Planning Around Success

When Tyres & Accessories spoke to Watts Tyre Group, it was only natural that the year we’ve just experienced – a particularly difficult period for the industrial tyre market – would be reflected upon. Yet times such as these also present an opportunity for companies that can capably adapt to their customers’ changing priorities. Watts, already a very strong player in the segment, is making the necessary adjustments needed to remain competitive in a depressed market.

“The last 12 months have on the whole been difficult for the industry – we are inextricably linked to global logistics, and as the manufacturing and retail sectors suffer, then so does the materials handling industry and those companies that sit downstream of the truck manufacturers,” relates Watts Tyre Group chief executive Jean-Paul Mindermann. “When you consider that virtually everything bought by households and businesses spends part of its life on a forklift truck, you quickly appreciate how a downturn in the economy affects the industrial tyre business.”

The fallout from the downturn has by no means been restricted to the industrial tyre segment, as report after report published by Tyres & Accessories and other news sources testifies. Mindermann sums up the current state of play in a succinct paragraph: “A brief look at the media tells a sorry tale for the tyre industry as a whole; significantly lower reported turnovers, plant closures and industrial unrest. The industrial tyre sector has not been immune from this, with the largest impact coming from the downturn in business of the OEMs. BITA recently reported that new truck sales have fallen between 42 and 50 per cent in the last 12 months. A closer look at the first quarter sales of 2009 reveals an astonishing drop in excess of 60 per cent. The aftermarket, an equally important part of the industry, has remained a little more resistant with sales having reduced by 20 to 25 per cent.”

Adding to frustrations for the industrial tyre market last year, Mr. Mindermann points out, were record high prices for key raw materials such as rubber, oil and steel, which put huge price pressure on the tyre industry and saw margins erode significantly as the increases could not be fully passed on. “This put pressure on the industry to deliver value either at the premium end through products that last longer or at budget level with products built to a lesser quality standard,” he notes.

“As the global economy has cooled down cheaper tyre products have grown in demand despite their being largely a false economy,” Mindermann continues. “Whilst it’s natural for people to want to pay less for their tyres, particularly in lean times, the only valid argument is looking at whole life cost including fittings and associated downtimes. Tyre purchasers can be easily seduced by low prices but need to take a step back and examine the product and its impact more closely. As the global economy improves we will see these budget products fall in popularity and the quality products recover lost market share.”

In terms of the products Watts supplies, the core products in the company’s portfolio remain solid tyres, Press on Bands and industrial pneumatics; wheel and complete assembly offerings are also an important part of the Watts range. The Watts chief executive comments that in the domestic market some change is occurring amongst individual brand lines, however the product sets remain more or less consistent in popularity. In export markets Watts is continuing to see a product shift towards solid tyres from pneumatics in some geographic territories. A key issue for customers in all markets at present is, naturally, the value a tyre delivers. Therefore, notes Mindermann, while environmental issues admittedly feature lower on the list of priorities, qualities such as reduced rolling resistance and tyre longevity have gained an appreciate audience thanks to financial benefits they deliver.

The market in which Watts operates has altered somewhat in the preceding 12 months, and Mindermann observes that “whenever there is a downturn in the economy we see resulting change at the far end. Some previously well established businesses disappear and new players emerge, processes that seemed set in stone are dismantled overnight and replaced by new leaner ones.” He adds that the majority of OEMs are already well into the process of reassessing their modus operandi, optimising their product range, adapting manufacturing capacity as well as taking the opportunity to implement supplier review programmes, to leverage better efficiencies from their supply chains. “In this climate industrial tyre companies that can offer an end to end solution (from manufacturing to fitting and final disposal) will benefit from supplier reviews as both OEMs and fork truck dealers look to rationalise costs.”

As to when and how the market will again pick up, while Mr. Mindermann notes that once global businesses have eliminated their excess stock levels, freight and transport activity will increase and with it the consumption of industrial forklift tyres, he is also well aware that a sustained recovery is dependent upon a much wider assortment of factors: “A return to the highs of prior years will necessitate that the overall global economy returns to growth and that we see stability in raw materials prices and that the currency markets stabilise.

“The UK market for industrial tyres will remain linked to overall economic performance, as and when the outlook improves we will see sales volumes increase,” he continues. “The service market is undoubtedly key; the focus for the UK will be on what added value tyre services companies can offer. The big opportunities will lie within the OE distributor channel and the large fleet end user market – these organisations will inevitably look to review their spend and to seek the best possible value from their supply and service arrangements.”

An area of the business that Jean-Paul Mindermann singles out as currently doing extremely well is the company’s Watts Zarya joint venture. The chief executive reports that through this joint venture Watts is seeing growth in its complete assembly sales, an area for which the company has recently been acknowledged as Toyota Industrial Equipment SA’s ‘Supplier of the Year 2008’.

“Watts are the market leader for tyre services in the UK and so will continue to plan around success in this segment,” Mindermann concludes. “We offer the most comprehensive range of products and services available and constantly strive to add value for our customers through service excellence and the expert industry knowledge that we possess. We continue to adapt our offering; we have changed our service model to move away from a rigid depot structure and to increase our mobile press fleet. We use our 22 depots as regional hubs with local stock holding based on Kanban principles to support our mobile fitting operation – we have around 50 mobile presses operational in the UK and can reach a customer truck anywhere in mainland UK within twelve hours. Our service operation has evolved into a highly flexible and responsive operation and we will continue to invest in it both in terms of press machinery and support technologies. The current economic climate hasn’t altered that headline challenge for us, but it has altered our methodology – we have to adapt to customer requirements and the opportunities that exist in the market.”