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Guest editorial: The value of diversifying the supply chain

Published March 24, 2021

By Kendall Young

I have specialized in providing sales and brand support to the OEM side of the industry for some 25 years now. SpinCycle LLC is my Bay Area-based OEM Brand Management company and we represent a boutique group of component brands to U.S.-based product managers. I am the "Guy behind the Guy behind the Guy" you might say; invisible to all but a small handful of bicycle brand designers and product managers

My goal is to offer up thoughtful alternatives to some of the more common specs seen on domestic bicycles and hopefully contribute to a measure of diversity of the species, which has driven the annual bicycle design process for as long as I can recall.

You could be in the cycling industry for your entire career and never meet someone like me. I operate at the "first cost" level, dealing directly with bicycle brand Product Managers, assembly factories and suppliers worldwide to help bring bikes to market every new season.

Starting last July, frantic product managers caused my phone to start ringing off the hook — the usually reliable supply chain of bicycle parts that feeds every brand's model lineup was coming under unprecedented pressure and by the end of the year it was clear the entire mechanism was in significant breakdown. The annual process of methodically presenting new component options to product managers had given way to a worldwide mad scramble for any and all component options available in order to complete the assembly of bikes and bring them to what was turning out to be a white-hot market.

Fast forward to today: A worldwide pandemic and the resulting appetite for any sporting goods that are perceived to support social distancing has caused the largest bicycle boom since the 1970s and while it is certainly good to get that many new and returning consumers on bikes, it has left bicycle parts suppliers and bicycle brands unable to meet the unprecedented surge in demand. Best current estimates are that the market will be this way into the 2023 model cycle at a minimum.

Back to my ringing phone, product managers quickly realized they had very few options to navigate the supply crisis. The across-the-board shortage of parts was exacerbated by brands choosing single-source suppliers over multi-source same category options, which has been the dominant supply chain management impetus for this last decade. The theory has been that to get the best price, delivery and service, awarding all business within a product category to ONE supplier will give sufficient leverage over said supplier that the brand will always be in first position for delivery. Many bicycle brands of all sizes are now getting a rude awakening regarding the perils of the single-source model as many brands are realizing they will not be able to produce anywhere near the volume of bicycles they had forecast for 2021-2022 and now must set their sights on model year 2023 to catch up with demand.

Working with more than one supplier for key product classes adds complexity to the supply chain, no doubt, but it also provides some measure of protection against the risks I've outlined. While it is theoretically easier, less expensive and more efficient to forge single supplier relationships, what happens when that supplier experiences a significant supply disruption? If you cannot get critical inventory from your trusted single source, what is the real cost vs benefit analysis?

Some of the advantages of multi-sourcing are:

● Less reliance on one supplier provides a safety net if a supplier runs into difficulties and lessens the chance of lopsided demand, where the buying company becomes more dependent on the supplier than the other way around.
● More flexibility to cope with unexpected product shortages by having more options to choose from.
● Fewer bottlenecks and shorter lead times at factories as more suppliers are better able to meet peak demand.
● Competition provides an incentive for suppliers to improve cost, service and often provides the buyer with more bargaining power.

In the end, it is my hope that as the current market equalizes, bicycle brands will revisit the wisdom of the single source vs. the multi-source supply chain model. I believe many Product Managers will find more benefits in spec diversity and that the margin savings perceived to be in single source models is not nearly as significant as imagined and actually poses a potential risk to steady component supply.

If our goal is to get bicycles into shops and out on the roads and trails under happy customers, which will ultimately encourage a heathier ecosystem for the whole sport, then a diversity-based parts supply chain is essential to that goal.

With a perspective,
Kendall Young

Topics associated with this article: Supply chain

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