CHARLOTTE, N.C. — Tucked away in an industrial district about five minutes from Charlotte’s airport is a warehouse operation for a company that nearly cracked the Fortune 500 list this year.

CHARLOTTE, N.C. — Tucked away in an industrial district about five minutes from Charlotte’s airport is a warehouse operation for a company that nearly cracked the Fortune 500 list this year.


Though American Tire Distributors is headquartered in suburban Charlotte, it has several distribution centers, one of which is here.


Step out of the distribution center’s office space onto the warehouse floor, and you encounter the unmistakable smell of rubber. Stacked from floor to ceiling are somewhere between 80,000 and 100,000 tires, ranging from "aggressive," 500-pound tires fit to be rolled in a CrossFit championship, to smaller tires suitable for a Honda Civic.


Each day, these tires move in trucks from the distribution center to automotive service shops and tire retailers across the region. The distribution center houses 43 employees, just a fraction of the 4,800 American Tire employees across the U.S. and Canada.


American Tire, originally founded as J.H. Heafner Co. in 1935, landed at No. 514 on Fortune’s most recent annual list of companies ranked by revenue. As recently as 2009 it didn’t even place in the top 1,000. The company’s net sales for the fiscal year ending January 2015 were $5.03 billion, more than double the net sales for fiscal year ending January 2010 of $2.17 billion.


"We really are Charlotte’s best-kept secret in companies," said Ron Sinclair, senior vice president of marketing.


Its growth is the product of several converging factors, including acquisitions, investment from private equity firms and a supply chain model the company says was forged through trial and error.


American Tire stores and distributes tires from a wide breadth of brands from Bridgestone to Goodyear and custom wheels fit for accessorizing lawn mowers and golf carts.


The company’s share of the replacement passenger and light truck tire market in 2014 was approximately 14 percent in the U.S., up from approximately 1 percent in 1996, the company said. Its market share in Canada last year was about 25 percent.


"So although we’re the largest (distributor of replacement tires), 14 percent in most categories is not a huge market share compared to other industries," Sinclair said. "We’re proud of the 14 percent market share, but we still believe there’s room to grow."


SOLVING THE SUPPLY CHAIN PUZZLE


The company is riding a wave of post-recession demand in the tire replacement market. The recession depressed demand for replacement tires, but the market wasn’t hit as hard as other industries, Sinclair said. That’s because "when your tire wears out, you have to replace it."


Another plus for the company: In recent years, many tire retailers have reduced the amount of inventory they hold because of the expanded array of replacement tires and wheels. As a result, tire retailers are relying on middlemen like American Tire more and more.


"As a retailer you can’t stock four tires in all the brands and all the lines in a store," Sinclair said. "Space-wise it’s impossible."


The challenge for American Tire is to anticipate supply and demand. The tire business is all about keeping tires rolling through the supply chain — of which American Tire serves as the midpoint.


American Tire’s capacity to smooth out delivery times and use information systems is key. It uses a bin location system that scans every tire in and out of the distribution center to keep accurate inventory counts.


"If a dealer goes on and says there’s four of these tires here, there better be four tires because he’s got a customer that he’s committed to having them on their car by 5 o’clock," Sinclair said.


Figuring out how many tires to get to customers was not a seamless process.


"We had made some attempts to service customers in Charlotte more than twice a day," said Jeff Jones, distribution center manager at Charlotte’s American Tire. "There wasn’t a need for it."


Today, American Tire typically services its Charlotte customers twice a day, but it always takes into account customer needs.


GROWTH CHALLENGES


Even as it expands, American Tire faces the challenges any company does when it grows so quickly: Making customer service keep pace with growth, said Bob Ulrich, editor of Modern Tire Dealer, a tire trade publication.


"Not all independent tire dealers find it easy working with such a big wholesale distributor, but that’s the nature of the beast," Ulrich said. "When you grow that rapidly, it’s harder to give that personal touch to the customer."


American Tire said it maintains a high level of customer service through many avenues, such as new employee training, ongoing supply chain analysis and investment in distribution systems like the bin location system.


Michael Castrillon might order eight tires in a typical month at his Charlotte auto repair shop. He relies on American Tire because of its fast delivery times, he said.


ACQUIRING DISTRIBUTORS


In addition to building new distribution centers, American Tire has acquired several distributors over the years, including in Canada. Folding companies into its business model presents challenges, such as speed of adjustment.


"It has grown a lot by buying other companies, and it takes a while for companies to fit into American Tire," Ulrich said.


But with American Tire’s abilities to catch trends early — under what Ulrich calls "visionary" leadership — and with the aid of private equity money, the distributor has been able to expand faster than anyone else, he said.


———


AMERICAN TIRE DISTRIBUTORS


History: American Tire traces its roots to the J.H. Heafner Co., founded in Lincolnton, N.C., in 1935. Over time it acquired other companies and was reincorporated under the name Heafner Tire Group in 1999. The company changed its name to American Tire Distributors in 2002. In 2009, Bill Berry became president and chief executive officer.


Number of employees: 474 in suburban Charlotte corporate office, 43 in Charlotte distribution center, 53 at Lincolnton mixing center. Total of 4,800 across the U.S. and Canada.


SOURCE: AMERICAN TIRE


———


©2015 The Charlotte Observer (Charlotte, N.C.)


Visit The Charlotte Observer (Charlotte, N.C.) at www.charlotteobserver.com


Distributed by Tribune Content Agency, LLC.


—————