How a Global Tire Manufacturer Finds the Perfect Match in a Distribution Center Location
At least 80 percent of the cost of a tire comes from the logistics and transportation of moving that tire through the supply chain – as such, identifying the ideal location for a DC is a crucial process for a global company like Michelin.
Making good products is one thing. Finding the appropriate place to house them until they are ready to reach stores and customers around the world is another.
The distribution centers we look for need to house important products. They are used every day by millions of people all around the globe, and the purpose they serve is as varied as the options and sizes they come in. They encompass 125 years of technological innovation, industrial ingenuity, and science from Michelin — the world’s leading tire brand.
They are important products. They keep people safe, they keep people moving, and they keep the goods and services the world needs rolling. Without them, airplanes could not land, trucks could not haul, tractors could not plow, and cars could not go.
They are one of the most important products people never want to worry about but always need. And when you make millions of them every year, all around the world, where you house them is a pretty big deal.
Yes, tires…the round, black things everyone dreads having to replace on their cars.
The Crux of the Operation
Michelin has been in the business of making tires since 1898, when there were less than 8,000 vehicles on the road in France. From humble beginnings in a small rubber factory in Central France — where the Michelin brothers made bicycle tires that could detach from the rim so as to decrease the time and cost of replacing a flat tire — Michelin has grown to one of the world’s largest tire manufacturers.
We produce tires in 67 facilities in more than 17 countries all around the world, and we have large research and development facilities on multiple continents. We market and sell our tires in more than 170 countries and our products range from high-performance tires for motorcycles and race cars to gigantic, industrial tires for giant mining equipment. Our customers range from automotive manufacturers to tire dealerships big and small in nearly every country.
As anyone in the industry can understand, our supply chain and distribution networks to accommodate a demand-and-supply schedule like that has to be pretty advanced and is of the upmost importance to the businesses objectives. Because we make some of the best products in the market, it is important that we support those products from the time they are manufactured to the time they arrive at the dealer to be put on your car. Storage, transportation, buildings are all taken seriously if the Michelin name is on it.
So when it comes to distribution buildings, there is a lot riding on them, just like our tires. Because our products are complex, varied, and there are many fluctuation points in the demand schedule, a distribution center serves as the crux of the entire operation. As you know, if you cannot get the product to the marketplace, business cannot continue as usual, and the implications for customers and end-users becomes extremely important.
We recently built a manufacturing facility in Anderson, South Carolina...When deciding where to build that new facility, you can imagine that access to the ports in Savannah and Charleston was extremely important in our decision.
A Serious Selection Process
As stated, Michelin makes tires for nearly every type of vehicle. From airplanes, heavy trucks, tractors, and construction equipment to giant earthmovers, bicycles, and passenger cars, there is a distribution need for each product line. We can no easier choose an empty building to use as a distribution center than we can forgo quality and performance testing on the tires we bring to market. With a team led by our logistics, legal, real estate, and internal business unit leaders, it is a selection process we take very seriously, and the timeline can take anywhere from six months to three years.
Depending on our internal client, our team seeks to locate as many options in the targeted market that satisfy the most building criteria. Although the needs of each business unit may dictate different criteria, we generally take into consideration things such as the distance to the ports, interstate accessibility, and infrastructure support as well as environmental protection, building conditions, and operational costs.
The first item on our checklist to find the perfect distribution center starts and ends with the transportation component. At Michelin, the business units are essential for keeping the real estate and site selection teams informed about what the business needs are, but because at least 80 percent of the cost of a tire comes from the logistics and transportation of moving that tire through the production line to the point of sale, we seek to minimize any unnecessary costs and rely heavily on our logistics team’s expertise to get the process started.
Creating Our “Profile”
Once we know the general scope and needs of the project, the next steps become much like creating a dating profile.
As a global company, top of the list is location, location, location. We are not interested in a long-distance relationship between where our products are made and where they ultimately need to go. While some long-distance relationships can work, it might be a deal breaker in our hunt for “the one.”
When it comes to distribution buildings, there is a lot riding on them, just like our tires. Because our products are complex, varied, and there are many fluctuation points in the demand schedule, a distribution center serves as the crux of the entire operation. When it comes to identifying an ideal location for a distribution center, the top factors for Michelin include access to major roadways and, potentially, port access. We recently built a manufacturing facility in Anderson, South Carolina, where we make the giant earthmover tires I mentioned. The tires produced at that facility are up to 13-feet high and 80 percent of them are produced for international export. When deciding where to build that new facility, you can imagine that access to the ports in Savannah and Charleston was extremely important in our decision.
After narrowing the field, my team and I will arrange visits to each of possible sites. An on-site inspection is critical to determine if the site meets our expectations of important factors. In this business, it is not the outward beauty that draws us in, but rather the internal structural details such as the fire safety systems, insulation of the roof, and the water pressure. These things are important considerations given that we will be housing products that, although designed to handle weather conditions, do not want to experience unnecessary or intense fluctuations in heat or cold.
Additionally, we need to control for some obvious factors such as accessibility, availability of loading docks, ceiling clearance heights, maneuverability inside the building, and the strength of the floor. Since tires are not the lightest products, it is important that the flooring foundation is both sturdy and stable.
Planning for the Future
One item that is always in the back of my mind when I am considering a building for a distribution center is how easily this distribution center could allow us to expand our operations, if necessary. Just as in a relationship, we are often after long-term potential and growth. Thus we need to ask ourselves how this potential distribution center can grow and expand if we need it to. Sometimes it is apparent to us that despite having all the qualities we need in the short term, there is just not potential there for a long-term relationship.
Even after all of that, it is important to note that these are the benchmarks and criteria that best serve our needs at Michelin. Much as in the dating pool, the same set of conditions and standards won’t apply to everyone. The folks at Match.com and eHarmony would certainly agree.
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