As unpredictability around tariffs has roiled various markets in recent months, Oilstop Chief Operations Officer Kevin Krossber says his organization has been “very fortunate” to have largely avoided turbulence with regards to managing the costs for its goods.
Oilstop’s good luck, though, has not been happenstance, but rather the product of strategic preparation. "Supercharged” dialogue with vendors and strategic inventory practices have kept costs in line and operations running smoothly for the Petaluma, California-based operator.
“We’ve actually seen a decrease in our oil prices from both of our vendors that we do business with, as well as a decrease in our filter costs through our preferred vendor, which is Service Champ,” says Krossber, an industry veteran with more than 20 years of experience who now works out of Vancouver, Washington. “We’ve seen a lot of good trends associated with not only a reduction in cost of goods, but also fulfillment staying very, very high and having to avoid any type of what we call emergency spend, where we go to retail stores for fulfillment.”
Tariffs have been top-of-mind for many Service Champ clients, says Doug Arnold, senior vice president of Highline Warren, the parent company of Service Champ.
“Tariffs, no doubt, have the most attention of everyone regarding cost of goods impact since there is a broad range of (factors), from country of origin to raw materials (such as) steel and tin, that will impact many products, depending on the outcome of the go-forward policies,” Arnold says. “This is a difficult situation to navigate with changing implementation dates and limited visibility to what items or products are included or excluded. So, as with everyone else, we are monitoring the policy decision closely.”
As tariffs became a hot-button issue in the fall of 2024, Krossber says Oilstop leaders had some concern about potential impacts on their company’s bottom line.
“As we prepared for this year and were looking at our projections, we met with all of our vendors to understand the strategy to avoid tariffs’ impact because that was a big thing back in the fall,” Krossber says. “And we wanted to understand fulfillment rates and any cost impact associated with that.
“It was really assuring to hear that our partners were increasing their safety stock levels and making the necessary changes to source inventory from a very diverse (group of) production (facilities) across the world. At the same time, we made adjustments to carry up to three weeks of safety stock on hand in our service centers to protect ourselves against any product shortages or delays.”
Arnold says Service Champ tries to be as transparent as possible in its conversations with clients.
“We've just tried to identify hey, here's how we're monitoring (industry developments) and here are some of the activities we're taking as a pre-emptive measure from a resource standpoint,” Arnold says.
Getting Strategic
Strategizing around inventory hasn’t focused exclusively on increasing safety stock within Oilstop’s stores, however. The company is also making sure it makes the most of its shelf space, bumping up inventory of in-demand products and clearing out items that have been collecting dust.
“We did an inventory cleanse. We got rid of a lot of our lower-turn items, things that weren't moving within 12 months of shelf space,” Krossber says. “Once we did that, we were able to free up some space and then really focus on getting more safety stock in for those higher-moving products. In general, within the industry, from my observations, most shops carry 10 to 14 days of safety stock. We bumped our stock to three (weeks). We're not carrying a lot more product. It’s not like we doubled up, so we haven't run into any space issues or anything like that.”
As part of its inventory strategy, Oilstop has shifted to a twice-per-year schedule for its quantity on hand/inventory review.
“We’ve standardized that to do it biannually so we can stay really sharp on the things that we need to keep high inventory stock levels on and discard the filters and products we’re simply not moving or are just not in demand based on the vehicle applications that we’re servicing,” Krossber says. “That also helps us to account for seasonal swings. As you think about six months down the road, you think about seasonality and the impact that has on car counts. The summer driving season, there is a peak in business that we are proactively looking at, so we’ll bump up products to prepare.”
Krossber adds that Oilstop has also recently made a switch to stocking Service Champ’s in-house line of oil filters, a move that has reduced costs and improved fulfillment rates.
In many instances, though, being cost conscious can be a nuanced endeavor for the quick lube operators that Service Champ does business with. Reducing costs is one mechanism, but many shops are also on the lookout for ways to meet customer demand for more premium offerings. More Service Champ customers are looking to leverage national brands with the goal of providing greater value with higher performance additive kits, along with synthetic oil filters to complement synthetic oil changes, says Arnold.
“Based on everything people read, see, and feel in their wallet, I can appreciate the (theory of there being an increased demand for value brands over their premium counterparts), but in many cases, we are seeing some of the opposite behaviors,” Arnold says. “More broadly, we have customers either considering or expanding their service offering to include high-performance products in filtration, additives, and wipers.”
“Consumers are more and more educated,” Arnold adds. “When they are making a buying decision, the trend is growing for the best overall value and product for their vehicle versus just what is the lowest cost option.”
Service Champ is also helping its clients meet their inventory needs by offering a Filter Stock-It Guide, which, as its name implies, helps shops determine which filters they should order. The guide now includes trend data to highlight which products are becoming more popular with consumers and which are in decline.
“That way, (quick lube operators) can start looking at their system and say, ‘OK, this one's on the downturn. We want to manage that inventory as we're moving through the years. But the items that are moving faster, we want to make sure that we are staying on top of it,’” Arnold says.
Staying Vigilant
While they have successfully navigated potential challenges over the past six months, Oilstop executives are keeping a finger on the pulse of the industry to keep their operations steady, Krossber says. Oilstop is continuing to meet with its vendors quarterly to understand projected pricing adjustments, confidence in vendors’ stocking levels, and their ability to meet client demand.
Oilstop has experienced fulfillment challenges with certain ancillary items such as squeegees and wiper blades, but “nothing that has been a burden on our operations or hasn't allowed us the opportunity to serve our guests,” Krossber says.
Krossber says Oilstop has also explored other product lines as potential backups for emergency stock as needed, but at this point, the company has not had any need to transition away from its standard product lines because fulfillment has been “incredibly consistent and very high.”
Service Champ, meanwhile, continues to keep an eye toward the future to be as ready as possible to mitigate any future cost-related challenges and economic uncertainties, Arnold says.
“Nobody really has a crystal ball right now (to figure out) what's going on with tariffs,” he says. “I think a lot of companies are trying to figure out how to navigate the changing environment. We’re no different, just like the operators are no different. You’re going to have to just bob and weave as the times come.”
