MONTEREY, Calif. (BRAIN) — No matter what the intended panel topics were on the first day of the Bicycle Leadership Conference, the discussion seemed to come back – inevitably – to retail and how brands are selling their products in an evolving retail environment. Even during an afternoon session on supply vs. demand, speakers skirted the topic of how to better forecast and adjust production to avoid the inventory swings that have prompted early season discounting.
The impact of high inventory levels on the specialty channel was felt especially hard last year. But gaining a better grasp on inventory and forecasting is a complicated issue that bike brands feel they are ill-equipped to solve quickly.
Bob Margevicius, a longtime industry executive and Specialized’s executive vice president, spelled out a few brutal truths about the industry’s supply chain model. One of the biggest challenges to overcome is long lead times on bikes. And with 95 percent of bikes sold in the U.S. imported from Asia, there’s not much that can be done to shorten long lead times.
“You’re looking at 150 days of planning and forecasting we need to do from the specialty side to service this market,” he said. “We are in a market where we’re importing a lot of products and turnaround and lead times really dictate a lot of the numbers we see because we need to plan and organize."
Arnold Kamler, CEO of Kent International, a supplier of bikes to the mass market, was more blunt in his assessment, noting how bike brands are strapped by the production schedules of drivetrain and parts suppliers.
“Lead times are way too long and it all stems from certain component parts that include derailleurs and other parts like that,” he said, adding how Kent specs derailleurs from three suppliers to minimize the impact. “How crazy to have to commit to a whole season in advance? You guys in the IBD market are prisoners. You have to place whole-year commitments or miss the whole season.”
Kamler, who’s assembling 1,200 to 1,400 bikes a day out of a South Carolina factory, said Wal-Mart’s push for made in USA bikes prompted the move to bring manufacturing back from Asia, and now he’s focused on shortening the supply chain by bringing as much production in-house as he can, from painting to frame building to component manufacturing.
He hopes to have domestic production of 40 percent of parts spec’d on Kent’s bikes, and to make his own frames and forks in the future. Automation is key to remaining competitive with Asia on production costs, he said. Outside of being closer to the market where he sells, Kamler noted the advantages to stateside manufacturing such as high turnover at Chinese factories, escalating energy costs overseas, changing worker attitudes and favorable factors in the U.S. such as lower real estate costs and a need for manufacturing jobs. All of this has played into Kamler’s strategy to reshore manufacturing.
In addition to long lead times, the industry contends with the impact of new model-year introductions and the lack of relevant data on bike usage and the impact of innovation on business. These factors complicate forecasting and inventory supply chain planning. “We need to know where [consumers] are buying and how and why,” Margevicius said.
Because of the ease with which anybody can source a bike or part and import it to the U.S., there’s a flood of new brands in the market. This low barrier to entry makes for a more competitive environment, where price is impacted not only by inventory levels but by the surplus of manufacturers in a particular category or segment.