ATD’s data-led revolution (and what it means for tire dealers)

Image Credit: American Tire Distributors

The algorithms are coming – and experts say they could soon be saving tire dealers across North America a fortune.

Data analytics has been revolutionizing industries around the world for a decade or so, but the tire industry has been relatively untouched. Until now, that is.

In Huntersville, North Carolina, ATD has quietly assembled the kind of team you’d normally find working for Silicon Valley tech giants like Facebook and Google. For the past two years, they’ve been developing ways to use the incredible amount of data the industry already collects, to find ways to help everyone from retailers to manufacturers do business more profitably. ATD calls it the Advanced Analytics Center of Excellence.

Data revolutionizing the tire dealer’s day-to-day

Tim Eisenmann is ATD’s Vice President of Advanced Analytics. He believes the US tire industry could save up to $1 billion a year by more effectively using the data it collects.

“Very often the industry produces the wrong stuff, then puts in the wrong stuff in the wrong places, puts the wrong amount of the wrong stuff in the wrong places – on OE, on distribution, and on the retailer side,” Eisenmann explained.

“That leads to high inventory levels, low fill rates, high levels of customer dissatisfaction and, ultimately, high costs.

“We think we’re in a really interesting position to connect each of those players with data and insights… to bridge the gap and help all of us drive inventory levels down by driving forecasting accuracy up, and drive the profitability in the industry.”

Tire dealers to benefit, profit from data

Eisenmann said tire dealers would be among the biggest beneficiaries of this data-led change.

“We deal with a lot of partners both from the retail and the OE side that look at us for advice,” he said. “They want to know: how much should I produce based on your forecast? What should I stock? How much should I stock? How much should I charge for it?

“We needed to equip (our sales team) with tools to help our dealer partners make better decisions. A lot of them are ‘mom and pop shops’, often second- and third-generation owners… and they’re looking to ATD to help them. We felt there were a lot of things we could do to help improve their profitability.”

That’s where the algorithm comes in. Want to know which brands you should be affiliated with to drive your overall profitability, or how much of which tires you should stock, or how you’re positioned price-wise in the market? It’s all in the incredibly rich data sets available to ATD. It just needs to be extracted.

At the moment, the ATD sales team is the point of access for that information, but the company is currently operating a pilot program that – if successful and ultimately rolled out to the industry – will allow dealers to access and use the data themselves, to help in the day-to-day running of their business.

Are tire dealers reluctant to change their ways?

But the tricky part could well be convincing tire dealers of the value of the data they have at their fingertips. James McAlpine is the Manager at XANGO Analytics, a business intelligence dashboard launched especially for tire dealers in 2015. He said tire dealers have often have a huge amount of valuable data within their own businesses they could be using to help identify gaps in their inventory and get suggestions on products to stock in order to fill those gaps.

“Often they just don’t know what to do with it, even with some of the tools we have developed,” he said.

“Tire dealers are good at selling tires – a small tire shop isn’t going to have a VP of advanced analytics. That’s why we have built some simple actionable reports and some automation in the system, to make it easy to action on some of the recommendations the platform makes.”

XANGO Analytics’ tool pulls data from a dealer’s own website and point of sale system and highlights missed opportunities based on what customers are searching for, and makes recommendations on stock and pricing.

“This can help increase sales and help dealers know exactly what to stock and when to stock it,” McAlpine said.

“That way dealers don’t need to be an analytics expert to be able to use the tool.

“The tire distributors who have taken it up have all had huge success with the system, and we work with them on creating more reports based on their feedback.”

Despite the convenience and ease of use, McAlpine said adoption in the marketplace had been slow.

Slotting optimization saves on travel time

Yet there’s plenty of evidence that data works. Back at ATD, Eisenmann says using data analytics has already improved the way the company runs its own business.

“We run our operations better than we did two years ago and our customers benefit from that,” he said “They may not realize the way we use artificial intelligence is the reason why (we’ve improved).

“(Data) is really important for us in our distribution centers; it means we have the right product in the right place, so we can serve customers the same day or next day instead of three days later.

“It means we get our trucks out on time and in a cost-effective way.”

That cost-effectiveness is actually a great example of what data can achieve. The experts at ATD’s Huntersville center used data to optimize the layouts of their distribution facilities, ensuring the most commonly sold products were closer to the loading points.

“We’re talking million-square-feet warehouses, so the travel time on the forklift can be minutes,” he said. “By working out which tires to put in which areas, we’ve reduced our travel time to between 10 and 20 percent.”

Data can stop bad news before it happens

Data doesn’t just show you what happened in the past. Experts can use it to predict the future, too.

“We used to be able to look at data and see where a decline has happened and then go to the dealer and see what’s going on,” Eisenmann said. “But the decline has already happened at that point. We wanted to be able to anticipate when a customer was struggling a little bit, before the customer was struggling.”

Eisenmann’s team built a model, or algorithm, that used 1,500 variables including transaction history and the market environment, to predict whether a dealer was going to do less business with them in the next three months than they usually do.

How’d it go?

“We can now say with 85 percent accuracy whether a customer is going to do 30 percent less business with us in three month’s time,” he said.

“Sometimes the retailer hasn’t even noticed the signals yet – often it’s things that are ‘under the hood’.

“So, then we have a conversation about what’s going on: have you looked at these four or five indicators? Is it something you were expecting? And how can we help?”

Big data, AI, and the future of the tire industry

It’s obvious why ATD is going down this data-based path. With 80,000 installation points and 80 years of history, they have an enormous data set to mine for insights and information.

But whichever company leads the way and whichever challengers emerge, if Eisenmann is right that the industry has $1 billion worth of pain points to be solved, the winners will ultimately be every business in the industry itself – from retailers right up to the manufacturers themselves.

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