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‘End of lease’-tyres’ stock reduction and centralisation

The Challenge

A leading vehicle lease company was challenged with their surplus of summer and winter tyres, located decentrally at car fitters. The car fitters assure that the lease vehicles are maintained during the lease period. This maintenance includes changing summer to winter tyres and vice versa. At the end of the lease-period the lease cars are taken out of service and are inspected and refurbished by the automotive logistics company before being sold. The cars are sold with only one set of tyres: the set which they are on at that time. The other set of seasonal tyres that was stored for the lease cars remained at the car fitters. With a growing number of lease cars being in service, and thus taken out of service a few years later, the stock of ‘end of lease’-tyres was increasing considerably. This increasing stock of tyres incurred unnecessary storage cost and became almost unmanageable because it was so dispersely located. In addition to the storage cost cash, for which also interest payments were being made, was tied up in the ‘end of lease’-tyres’ stock. The leading vehicle lease company turned to the automotive company to help find a solution that would reduce the logistics cost and make the inventory more manageable by centralising it.

The automotive logistics company approached ESCIMCO to help find a solution for the growing problem of ‘end of lease’-tyres for the vehicle lease company. A solution that would tackle both the management of the stock and the cost involved with it.

The Approach
ESCIMCO mapped the process that tyres were following once the lease cars were at the end of their lease-period. Using a few years’ worth of data provided by the vehicle lease company ESCIMCO further expanded the mapping and showed the financial consequences of the growing stock of tyres.
Making use of the mapping ESCIMCO also identified various opportunities to reduce the stock of stored ‘end of lease’-tyres, which consequently would also reduce the burden of cash tied up in tyres and interest payments due.

ESCIMCO further analysed the available decentralised ‘end of lease’-tyres’ stock and identified which part was still active and complete. With this analysis and the tyre-industry’s best practice for storage of tyres, ESCIMCO identified the storage requirements for a centrally located stock of ‘end of lease’-tyres. Based on an optimised process for handling tyres in and out of the warehouse ESCIMCO furthermore determined manpower and handling material needed. Lastly ESCIMCO determined the data requirements to manage the ‘end of lease’-tyres’ stock and the system to support the management of that stock.

The Results
The vehicle lease company was extremely happy with the results of the engagement. With a net engagement time of 5 weeks spread over a period of 4 months ESCIMCO managed to successfully complete the assignment. The assignment delivered a huge reduction of the ‘end of lease’-tyres’ stock, while giving complete controle over it in a centralised and much lower cost warehouse location. The engagement resulted in an overall 10:1 ROI.

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