Keeping Tire Manufacturing on Track in the New Normal: Supply Chain Optimization is the Best Route Forward
Over the past decade, the tire industry has faced several market and technological challenges, caused by increasing competition and growing demand for high technology tires. At the same time, tire manufacturers have suffered from extreme volatility, raw material shortages with rapidly rising prices, a shortage of global transport capacity and increased costs caused by the global COVID-19 pandemic and additional disruptive forces. More intense customer and regulatory demand around environmental sustainability has posed a final challenge to a tire manufacturing segment in the midst of a transformation journey.
In recent years, tires have become more like a commodity, with manufacturers primarily focused on managing costs while the market grew at a slow pace. This led to the need for – and creation of – value-added services as a key differentiator among tire manufacturers, especially in the volatile and competitive replacement market.
Changing order behavior, from pre-order to ad-hoc supply requirements with lower volumes and higher frequencies, has become key for customers. In the current market environment, this places high demand and risk on manufacturers to balance an ever-growing complexity of article portfolios, with the right level of stock across their supply chain.
With this in mind, manufacturers have relied on customer service as a partial saving grace. But, more significantly, they have looked to enhance their supply chain efficiency and responsiveness to ensure that a lack of availability is never an issue.
Managing more change in shorter cycles has increased the importance of planning, collaboration and execution to this end. Deciding on the right global manufacturing locations and distribution strategy has grown in importance, considering that bulky tires are not the best adapted products to be efficiently transported between stocking locations.
As such, the supply chain remains a strategic weapon – to ensure that you, as a tire manufacturer, can deliver in whatever mode, and at whatever time, is most suitable to both Original Equipment (OE) and replacement customers.
However, this isn’t the end of the industry’s concerns.
Sandwiched between increasing raw material costs on one side, and a stable (if not deflating) price point for the customer on the other, manufacturers have come to realize that the supply chain isn’t just a way to ensure availability through improved collaboration and the right placement of inventory further upstream at their plants. It has become a financial and competitive differentiator too… a way to fulfill requirements and service levels against rising expectations, in a more cost-sensitive climate. As a response to this, tire manufacturers have adopted concepts of supply chain segmentation to differentiate premium and budget brands, as well as differentiating among customers, and establish the most efficient and effective delivery model within each segment.
End-to-End Visibility to Manage Risks and Opportunities: The Next Frontier
COVID-19 hasn’t necessarily altered the realizations that have been reached in recent years, but it has certainly accelerated manufacturers’ strategies towards a more connected and digitized supply chain.
Shut down plants, transportation constraints and equipment shortages, raw material access challenges, chip shortages constricting the automotive sector, and labor concerns, were some of the most pressing obstacles of this more recent 2020-2022 era.
Once again, the financial limitations that manufacturers have had to work within have been constricting. And, just as planning had become a key touchpoint before, the next frontier has become visibility and execution.
Knowing what is available and achievable, both in real time and further up the road, is even more critical. Failing to convert the volatility within the market into a transparent and continuously updated digital view of risk and opportunities has therefore become an unfavorable race towards:
- producing the wrong tires against demand;
- producing tires too late, relative to seasonal demand and general industry waves;
- not having requisite stock in the right locations across global footprints;
- or mismanaging the production or distribution of new tire articles in the market.
End-to-end visibility, leveraging the power of supply chain control towers, combined with integrated demand and supply planning solutions, has subsequently become the link between planning and execution, to drive an intelligent, synchronized response across the extended supplier and customer network. The result is enhanced awareness of current and future availability of raw material and finished products, expected arrival times of inbound shipments, and optimum fulfilment options based on location, seasonal requirements and real-time demand.
No matter the hurdles of 2020, logistics was up for the challenge. It kept production running and critical supplies flowing while adjusting to the shocks in demand and supply patterns. As an all-encompassing term, the tire manufacturing sector has sought to master “unified logistics,” where manufacturers can seamlessly plan, optimize, and orchestrate across nodes and networks, resulting in consistently higher customer service levels and efficiencies.
This includes breaking down geographic boundaries to achieve optimum supply prioritization, based on where the finished product needs to be transported to, and where production would be best placed.
“With unified logistics and artificial intelligence (AI), operations can dynamically predict real-time order volumes and profiles at the lowest granularity, as well as provide dynamic guidance for labor and inventory needs at any point in time,” a recent Blue Yonder article explained.
What a unified logistics model ultimately lends to is a new-found resiliency to risk. Yes, it also strives for differentiation through efficiency, timeliness and customer service levels. But for a tire sector that is vulnerable to so many external events, and influenced by so many peripheral components in the wider manufacturing process; resiliency to the unforeseen is now the holy grail.
As part of this holy grail, the industry now needs to look ahead to the final stage of this slaloming, undulating decade.
To complement and guide the sector’s strive for improved:
- planning and execution;
- real-time, end-to-end visibility;
- unified logistics through seamless orchestration and execution;
- and integrated demand and supply planning;
The final aim should be to adopt and integrate a supply chain control tower.
As an HQ to oversee this entire network of improved agility, transparency, connectivity and forward-planning, being able to monitor the full picture at a glance, while auditing ongoing performance, is the final link in the chain.
The broad availability of advanced AI and machine learning (ML) makes it possible for supply chain professionals to increase end-to-end visibility, identify disruptions, conduct analysis and arrive at optimal resolutions faster than ever.
It will also help to channel new or burgeoning requirements from across the market, such as having seen through the impact of sustainability protocols and pressures in recent years.
Further, this enhanced control of a rejuvenated supply chain can be the hub where manufacturing meets logistics. In a world that is also being disrupted by robotics, automation and IoT, there is now a possibility to connect production itself to supply chain optimization.
Following several years of such intense changeability, the tire sector has surely realized that there is no end point when it comes to sector challenges. The key is to remain agile and robust in the face of whatever comes next.
And this can only be achieved with a more agile outlook, a more connected and smart supply chain, and the best tech partners out there to help navigate tricky corners yet to come.
Industry Guide: Building a Future-Fit Digital Supply Chain in the Tire Industry
Discover how industry-leading tire manufacturers overcome value chain complexities. Download our industry guide to learn how Michelin, Mahindra & Mahindra, and CEAT Tyres have achieved significant performance and efficiency improvements, enabling them to rapidly adapt to fast-changing market requirements.