Following the initial cancellation of orders and period of uncertainty at the beginning of the corona pandemic in 2020, it soon became clear that the pandemic was going to bring a completely new set of challenges to the bicycle industry. What followed was two years of supply chain woes in a booming market. Industry insiders share their thoughts on this experience and outlooks for the future..
“A long-term vision is required to limit the risk”
“Over the past two years we have seen an accumulation of challenges which are unprecedented,” says Fulcrum CEO Davide Campagnolo, who is also closely involved in Campagnolo operations. “On the one side cycling is top of mind which is very good for the market. On the other side, we have big ‘issues’ due to supply chain constraints and the sourcing of raw materials on a scale which we have never experienced before. On all levels in the supply chain, companies now have to plan 2 years ahead and that is something the industry was not used to in many cases. It requires a long-term vision and a clear understanding of your business to limit the risks.”
While Campagnolo's transmission production is located in Italy and elsewhere in Europe, the company still faced many f the same problems as the rest of the industry. “A Campagnolo group set contains so many different components, and if one screw is missing, the whole group set can’t be delivered.” The supply chain delays created a knock-on effect for Fulcrum. “As a wheel specialist we received a lot of requests for postponement of deliveries. The these requests came from bicycle assemblers and brands who faced postponements of drive train components by the leading manufacturers. In each individual case we tried to find the best possible solution for all parties involved. Of course, this has a negative impact on the performance of the business for Fulcrum. And not only that, partners then ask us to keep the wheel sets in stock for another six months, while we had initially planned to deliver them six months ago, it creates problems for our warehouse as well as our turnover.”
Giant Group is taking a rather cautious approach to the current fiscal year 2022 as became clear with the publication of the 2021 annual figures. Both inflation and the war in Ukraine make for unpredictable uncertainties. A further increase in operating costs would also put pressure on profitability. However, Giant has stated that it is optimistic about the future as the world transitions into a post-pandemic new normal. “Some bicycle parts have a lead time of two years and even simple components can take six months,” Bonnie Tu said in an interview. “That compares with a normal wait time of one-to-two months.”
Although there are signs that the end of the supply crunch is coming, inventory levels are still on an all-time low. High-end bicycles face the worst shortages of parts, though Tu predicts that will likely ease by the end of this year. “Some components, like a Shimano derailleur set that is a core part of a bike’s gear mechanism, may still be in short supply into 2023. While the cycling industry is used to sourcing around the world, COVID-19 has made it extremely complex.”
China is still an important production base for Giant as it accounts for half of the company’s capacity. But this situation is changing slowly as the Taiwanese manufacturer has started with the construction of an all new partly robotised facility in Vietnam. Also for Giant, the disruption has underscored the importance of diversifying sourcing and production locations.
Rose Bikes MD changed approach as supply crunch hit
"Supply chain bottlenecks? These won’t end before 2024,” says Thorsten Heckrath-Rose, Managing Director of the D2C brand, Rose Bikes. But it’s not all doom and gloom as companies like Rose have changed their approach over the last two years and are continuing to do so.
“Especially over the past two years we have had to struggle with this, and we expect it to continue. We are more or less learning to cope with it, planning buffers, ordering more in advance and keeping alternatives ready as much as possible. Ultimately, however, we are very dependent on our suppliers and unfortunately have not yet managed to free ourselves from this dependency.”
Many say companies should bring production to Europe to face this problem. Is it that simple – and what would that mean for the price level? “First of all, it is currently not affordable to bring production to Europe – especially not alone or with only a few allies. We hope to be able to join forces with the whole industry and even across industries to use the concentrated power of European manufacturers to move production here in the future. In that case, we should also seize the opportunity to directly create a real circular economy based on renewable materials. We can only speculate about ‘if and when’ this dream can be realised, but the talks are ongoing, and we certainly don’t lack ideas.”
Thorsten Heckrath-Rose expects the supply bottlenecks to continue to effect his business until 2024. “Hopefully, if our solutions work well, we won’t be affected too much any more. We already have some bikes available quickly, which was completely different a year ago.”
The number of job vacancies for supply chain managers in the bicycle industry hiked last year. Previously, a dedicated position or even a department was only customary at big companies. That’s no longer the case. In the bicycle industry the meaning of ‘supply chain’ has changed radically over the past two years, writes Bike Europe Editor in chief, Jan-Willem van Schaik.
For the vast majority of businesses in our industry, this important task was handled by the sourcing managers, or partly handed over to trading companies. The complexity of the supply chain in our industry, which has been existing for a long time, caused most owners and managers to presume that managing the supply chain was part of the daily business of sourcing components.
Since early 2020, we know better. Factory closures, order cancellations, hiking container prices and shortages of almost everything you can imagine, brought to light the need for a specialist to help companies find a way in the maze of logistics to get their products despite the hampered supply chain. It is unlikely that this situation will change any time soon.
Even when suppliers’ production is running at full capacity again, it will take more time for logistics to return to normal. What will the future position of the supply chain manager be in the bicycle industry? His or her expertise will certainly impact the industry and take the know-how of the supply chain on our industry to a higher level, and probably more – it will better connect the bicycle and e-bike business and its complex production processes to other industries thanks to the influx of this expertise.