Tyre manufacturers have to become more customer-centric in order to survive. Doing so will require massive investment—and new ways of doing business.
By Dries Lottering, Manufacturing Renewal Executive, Bridgestone South Africa
“Digital transformation” is one of the most used buzzwords in business today—quite rightly, in my view, though its exact significance changes from industry to industry, and even from company to company.
Two forces are driving the dynamics of digital transformation. One is that the advent of the Digital Age has created new expectations amongst consumers while giving them more power via social media and access to information. The other is that digitalisation allows companies to work smarter and to service their customers more accurately. These two forces impact each other: as businesses get smarter, so consumer expectations rise—ad infinitum, presumably. Today’s business mantra is, as always, the customer is always right but the transparency enabled by a digital world makes it much more urgent than ever it was.
Financial services companies and retailers are in the frontline of this business revolution, but the pressure to become more customer-centric is now being felt even in tyre manufacturing. It will prompt change on a large scale, and could ultimately lead to a complete realignment of the industry.
What does customer-centricity actually mean when it comes to tyre manufacturing?
In essence, tyre manufacturers have two sets of customers: the original equipment manufacturers (OEMs) who design and manufacture the vehicles on which the tyres are to be fitted, and the end-users, who purchase the vehicles.
The vehicle OEMs are under the same pressure as everybody else to improve current offerings. Better performance, lower running costs, better safety, more sustainable use of raw materials and more features are part of this equation. Vehicle OEMs are producing not only more models to meet customer expectations for greater choice; they are also introducing a greater range of alternatives on each model to give consumers a greater ability to “personalise” the vehicle that they buy.
Consumers now have a growing range of choice relating not only to vehicle colour but also a host of other options, including tyre type and size. Manufacturers will need to produce shorter runs based on a much more accurate view of consumer preferences than had previously been necessary.
In addition, tyre design plays a big part in the overall customer satisfaction because of its impact on how the vehicle performs. Manufacturers thus are under pressure to produce the tyres that complement each vehicle. Vehicle OEMs spend millions on each new model, and they expect the same commitment from tyre manufacturers.
The pressure to innovate
Tyre manufacturers are also on notice to innovate more profoundly in order to produce new types of product in line with growing consumer and regulatory demands. Into this category fall autonomous and semi-autonomous vehicles, as well as vehicles powered by alternatives to the high polluting internal combustion engine.
In short, the days of producing long runs of a fairly limited range of tyres are drawing to close. The old success levers of efficiency and cost reduction derived from economies of scale are being supplanted by the need for agile, flexible manufacturing capabilities. Of course, cost pressures have not gone away either.
Two implications are of particular relevance to South African tyre manufacturers. The first is that massive new investments in plant equipment will be necessary to give the flexibility needed to produce shorter runs of a greater range of tyres. Unfortunately, our industry has not invested consistently over the past decades, in part because low labour costs have made the business case for capital investment hard to make.
The investment needed now will be substantial, and it won’t be confined to manufacturing equipment. Our very plants will need modification in order to accommodate the requirement for a smarter, more IT-intensive manufacturing process.
The second, related implication is that of skills. Lack of investment in modernising equipment has meant that the skills have also not been upgraded. The new generation of machines require a more sophisticated skillset. One challenge is our educational system, which is simply not turning out young people with the right skills; another is how best to help the existing workforce obtain the necessary skills or find alternate career paths.
These are significant challenges indeed, but they will have to be overcome if we are to remain relevant as a tyre-manufacturing country—or a manufacturing country at all.