In 1930, K. K. Penner Tire Centers started as a small service station/mechanic shop. Today, it has grown into a major tire-supply company with a third generation of Penners among the management team. True to its roots, Penner Tire Centers still repairs tires as well as selling them new. More importantly, the company wholesales to subdealers all over northwestern Manitoba, Saskatchewan, and northern Ontario—an area sometimes referred to the as the “wholesale capital of Canada”—and has a thriving retail trade as well.
Expert, computerized inventory management provides the company’s competitive edge. Penner Tire Centers carries a large inventory of the most renowned tire manufacturers, and it closely monitors its inventory turns, which includes new and used tires for passenger, truck, agricultural, and industrial use. Gerald Penner, vice president of sales, attributes the company’s good performance during the recent downturn in the economy to this diverse range of products.
“When the economy is less strong, manufacturers scale back on production,” he says. “With less inventory available, the result can be shortages and slow deliveries. We tend to make bulk purchases of new tires to make sure we have enough stock, and we carry a large inventory.”
Such a task is not easy. In the 1940s and 1950s, only 12 tire sizes were required to fill 90 percent of the demand. Today, Penner Tire Centers carries between 50 and 60 tire sizes. “Even that wide of a selection still covers less than 90 percent of the demand,” Gerald says. “We special-order tires to make up the difference.”
To stay competitive during the downturn, Penner Tire Centers provides its customers with a more timely delivery than the manufacturer. The web store also helps business, as it required no minimum order.
“Like other companies, the recession challenged us to experiment and to think outside of the box,” says CEO Mike Warkentin. “For example, most of our main suppliers have a national account program for distributors, which allows us to supply tires to car dealerships. Essentially we have become a warehouse and service provider for them, and receive a credit and commission on sales and service.”
It was a risky move, as the margin was lower on sales to car dealerships than to customers directly, but it ultimately paid off. Tight inventory control, combined with low-overhead sales through the company’s web store, provides efficiencies that make even low-margin sales profitable.
Other techniques have allowed the company to weather the recession. “We keep a close watch on tire aging,” Gerald says. “Every month, the inventory system spits out a report of tires that are 11 months past their manufacturing date. We price them for clearance and put that list up on our web page. The system helps us manage used-tire sales, too. In hard times, more people rely on that to get by. We figure it is a good way to start building customer relationships.”
Warkentin explains that the most difficult decisions during a downturn relate to extending credit and managing receivables. “When we have a long history with a customer, it is a challenge when their payments slow down,” he says.
According to Warkentin, Penner Tires Centers tries to be a relationship-based company. “All parties to a transaction have to see a benefit from that transaction,” he says. And, with times as tough as they are, there isn’t a more practical solution than that.