1. Perspective
T
yre industry over the years
has had a steady growth and
by market estimates, nearly
two billion tyres, of various
categories, are expected to be produced
in 2015 alone. This is primarily fuelled
by the industry’s growth drivers such as
the vast replacement market and OEM
segment. The Tyre industry is expected to
grow about 4.3 per cent year on year in
2015, according to Tyre Study. We have
observed in the tyre sector, manufacturers
are setting up new plants and increasing
capacity in existing ones to meet rising
demand. This optimistic outlook is not
surprising given that there are a number
of market trends which impact the tyre
industry, one of which is the growth
of automotive industry in general and
The pressure to reduce cost, manage shortened order-to-delivery
cycles, and still ensure a highly efficient logistics network to
store and distribute tyres are some of the key challenges that the
industry faces
By Madhu Bhaskar Thirikode*
Supply Chain
Challenges in
tyre industryanother is the rising urbanisation that we
see in Asia, the emerging markets in Latin
America and Russia in particular.
A quick observation on Asia alone -
China’s car market is now the largest in
the world after it overtook the US in2009.
Car ownership is expected to grow with
the economy. With rising disposable
income, better infrastructure and roads,
and ever increasing new model roll-outs
by car manufacturers eager to tap the
potential of the market, analysts have
forecasted that by 2020, total sales
of cars in China alone may exceed 30
million, assuming an annual sales growth
of 5.3 per cent in the next decade (source
: DBS 2020 report)
For Indonesia, Malaysia and Thailand,
demand for cars and vehicles are also
expected to increase by about 10 per
cent per year during this decade, fuelled
by rising urbanisation and better road
infrastructure in these countries. The
rise of the middle class and increased
domestic consumption is evident in Asian
economies and this phenomenon will
translate into more demand in an industry
such as tyre.
Supply chain challenges
Supply chain management for tyre
industry is getting more complex today.
Volatility of market demand and supply
adds to the complexity. The pressure to
reduce cost, manage shortened order-
to-delivery cycles, and still ensure a
highly efficient logistics network to store
and distribute tyres are some of the
key challenges that the industry faces.
Tyres now come in an ever increasing
range of types, sizes and weights with
the associated pressure of storage
and handling. On top of that, managing
inventory with the right technology
support to provide tyre manufacturers
with better control and visibility, on a real
time basis, is also a major pain point.
Cross borders handling and safety issues
for many of these global manufacturers
with worldwide footprint is also a big
concern.
Paradigm shift from distributor model to
manufacturer owned distribution network
where deliveries are done till dealer

2. points by the manufacturer themselves
have caused the tyre companies to focus
their attention on their supply chain for
cost saving and logistics efficiencies.
The driving factor for this being the
challenging lead times from order to
delivery placed by the market demand
and the pressure for cost savings and
supply chain optimisation.
Tyres may not be the most expensive
product category when it comes to
warehousing and therefore needs
solutions that can justify cost to deliver
to market.This also differentiates the
Tyre warehouses in terms of their need
for cheaper rental compared to normal
consumer goods warehouses .The need
for long term leases or fixed rental is very
crucial to keep their supply chain costs
under control for tyre distribution.
The following table lists some of the
common issues and challenges that we
Technology
• Lack of integrated, centralized planning and
operating tools
Information Visibility
• Lack of global supply chain visibility
• Lack of reporting and information sharing
on a real time basis
Globalization and Network
Complexity
• Centralizing key supply chain planning
decisions
• Integrate and manage multiple supply chain
components and partners
Flexibility and Scalability
• Need to adapt to changing end user
demand and technologies
• Specialized needs of products and materials
• Scalability and warehousing capacity
Supplier Management
• Sub-optimal supplier rationalization and
management
• Inconsistency in suppliers’ performance
(on-time delivery, production and quality
standards)
Financial Management
• Understanding and control of all costs along
the supply chain
• Need for improved cash flow
• High fixed and variable costs
• Aggressive working capital reduction goals
Inventory Management
• Uncertain demand forecasts and rapid
technology changes lead to inventory build-up
or stock-outs
• Product obsolescence and product life cycle
constraints
Regulatory and Security
• Risk migitation
• Regulatory and compliance issues
• Security and safety issues
Operations Excellence
• Inefficient supply chain and store processes
• Returns/reverse logistics
• Flawless implementation and start ups
• Seamless transitions from in-house to
outsourcing
have come across with our customers in
the Tyre sector.
Logistics service providers
Given the myriad of challenges in this
sector, it is clear that logistics providers
who have strong experience and in-depth
knowledge of the sector and its supply
chain requirements will stand to gain.
Most logistics companies will be able to
support the Tyre sector from warehousing
and storage solution to didstribution,
import and export handling, raw material
warehouse management and production
line feeding.
However, logistics providers who are
able to provide industry best practices to
deliver more value-driven services are in a
better position to be the Tyre companies’
logistics partner of choice. These include :
• Outsourcing of warehousing
&distribution
• Innovations on storage methods
• Innovations on storage mediums ( Eg
Stiilage design)
• Multi user facilities only for Tyres which
provide economies of scale and cost
benefits
• Warehouse Management System
designed only for Tyres
• EDI connectivity of Warehouse
Management System to customer’s ERP
systems
• Import related services from port of
arrival to warehouse
• Plant finished goods warehousing
management

3. • End of Life (Tyres) management
• Integrated approach for Air, Ocean,
Trucking solutions
The increasing complexities of the Tyre
industry requires 3PLs with strong
expertise in this sector, such as CEVA,
who are able to provide end to end
logistics and supply chain solutions,
while mitigating risks and increasing
operational efficiency to be trusted to
keep their tyres rolling in the market.
*Madhu Bhaskar is Director – Global Tires
Sub-Sector, Business Development, CEVA
Logistics, Singapore.
Perspective