Toward connected aftermarket supply and service chain: A case of tire-related services for national truck fleet customers.

Publication Type:

Conference Paper


Gerpisa colloquium, Paris (2021)


Gerpisa research proposal
29th International Colloquium of Gerpisa

Toward connected aftermarket supply and service chain: A case of tire-related services for national truck fleet customers.

Reflecting the trend of technological evolution related to connected vehicles, a growing number of papers discusses the digitalised maintenance of automobile parts (Siegel et al., 2018, for example). In this paper, we study the case of the present tire-related services for national-based truck fleets in the U.S. market. We aim to find how and when the opportunism by tire service providers (tire dealers) occurs against tire manufacturers who intend to build a connected tire business and maintenance infrastructure for large truck fleet customers.

We apply the transaction cost economics to analyse the case of the collaboration between tire manufacturers and their service providers for sizeable national truck fleet customers in the U.S. aftermarket. We see how they agree on the terms and conditions of tire sales and services provided for those customers and collaborate. Many of the service providers of truck tires in the U.S. market are independent tire dealers handling multiple brands. Since they are dealing with multiple tire manufacturers, they tend to act to compare deals offered by each manufacturer.

This paper uses transaction cost economics as a lens to understand the mechanisms leading to service providers' opportunism and the tire manufacturers' countermeasures to avoid it. We then discuss the issues between tire manufacturers and service providers concerning investments to form future connected truck tire services collaborations. We collect the data from the tire manufacturers' official web pages, trade magazines in the tire industry, and websites for truck fleet users.

The tire manufacturers provide a nationwide tire service network for the truck users by collaborating with the service providers. The tire manufacturers need to rely on the local tire dealers to provide nationwide product availability and related services for meeting the unexpected tire and service demands from nationally operated trucks.

Many service providers in the U.S. are independent tire dealers that handle multiple brands. Tire manufacturers enter a direct business agreement with national truck fleet customers and provide incentives to the service providers for tire inventory and related services. Some major tire manufacturers own a retreading business and use the service providers as franchisees. The tire manufacturers give the service providers the retreading business of these large national truck fleet customers to increase the influence on the service providers' business. Also, to maintain a collaborative relationship, the tire manufacturers provide various supports such as training and financial assistance in purchasing service trucks.

The tire manufacturers obtain the business with numbers of national fleet customers to secure the binding power over the tire dealers. The binding power has the effect of avoiding the tire dealers’ opportunism as long as the tire dealers are satisfied.

Connected tire services in the future will involve some transaction-specific investments to monitor the conditions of tires by connecting to truck operations by tools such as radio frequency identification tags and tire pressure monitoring devices. To check the tire conditions, the tire service providers need a reader; to keep the obtained tire and truck data, the tire manufacturers need a data storage system and analysis software. These investments may lead to opportunism as they include unique technologies and know-how of the tire manufacturers. On the other hand, the biggest challenge faced by service providers is to secure tire technicians. Since the labour-intensive service work is one of the reasons for the recruiting difficulty, the efficiency improvement and the labour load reduction by the connected tire services will motivate the service providers to deepen the relationship with the tire manufacturers.

Practical and theoretical implications:
The dealers of truck tires in the U.S. deal with multiple brands and are in the position to compare each tire manufacture’s business conditions. The tire manufacturers try to bind the dealers by assigning them as service providers for directly agreed business with large truck fleet customers. This binding power might not be enough to keep the service providers when they are not satisfied with the business volume, the level of the incentives, and the allocated business territory compared to competing service providers.
Failure to obtain the business with large truck fleet customers by the tire manufacturers changes the dealing brands’ priority within the service providers.

The future efficiency improvement of the tire-related services through information technology (IT) might solve the service provider’s problems.
The tire manufacturers compete to apply IT to improve the service providers' efficiency in tire services, including transaction-specific investments. These investments may cause a threat of holdups to the tire manufacturer, and the similar activities intended to support the service providers by the competing tire manufacturers increase the service providers' choices to behave opportunistically.

The tire manufacturers’ efforts to avoid opportunism by the service providers may, at the same time, accelerate the opportunism if not properly designed.
Siegen J. E., Erb D. C., and Sarma E. (2018) “A survey of the connected vehicle landscape: Architectures, enabling technologies, applications, and development areas. IEEE Transactions on Intelligent Transportation Systems, Vol. 19, No. 8, pp. 2391-2406.

Connected vehicle, auto parts, maintenance, transaction cost economics, transaction-specific assets, tire manufacturers, tire dealers, truck fleet customers


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