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New markets tie up Taiwan factories

Published January 3, 2011

By Matt Wiebe

TAICHUNG, Taiwan—U.S. and European retailers may find it hard to reorder bikes during the production season as bike builders in Taiwan work to fulfill orders from emerging bike markets such as Singapore, Indonesia and other Pacific Rim countries.

Taiwanese bike builders are running full tilt due to booming bike markets that are shifting some focus at factories away from its traditional mainstays of North America, Europe and Japan, according to officials who attended Taichung Bike Week in December.

While orders have suppliers and factories smiling, tight production timetables mean lead times are lengthening and suppliers have little wiggle room to tweak production forecasts.

“At the end of 2008, our lead times were 30 days. Now we are working with 90-day lead times, and demand continues to grow,” said Bill Shook, president of American Classic, one of Bike Week’s exhibitors.

CrankBrothers is seeing a similar pattern, with lead times creeping up to five months, said Andrew Herrick, group director of Selle Royal, which owns the CrankBrothers brand.

“The bike business is global now. What’s happening in Europe and the U.S. is only part of the picture,” Herrick said. “Our sales are booming in Singapore and Indonesia. Bikes are a growing part of the culture there.”

He added, “We’re selling more into Indonesia than we are in Benelux. We’re selling more into Singapore than we are in Japan.”

In fact, the company’s Steve Cuomo said CrankBrothers is selling to OE customers in Indonesia for the first time.

Selle Royal is so bullish on the Asian market that in February it purchased a majority stake in Justek’s two saddle factories in Jiang Yin and Tianjin, China. The acquisition boosted Selle Royal’s saddle production to 25 million units a year.

At Fox Racing Shox, high-end mountain bike demand is higher than ever before in Asia, Indonesia and South Africa, said Christoph Ritzler. Ritzler, who handles international sales outside of the Americas, said this demand is driving the company’s sales of shocks to OE customers.

Shook said the growing lead times are straining American Classic’s wheel deliveries. Last April, the company moved to a new factory in Taichung that was twice the size of its previous production facility. A key reason for the expansion was to lower the company’s own lead times.

While the American Classic factory is running smoothly, Shook said his vendors—such as forgers, rim extruders and spoke suppliers—are so busy that their lead times to him have doubled, and then tripled, within a year.

“The Americas—North and South—are still slow, but sales to our other global markets are taking off. And they are taking off for everyone, which is challenging all the vendors,” Shook said.

Tight production schedules and growing lead times are the new normal and a long way from the idle factories and quiet production lines at Taiwanese builders just two years ago.

For retailers in Europe and North America, the view from Taichung carries some warnings. Suppliers say one reason they were pressing U.S. retailers so hard for preorders in August and September was to be prepared for the tight supply situation.

Even though the American market is soft, they say, retailers may not be able to reorder product during the production season. With Taiwan production spoken for and with lead times growing dramatically, suppliers may not be willing to warehouse bikes in the U.S. when they can sell them to Indonesia.

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