deardorff foresees no “major reductions in staff” as a result of this agreement, one activity that will be affected is the shipment of tires from these garages to all the outlying terminals. This job will be handled primarily by TMS.

Tirona says the deal with Roadway has drawn interest from other major U.S. fleets. While the focus has so far been exclusively on American fleets, he expects that they’ll be in a position to start actively marketing TMS to Canadian fleets by late summer.

“There are many fleets across North America who are eager to ‘exit the tire business’ and focus on their core truckling operations,” Tirona sums up. “Tire Management Solutions has been created to let them do just that.”