As the new year starts, tire distributors and dealers are keeping a close eye on their inventory levels, which seemed to finally level out at the end of 2023.
Joaquin Gonzalez Jr., president of Miami-Fla.-based Tire Group International LLC (TGI), and John Ziegler Jr., vice president of Massillon, Ohio-based Ziegler Tire & Supply Co., recently talked with MTD about their companies’ current inventory levels and plans to stay on top of inventory during 2024.
TGI is primarily a wholesale-distributor, while Ziegler Tire wholesales tires and has 22 combined retail/commercial tire outlets.
“At the beginning of (2023), we were still trailing with high-priced inventory due to the high freight cost paid in 2022,” said Gonzalez.
“So our sell-in trailed our sellout for all of 1Q and 2Q,” he noted. “The second half of the year, we began to see things pick up and our sell-in increased sharply to keep up with demand. This is putting us at a 10% to 15% higher level in inventory than where we finished in 2022.”
Ziegler said his company’s inventory levels “reduced somewhat” in 2023.
“There was more inventory available in most types and brands (of tires), so there wasn’t the need to feel like you had to ‘load up’ to make sure we had the coverage.
“That being said, inventory is still higher than we would want it to be. Entering the slower time of the year, we anticipate prices going down in the early part of the year with supply on the manufacturer side being higher.”
Gonzalez says TGI ended 2023 in a “good position” with inventory as he and his team “transitioned all of the overpriced inventory we had in 2023 and replaced it with a lower average cost” units.
He credits TGI’s good position on inventory to the fact that the company did not “shy away from ordering as all of the uncertainty with the anti-dumping investigation unfolded.” (Read more about tariffs that may be applied to TBR tires made in Thailand here.)
Stability and predictions
Gonzalez said he coined the term “inventory indigestion” to explain out-of-whack inventory levels during 2022.
“Every dealer in the supply chain began ordering more tires than they actually needed because demand never took a reprieve during the pandemic,” he says.
“The price of freight became secondary to not having tires in stock. This abruptly stopped, as it took freight 22 months to reach all-time highs, but only six months to normalize (back down to) pre-pandemic levels.”
This put a lot of pressure on distributors to offload overpriced inventory in a short amount of time.
Gonzalez said this made the end of 2022 and the beginning of 2023 “difficult to manage.”
He added that TGO readjusted minimum and maximum numbers across the board and “stuck to that strategy until demand would rebound and begin to out-pace supply once again.
“We understood the discipline it would take, as well as the hits we needed to take in order to right-size our inventory in short order and get us to the other side of the curve as quickly as possible.”
Ziegler Jr. said keeping a close eye on the turns in Ziegler Tire’s inventory helped to keep his dealership’s inventory stable.
“We were able to order less units on a regular basis because availability was better. Imports were much more reliable in 2023 - getting back to more normal order-to-receipt times versus 2022, when international container shipping was a total disaster with pricing and the supply chain mess.”
Going into 2024, Ziegler says his plan of attack is to continue to reduce inventory while maintaining turns so that “we have what we need, when we need it.
“We also want to make more of a concerted effort to keep the right inventory in distribution center locations,” in order to alleviate pressure on retail/commercial stores. (Ziegler Tire has three warehouses.)
Looking ahead, Gonzalez predicted there will be some supply interruptions as dealers try to navigate pending anti-dumping decisions, but says “it shouldn’t be anything we aren’t already used to by now.”
“The key will be the impact these decisions will have on land pricing and supply chain origin,” he noted.
“Once final decisions come down, it may take a whole quarter to adjust to the new rules, but I don’t see anything that isn’t insurmountable.”
Gonzalez said he believes inventory levels will slightly increase in 2024 as more consumers migrate from more expensive to less expensive tires and brands.
