How retreaders and manufacturers are supporting carcass supplies
While we have all heard references to the financial crisis ad nauseam, in the retreading sector the paucity of quality casings is becoming a crisis of its own. Of course there are links between the general economic environment and the lack of casings in the market, but there is more to it than that. It seems that a number of pressures have combined to cause a perfect storm of hindering factors, preventing the necessary supply of casings getting to the people who need them the most – retreaders. And while getting hold of any retread’s most fundamental component is said to be taxing for everyone, things are said to be especially difficult in the independent sector.
In the last Retreading Special (March 2013), we looked at how general economic pressures have led to lower overall new tyre market volumes and therefore a smaller general first life casing source pool for retreaders. In addition the influx of lower quality first life products we have witnessed over the past five years or more, which have until recently been routinely imported without any clear strategic and logistical support for retreading, means casing supply is further constricted.
Then there is the curveball of some retreading operations becoming victims of their own success, with fleet customers known to specify 100 per cent retread policies. And these by definition consume casings without necessarily returning any to the source pool. With this in mind, it is hardly surprising that some of the most professional independent retreaders in the leading European markets have opted to partner with the Chinese tyre makers they believe a) offer the best first life quality amongst their peers and b) are most retreadable as such an “if you can’t beat them, join them” approach widens their new tyre product portfolios, opens up casing possibilities of their own and potentially slows the growth of the so-called disposal casing market.
The problem is that, as the second quarter draws to a close, the consensus says there hasn’t been any noticeable improvement. And in fact, with new tyre markets depressed, new vehicle sales generally still behind the pace and freight miles driven remaining lower than average in the key markets, it means that the supply chain remains constricted.
In addition it is also worth highlighting some other factors that put pressure on casing supply in this market environment – increased leasing take up and the role of large new tyre manufacturers. The role of leasing might not have made much of an impact if the market itself wasn’t already pressured. Indeed the fact that vehicle operators have been on a half-decade long economy drive is nothing new. But what this in general, and the inherent pressures on cash flow, mean is that there is said to have been increased take up of leasing options; for example, KPMG data from 2012 reports that 45 per cent of German trucks are funded by this method. The point is that when trucks are leased rather than bought with cash or purchased with credit, it is not unusual for some degree of tyre management to be wrapped up in the contract. And as the economies of scale mean it works best for leasing companies to operate as large fleets, this means that once again the casing supply is controlled. Therefore these casing too are not connected to the open market.
At the same time the larger manufacturer-owned retreading operations continued to make efforts to secure their own casing supplies, again meaning there are even fewer available on the open market. This again causes particular problems for independent retreaders. No-one is making a judgment about whether or not this is a good thing, but it is a reality that has to be taken seriously when considering the overall casing supply chain.
Bridgestone states its case
The fact remains that a free market is exactly that and that at times of pressure it is up to the suppliers, retreaders and manufacturers to cooperate and compete in order to meet their and their partners’ needs and demands. And with this in mind it is worth pointing out that the casing supply affects everyone – large and small. While Bridgestone, for example, may boast some of the most advanced retreading technology in Europe, the brand remains acutely aware of an underlying casings issue that threatens the success of its operations.
With more than 50 per cent of Bridgestone’s total commercial tyre sales being retreaded products, it begs the question: “Where do they find all the casings from?” According to Terry Salter, retread development manager for Bridgestone UK, the answer is far from straightforward, with a solution taking some time to find.
“When it comes to casings, there is a continuous struggle,” he said. “At Bridgestone, we are ahead of our competitors, in that we have a range of sources that ensures a good continuity of supply.”
Salter said that Bridgestone’s supply of casings, with more than 130,000 received at its Bulldog factory in Bourne alone each year, can be attributed to four key factors – tyre life, tyre care, the Bandag franchise and its European network.
When it comes to the company’s lauded “Total Tyre Life” Bridgestone points out that its truck tyres have retreading technology built into the original tyre design. And of course this really helps premium manufacturers such as Bridgestone when it comes to retreading their own casings down the line. To realise this potential, Bridgestone’s approach to market includes not only the sale of new and retreaded tyres but also a comprehensive casing collection service. This aims to collect the removed tyres within an average of three days of notification and then track those casings throughout the retreading process, ensuring that value is realised from this key asset.
According to Bridgestone, tyre care is equally important. And the strength of the company’s Total Tyre Care programme – administered through Bridgestone’s Truck Point network – is that it aims to maximize the life and usage of Bridgestone products, carrying out audits, reports and tyre care husbandry. Bridgestone’s Tyre Pressure Monitoring System (TPMS), a sensor-operated system providing real-time pressure data for increased safety, is an extension of this service.
In addition the Bandag franchise network Bridgestone bought in 2007 just before the financial crisis told hold helps the company maintain casing supply, while working at the same time with partner businesses in the production of retreads. In the UK this means that the company has both production and supply contacts through its own manufacturing facility in Bourne, Lincolnshire and its network of Bandag franchisees. According to the company, this has not only increased the production capacity and sales of the company’s retreads, but it has also increased the quantity of casing sources.
And finally all of this is supported by the company’s connection with the rest of the continent via a pan-European network. This means that, for its part, Bridgestone UK has already spread its casing management expertise into the Danish market with the installation of its unique casing management system at the firm’s Tobol plant. This has reportedly improved casing operations within the Danish market and has resulted in an exchange of casings between these two nations that further helps Bridgestone serve its customers.
As a result this expertise is now being spread further across other European countries and will, say company representatives, result in further improvements in casing management as the year progresses.
Bridgestone’s Terry Salter added: “Since the start of the financial and economic crisis that hit Europe in 2008, there has been unprecedented growth in demand for retreads and a restriction on the new tyre sales, with less vehicles being sold into the market. This has changed the normal balance between new and retreaded supply and this is resulting in ever-tighter casings supply just when the market needs it most. Bridgestone’s solution is to look at new and innovative ways with customers to overcome this challenge.”
With the retread market having experienced what Salter described as “unprecedented growth” in the past few years due to tougher economic conditions for the commercial vehicle industry, the question remains: how will companies counter the casing conundrum?