g it for us. We didn’t get that customer demographic because of our marketing efforts initially; it must have been work on the wholesalers’ or retailers’ part to start positioning Kumho at that higher level. We thank our dealers for helping us get where we are, and now we’re just trying to do more to keep us at that level – or higher – and give our dealers even more support.”
Brennan: “Our dealers moved us up quite well. Now we have to do our job to support them. We need to do as much as we can to make it easier for them to do business with us.”
How did Kumho’s fill rates improve in 2011?
Brennan: “By concentrating our inventory into three warehouses, we were able to have everything dealers needed in one location, versus having to ship more product between warehouses. In the first half of 2010, our overall fill rate was roughly 79%. That increased to about 82% the second half of 2010, and in 2011, fill rates reached about 90%. Dealers are extremely happy, especially when some of the other manufacturers have been really aggressive but haven’t been able to fill orders for what they’ve been pushing. It’s one thing to get aggressive and push product, but if you can’t provide it, it doesn’t help dealers one bit.
“It was also a lot of work by our logistics team to focus on getting the right products and the right amount of those products. When you have so many factories to coordinate with, that communication can be a challenge. Sometimes you have to negotiate in order to get supply sent to you, rather than to another region. Our team was the ‘squeaky wheel,’ but they did it in a manner to benefit the company, in a manner that didn’t disrupt things.”
Have there been any lingering effects from adjusting to the 2009 Chinese tire tariff?
Brennan: “No, we wrapped that up in 2010. The tariff caused us to absorb a lot of shipments that were already on the water. Also, we couldn’t just shut down production because it would leave people hanging. So there was a lot that we ended up having to pay the 35% on when that happened. By us moving all the tire molds (to factories outside China), we were able to get away from that, but it cost millions to move that equipment. We had to take it out of the factory, ship it to the port, put it in a container, ship it to the other factories, install it and get it up and running. And in many cases, the sizes and types of tires produced by those molds had previously been moved completely out of the factory that we sent the molds back into. So then those plants had to acquire new materials and reopen their inventories, which adds another cost. In the end, millions and millions of dollars were spent reacting to the Chinese tariff.”
How does Kumho’s new Premium Fuel Program compare to the original Fuel Program?
Brennan: “Our new Premium Fuel Program is basically a simplification of the original program. Our intent is to make the new program as accessible and user-friendly as possible. We’ve received much feedback from our dealers regarding what they needed from the Fuel program to work for them and we completely revamped the system to reflect the comments we’ve received. The old program worked so that if dealers bought 200 Kumho tires, they received 2% back; at 250, they received 3% back; and at 300, they received 4% back. This offer was on the entire Kumho lineup. The new system is simple: For every 12 tires you buy in a quarter, you receive $60 back. This offer will only be on our UHP lineup, however.
“UHP is an area dealers should be focusing on, so this is a great partnership because we’re offering an opportunity in an area they need. And it’s affordable and easy to hit the targets.
“Our new program will also put a focus on communication to make sure dealers’ needs are met. In the past, our main means of communicating with the retailer was through fax-blasts and e-mail blasts sent out every so often. Now, right when a dealer signs up for the Premium Fuel Program, we will send out a free kit of Kumho POP materials for them to utilize in their stores. We will also utilize fax-blasts and e-blasts on a regular basis to make sure everyone’s in the loop on updates, new products, new POP materials and more. Current Fuel dealers will be grandfathered in.”
Koh: “One of the goals of the new program is to expand Kumho’s retail sales points and to incentivize wholesalers to reach out to their dealers. It’s also a way for us to get information from more of our retailers – once they sign up through their wholesaler, we’ll have their contact information and will be able to open direct communications with them, rather than relying on their wholesaler.”
What’s the biggest challenge dealers face going into 2012?
Brennan: “Managing their own inventory and keeping it at the correct level. Because the market’s been up and down, there’s a huge fluctuation in the monthly numbers for the industry. We especially saw that in June through October 2011. The key is having the correct levels if they manage their own inventory, or if they do just-in-time, making sure they have someone who can deliver the product.
“Pair that volatility with SKU proliferation, and it’s an even bigger challenge. The number of SKUs dealers need to have access to in order to cover about 80% of the market is roughly 3,500.
“Many dealers stock a lot of different brands, and there are a lot of opportunities for purchases made within each of those brands. In 2011, we saw a lot of dealers finally starting to look at the market quite differently and say, ‘I just can’t stock that. I don’t care if the price is low, I just can’t put that in inventory.’ They’re really realizing how complex it’s become and they’ve started doing a better job of keeping on top of it.
“For example, we have dealers who buy some sizes from us and some sizes from other manufacturers, and that makes up their whole broadline offering. So they don’t buy every size in one brand.They have to pick and choose to be able to meet the demand. They have to know their own business well and know what they need at different price points. And that’s a hard decision to make, because it may mean losing an opportunity if you don’t have something in stock. That’s why it’s so important to partner with someone who can get tires to you fast. Single-source supplying really is a thing of the past. Even if a dealer buys direct from a manufacturer, they should also be buying from a wholesaler, because he may need tires on an individual basis for a particular customer, and they need to get it fast.”
No new products were announced at this year’s meeting; what is Kumho’s new product strategy?
Brennan: “We have size expansions for 2012 that will make some of our lines better. We launched the Ecsta 4X late in the year in 2011 for a typical product launch, and there are a lot of dealers who haven’t taken it on yet. So while we introduced it last year, it’s still somewhat of a new product. Dealers are starting to realize how much of an impact Kumho made when we launched it; there are consumers who are out there looking specifically for this tire, and some dealers didn’t have it.”
To view exclusive photos from the 2012 dealer meeting, click here.
