At the end of 2003, some experts were saying that commercial truck equipment demand could create "the mother of all buying cycles" over the next two to three years. Looking at the numbers, the cycle appears poised to bust loose.
Truck OEMs could be seeing Class 8 sales jump by 30% over last year. This is especially good news when you consider the U.S.’s Class 8 fleet is as old as we’ve seen in a long time.
And let’s not forget trailers, which might have the best short-term outlook due to pent-up demand that dates back to the low sales years of 2001 and 2002; the here forecast is up 30% for this year.
Class 5-7 truck sales could also fair better then expected, with a forecast of 15% to 20% growth in 2004. Trends here point up for school bus and RV/motor home segments, and better economic conditions would certainly up lease/rental truck demand.
Over the last several months, truck tonnage has risen considerably, reaching all-time highs on a seasonally adjusted index. Bob Costello, chief economist for the American Trucking Association, credits product inventory rebuilding by manufacturers and the improving economy as the basis of his rationale for forecasting a positive 2004. Additionally, it appears that the overall utilization of the nation’s fleet has been moving in the right direction ®“ and that’s up!
All of those indicators from the ATA leave a solid impression that vehicle sales projections should prove to be pretty accurate.
A well-respected insider was recently quoted in the truck trades that he’s noticing backlogs rising as OEMs start ratcheting up production. In the truck biz, when it rains it pours. He says it’s time to open your umbrellas.
For the first time in a number of years, fleets are getting in line to purchase equipment. In the past few years, fleets held on to their trucks a few years longer than usual and had a high quantity of used equipment available to bring onboard if needed. Today, that large inventory of used equipment has, for the most part, been pretty well picked over and most of the quality equipment is now gone.
Another factor pushing forecasted demand is the potential that carriers will increase trailer-to-tractor ratios in response to the loss of productivity related to the new driver hours-of-service regulations that went into effect in January. Some carriers have had to turn down loads because of a lack of capacity. So there could be a shortage of tractors and trailers until fleets bring on a wave of new orders and manufacturers crank up production.
Finally, businesses are simply starting to invest again. The last time we saw that was in 1999 as we all prepared for the phony Y2K bug. The stock markets are certainly a good indicator and their numbers demonstrate investor confidence. In fact, the Dow average is within striking distance of its record set in 2000.
So how does all of this good news translate to your commercial tire business? Well, the demand from OEMs could weigh heavy on replacement tire fill rates, obviously affecting your business. However, the people who watch the numbers say the typical "OE up, replacement down" scenario may well not play out for a while as both sides rationalize requirements.
To make sure their pipelines are filled, OEMs are communicating tire requirements daily with tiremakers. Smart dealers have to communicate their anticipated business levels, as well. Crisis, after all, is the byproduct of a lack of communications.
Get closer to your suppliers. You need to know whom your first, second and even third tier choices are. If you haven’t done so in awhile, have lunch with your supplier reps and discuss your anticipated tire needs. Look for assurances of product availability and solid fill rates, and if you need to ratchet up your "commitment" level in order to maintain smooth supply, then consider doing so. Remind your reps, though, that commitments are always two-way streets.
More than ever, your people must be up to date on the latest tires and applications, and understand how this information can meet your customers’ needs. You need to be the "answer man," the expert who creates bottom line solutions for fleet customers.
Last, but certainly not least, now is a good time to reexamine your commercial tire business plan. After the last three years, if you haven’t kept up, you’ll get caught out.
Business hasn’t been all that bad over the last few years. With the coming whirlwind, make sure you are ready so you can enjoy the benefits.