Dive Brief:
- O’Reilly Automotive is monitoring supplier health as one of its many levers against tariff impacts, President Brent Kirby said during an Oct. 23 earnings call.
- The auto parts retailer’s supplier risk management process includes assessing shipping performance, product quality, catalog support and financial stability, the president told analysts.
- Kirby noted that O’Reilly’s merchandising teams work closely with the company’s supplier base to actively manage exposure and risk, which can range from country of origin to diversification of supply within a single product category.
Dive Insight:
O’Reilly Automotive has worked on supplier diversification for years, Kirby told analysts. In light of the current tariff landscape, he added that the retailer’s supply chain teams have been working internally and alongside supplier partners to buffer any potential impact.
As an example of its diversification efforts, Kirby said the retailer’s percentage of goods sourced from China is currently in the mid-20s range. He added that the rate is hundreds of basis points less than a year ago and continues to fall.
“But generally speaking, we feel like we're very diversified globally and the teams continue to get more diversified,” Kirby said.
However, Kirby noted that “it's less about what that China number looks like, and it's more about the blend and the ability to multisource from multiple countries of origin and to manage that dynamically and to work with suppliers that are managing that dynamically.”
As part of its tariff mitigation strategy, the auto parts retailer also continues to monitor the pricing environment to assess the need for any adjustments, Kirby told analysts.
He added that O’Reilly’s supply chain is at its “healthiest point” since the COVID-19 pandemic with sustained in-stock availability across its distribution network.
While trade uncertainties prevail, Kirby believes the company navigated “the lion’s share” of tariff impact in Q3.
“So, we feel like we're very well positioned to respond and react to whatever comes our way,” Kirby said. “The teams have done a great job with sourcing across the globe, and we're going to continue to do that and work with suppliers that are doing a great job of that.”
