Supply Chain Analysis on the Tire Industry Helps a Client Reduce Costs

One of the research found that the global tire market size reached2,321.3 Million Units in the last year and it is anticipated that by 2028 there can be an increase of 2.81%. With various technological advancements revolutionizing the transportation industry, tire manufacturers are finding themselves standing at the crossroads of tremendous opportunities but also unprecedented challenges. To maximize the benefits that can be drawn from this opportunity, it is essential for manufacturers to optimize the tire industry supply chain. This will help them deliver significant reductions in supply chain costs and improve their service levels. In light of the same, recently, SpendEdge assisted a leading tire industry player who wanted to effectively reduce costs across their supply chain. Additionally, the client wanted to evaluate their supply chain capabilities and compare how they fare against their competitors in the tire industry. They also wanted to identify the major areas of spend across the supply chain and different manufacturing locations.

To cater to the specific category requirements of the client, the supply chain analysis experts at SpendEdge followed a comprehensive research methodology, which included primary and secondary research coupled with qualitative and quantitative data collection procedures to address the issues of the client. During the course of this supply chain analysis engagement, the tire industry client was able to evaluate their supply chain capabilities and compare efficiencies to those of their competitors. Additionally, the client discovered their major areas of spend across the supply chain and office locations. This helped them effectively reduce costs.

The supply chain for tire industry analysis engagement helped the tire company to effectively reduce costs across the tire supply chain. Additionally, the client gained insights on several cost components, which helped them increase their overall profitability.

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The Business Challenge

A leading tire industry player wanted to effectively reduce costs across the supply chain. Additionally, the client wanted to evaluate their supply chain capabilities and compare efficiencies to that of their competitors in the tire industry. They also wanted to identify the major areas of spend across the supply chain and office locations.

Engagement Overview

To cater to the specific category requirements of the client, the supply chain analysis experts at SpendEdge followed a comprehensive research methodology, which included primary and secondary research coupled with qualitative and quantitative data collection procedures to address the issues of the client. During the course of this supply chain analysis engagement, the tire industry client was able to evaluate their supply chain capabilities and compare efficiencies to that of their competitors. Additionally, the client discovered their major areas of spend across the supply chain and office locations. This helped them effectively reduce costs.

Key Findings

The supply chain for tire industry analysis engagement helped the tire company to effectively reduce costs across the tire supply chain. Additionally, the client gained insights on several cost components, which helped them increase their overall profitability.

Tire Industry Analysis

The global tire industry is expected to proliferate due to the strong focus on fuel efficiency and increasing demand for low-rolling-resistance tires. Additionally, the introduction of stringent environmental regulations and growing consumer preference for eco-friendly tires will spur the growth of the tire industry across the globe.

However, according to SpendEdges supply chain analysis experts, the increasing pressure to manage shortened order-to-delivery cycles, reduce cost, and rising need ensure a highly efficient logistics network to distribute tires are some of the major challenges that the tire industry faces. Consequently, to retain their foothold in this market space, major players from the tire industry have started adopting supply chain analysis studies to reduce costs and ensure a highly efficient logistics network to cater to their customers.

The global tire industry is expected to proliferate due to the strong focus on fuel efficiency and increasing demand for low-rolling-resistance tires. Additionally, the introduction of stringent environmental regulations and growing consumer preference for eco-friendly tires will spur the growth of the tire industry across the globe.

However, according to SpendEdges supply chain analysis experts, the increasing pressure to manage shortened order-to-delivery cycles, reduce cost, and rising need to ensure a highly efficient logistics network to distribute tires are some of the major challenges that the tire industry faces. Consequently, to retain their foothold in this market space, major players from the tire industry have started adopting supply chain analysis studies to reduce costs and ensure a highly efficient logistics network to cater to their customers.

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Strategies for cost reduction in tire supply chain management

Demand Forecasting and Inventory Optimization:

To improve inventory management, consider investing in data analytics and software tools that can analyze historical data and market trends. By doing so, you can make more accurate predictions about the demand for different types of tires. This will help you avoid overstocking or understocking, and reduce the need for safety stock. By relying on precise demand forecasts, you can minimize storage costs and the risk of tires becoming obsolete. It is also important to work closely with suppliers to reduce lead times. Shorter lead times allow you to order tires closer to the time they are needed, reducing the need for large inventory stockpiles.

Supplier Collaboration and Negotiation:

Establish long-term partnerships with key suppliers. By committing to a more extended relationship, you can negotiate favorable terms, such as volume discounts, lower prices, and priority access to new tire models or innovations. Collaborate with suppliers to identify cost-saving opportunities in the supply chain. This may involve jointly optimizing logistics, streamlining order processes, or finding ways to reduce defects and returns. Implement key performance indicators (KPIs) to evaluate your suppliers’ performance. Use these metrics to encourage continuous improvement and ensure you are getting the best value for your procurement spend.

Just-in-Time (JIT) Inventory System:

JIT reduces the requirement for large amounts of storage space. Smaller, more efficiently designed warehouses may save a lot of money on storage and free up funds for other projects. Keeping only the inventory needed for current demand significantly lowers holding costs, which include storage, insurance, and depreciation. There may be significant cost reductions as a result. By emphasizing a seamless and effective supply chain, JIT lowers the possibility of delays or bottlenecks. Additionally, it promotes a more flexible reaction to modifications in the market or changes in consumer demand.

The need for optimizing the tire supply chain

The establishment of efficient global supply chains has become critical for tire manufacturers to stay competitive. This need has been increased further with new tire technologies being developed at a rapid pace. The race to secure the necessary raw materials and technology implies that companies must maintain a robust supply chain. Starting from raw material procurement to the eventual sale of the tire, minimizing inventory through product life cycle controls and facilitating prompt product supply is as important as product differentiation strategies. To achieve this, however, the supply chain needs to function at its most optimal level and tire manufacturers must be able to respond quickly and effectively to changing supply chain needs and technological revolutions. There are several benefits of an optimized supply chain.

Short-term benefits

In the short-term, it helps optimize inventory to boost bottom lines and ensure on-time-in-full (OTIF) delivery to customers, especially to the original equipment manufacturers (OEMs). It helps improve the planning process for capacity utilization by balancing the numerous conflicting constraints and maximizing resource utilization and customer satisfaction, while minimizing machine setup times, inventory levels and overall costs. Supply chain optimization also allows the automatic creation and revision of detailed planning and scheduling for production facilities, which improves the management of various processes. In addition, it helps accomplish operational excellence and higher production quality while reducing costs in the short-term.

Long-term benefits

The long-term benefits of supply chain optimization include an improved overall view of the supply chain which allows for the evaluation of different scenarios, thereby leading to better long-term investment decisions. It also empowers procurement teams to negotiate more effectively with raw material suppliers and service providers, as well as provide the ability to automate purchasing and production decisions based on real-time price and market data. In the long term, production plans can also be optimized based on accurately forecasted demand, and orders can be assigned based on various factors such as customer location, mode of transport, etc. Finally, it helps identify the best product allocation and visualize the impact of major investments on-demand fulfillment and margins while driving strategic decisions.

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