• Miebach India

Complications of Tire warehousing

Tire

Employing over 650,000 people globally, the tire industry is a significant piece of the world economy. Despite its high consolidation (80% share by a handful of companies), it is still an industry which remains widely competitive. Thanks to this competition, and the ever-impatient consumer, tire companies face significant pressure to make fast and cost efficient deliveries to the market – not an easy task with the product characteristics they have to handle.

In the recent years, Miebach has had opportunity to look closely at tire supply chains, understand their issues and explore solutions to address some of these issues.

Below are some of the highlights from issues we have seen and the solutions we have recommended on those:

Large number of SKUs: Tire manufacturers produce anywhere from 300 to 1500 SKUs, with 60% sales coming out of 5-15% SKUs. You can see where this is going – a lot of slow moving inventory, which is always a challenge to maintain. And yet, most tire companies continue to use “one size fits all” approach. To some of our customers, we have recommended a 2-dimensional categorization, based both on velocity and profitability to identify different supply chain policies.

Dependence on manpower: Since all the tires are black, the tire information embossed on them is very difficult to see manually. Also since the tire sizes vary a lot, even with barcoding , it is difficult to always scan and identify the tires. Hence, in most warehouses, there are a set of people who are trained in identifying the SKUs. But they have a learning curve, and therefore make mistakes.

Despite the lack of volume complexity, this makes a strong case for WMS (Warehouse Management System) with real time location mapping and trace-ability within the warehouse.

Handling

Tires are a difficult product to keep on standard pallets. They will either lead to unstable storage, or inefficient use of space. Even when specially designed pallets are used, demand is seldom equivalent to pallet loads (~20-30 tires in a tire pallet). This means that in picking, loading & in unloading, they have to be handled manually, which for a weighty product is not an easy task.

For storage of small tires, the industry largely relies on special tire pallets, which also double up as racking. While this gives an efficient storage structure, it is more difficult to handle when compared to standard pallets, especially when placed at heights.

tire pallet

There is still innovation awaited in this space – particularly for picking. Some of the burden can be eased during loading/unloading by using telescopic conveyors which will save both the effort (in bending and rolling) as well as time (in directional alignment) from resources.

Storage

A lot of warehouses continue to store tires on ground. More sophisticated warehouses move to use of pallets mentioned in the above section. But even there, the storage is often restricted to 1 or 2-deep. However, most warehouses carry significant inventory, particularly when carrying seasonal products like farm tires. This inventory often needs 3-10-deep storage, and almost exclusively relies on a flexible storage structure as inventory builds up or depletes through the month/season. To manage such a dynamic storage structure, a WMS system becomes an absolute necessity.

There are other numerous issues – like maintaining visibility of a tire through the warehouse for efficient picking, eliminating put-away & picking errors due to similarity of products, and many more. Most of these can be solved through use of barcodes and a WMS system. While for small warehouses, WMS may seem like a significant cost, but there are many inexpensive & simple WMS solutions available in the market which are cost efficient even for distributor operations.

Miebach Consulting has worked successfully with Tire companies in reducing their supply chain costs while streamlining operations. For knowing more about this service and our success stories in supply chain consulting, please write to mcindia-mkt@miebach.com

 

The question of Last Mile Delivery – 2

Last mile Continuing from our discussion in the last post,  where we looked at a few levers to reduce variable costs of last mile delivery, let us now talk about the other key cost of operations: Fixed costs. For most ecommerce vendors & courier companies, these fixed costs are the cost of facilities & the fixed costs of delivery agents. Working with less: We can begin with keeping the assets low. Continue reading

The question of Last Mile Delivery

leh

At one time, the last mile was a problem relevant only to the communication companies. It pertained to the complexity of laying that last bit of wire that takes the TV, internet, telephony to each and every home. Now, as that technology has come to our homes and brought with it the rapid advent of eCommerce, last mile is no longer only a communications problems, but also a supply chain problem. How do I ensure that I reach my customers, sitting across millions of addresses today in a fast and effective manner, without spending a fortune? The jury is still out on the one ‘Bull’s eye’ solution, but here are a few thoughts that might be useful.

To begin with, let’s start with a background on how last mile is structured currently. Continue reading

When should I use market trucks?

Most companies like to use existing market trucks for their transportation needs rather than going for custom truck capacity. Even though this heavily increases their dependence on external parties, why do companies do this?

The simplest answer is, someone has already invested in the capacity and it is available for use. It meets the needs of varied requirements and therefore its asset utilization is higher. If on the other hand, you decided to build dedicated truck capacity, the cost would be higher, there may not be many takers and hence the service would come at a premium. New investments would also result in high depreciation of trucks and hence higher cost of operations in the initial year of operations. Continue reading

Levers for Managing Transport Cost

Transportation cost is a key cost component for supply chains. At 2-5% of revenue for most industries (12-15% for some industries e.g. Bulk) , a reduction in these costs can directly impact the bottom-line in a significant way. It is therefore very important to understand the levers impacting transportation costs.

What are these levers? Most of the levers can be classified under the following 4 heads: Usage of market truck capacity, Return load, Truck-turnaround time and economies of scale. Continue reading

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