Supply Chains & International Bike Business

[November Dave]

Our price on CX Rays has doubled this year. Not because Sapim US charges us more, but because they never have them, and we have to go to second and third sources (all authorized distributors) for them. Other spoke prices have gone up similar amounts for the same reason.

The amount of working capital we have in play is WAY higher than we've traditionally done. We normally have maybe 20 sets of unsold carbon rims and almost no alloy rims on hand. Alloy rims used to take 3 days to get and your price was the same unless you bought 100 of them and paid at time of order. With the variety of rims we usually sell, that's not a viable option. It doesn't make sense to hold much more carbon inventory than that because between pre-ordered carbon wheels and alloy wheels, we don't have capacity for more than about 15 build slots for "in stock" carbon builds per month, and we generally have a monthly order cycle for them. Now, when we see alloy rims that we like available, we buy all that we can afford.

With literally thousands of different hub iterations between axles, drive types, colors, lacing patterns, and brands, we used to keep no hubs in stock. Why would you? You could have $100k in hub stock and not have the right hub on the shelf for a month's worth of sales. We now keep (for us) a fortune worth of White Industries hubs, in black only, in stock because they're our most popular hub (and the one we like the best) and the lead time is 12 weeks.

The nature of working capital is that you get that money back out "at the end" but who knows when the end of this is? Meantime we have a (relative) fortune tied up in inventory, with higher costs to boot. I think we're doing well to buy able to offer a 3 week-ish turnaround on most builds for which we have parts in or on the way in, but what used to be a nice cash cushion is now.. thin.

(edit - a bunch of this got trimmed bc my browser logged me out as I was typing it. I think we'll see a global movement away from JIT and towards resilient supply chains. The smart investment guys - Vertical Doug, Veloduffer et al - can say what ramifications this will have on corporate profits etc but my take is that a huge slice of shops and smaller brands across a ton of industries won't make it through)

[ripvanrando]

Originally Posted by November Dave

Our price on CX Rays has doubled this year. Not because Sapim US charges us more, but because they never have them, and we have to go to second and third sources (all authorized distributors) for them. Other spoke prices have gone up similar amounts for the same reason.

The amount of working capital we have in play is WAY higher than we've traditionally done. We normally have maybe 20 sets of unsold carbon rims and almost no alloy rims on hand. Alloy rims used to take 3 days to get and your price was the same unless you bought 100 of them and paid at time of order. With the variety of rims we usually sell, that's not a viable option. It doesn't make sense to hold much more carbon inventory than that because between pre-ordered carbon wheels and alloy wheels, we don't have capacity for more than about 15 build slots for "in stock" carbon builds per month, and we generally have a monthly order cycle for them. Now, when we see alloy rims that we like available, we buy all that we can afford.

With literally thousands of different hub iterations between axles, drive types, colors, lacing patterns, and brands, we used to keep no hubs in stock. Why would you? You could have $100k in hub stock and not have the right hub on the shelf for a month's worth of sales. We now keep (for us) a fortune worth of White Industries hubs, in black only, in stock because they're our most popular hub (and the one we like the best) and the lead time is 12 weeks.

The nature of working capital is that you get that money back out "at the end" but who knows when the end of this is? Meantime we have a (relative) fortune tied up in inventory, with higher costs to boot. I think we're doing well to buy able to offer a 3 week-ish turnaround on most builds for which we have parts in or on the way in, but what used to be a nice cash cushion is now

Excellent explanation for JIT. Some think it is about space in the warehouse, it is all about capital

[unterhausen]

Originally Posted by oldpotatoe

Build fee as in, taking a complete bike out of the box and building it? I only hope it's done well then, like opening up HS, truing wheels, tires off and the like. Not slapped together like even some "bike shops" in the republic does.

My lbs takes out the headset and bb and faces/chases every bike they sell, even the cheap kid's bikes. They don't mess with the fork crown race or head tube reaming unless there is a problem, because that's usually okay and doing it again can lead to issues. Tires removed, wheels trued, tension checked. Remove cassette, check hub cone adjustment. Check derailleur hanger alignment.

Makes me feel guilty for the slapdash job we used to do on new bikes BITD.

They don't charge for assembly.

I was in there yesterday and the boss was ordering parts from Amazon. I think that if you had told him he was going to be doing that even a year ago, he might have thrown you out of the shop.

[peanutgallery]

Take that margin and factor in shipping, at least $50 per bike. And they're all coming separate, no such thing as a free freight order these days

Build fees and no sub $1k bikes for the near future. Be some bummed out rail trail cruisers

Originally Posted by oldpotatoe

Build fee as in, taking a complete bike out of the box and building it? I only hope it's done well then, like opening up HS, truing wheels, tires off and the like. Not slapped together like even some "bike shops" in the republic does.

Considering the lowest margin item sold in a bike shop is the bike, not surprised. Getting a decent margin on a bike is hard..particularly when you don't have any inventory.

Sell a bike in the box, unbuilt? Let the 'customer' build it? That'll never happen. That has lawsuit written all over it.

[peanutgallery]

Nail on head

For the last decade or so, the successful shop has been one that utilized JIT well and paid as they went. The unsuccessful shop was one that paid too much in rent and got floorplanned by the rep. Like an old Schwinn shop. Bike companies are attempting to revive this idea as a result of the pandemic and supply issues, bill you EOM30 and charge shipping. Something is going to break

Better to have cash in the bank

Originally Posted by November Dave

Our price on CX Rays has doubled this year. Not because Sapim US charges us more, but because they never have them, and we have to go to second and third sources (all authorized distributors) for them. Other spoke prices have gone up similar amounts for the same reason.

The amount of working capital we have in play is WAY higher than we've traditionally done. We normally have maybe 20 sets of unsold carbon rims and almost no alloy rims on hand. Alloy rims used to take 3 days to get and your price was the same unless you bought 100 of them and paid at time of order. With the variety of rims we usually sell, that's not a viable option. It doesn't make sense to hold much more carbon inventory than that because between pre-ordered carbon wheels and alloy wheels, we don't have capacity for more than about 15 build slots for "in stock" carbon builds per month, and we generally have a monthly order cycle for them. Now, when we see alloy rims that we like available, we buy all that we can afford.

With literally thousands of different hub iterations between axles, drive types, colors, lacing patterns, and brands, we used to keep no hubs in stock. Why would you? You could have $100k in hub stock and not have the right hub on the shelf for a month's worth of sales. We now keep (for us) a fortune worth of White Industries hubs, in black only, in stock because they're our most popular hub (and the one we like the best) and the lead time is 12 weeks.

The nature of working capital is that you get that money back out "at the end" but who knows when the end of this is? Meantime we have a (relative) fortune tied up in inventory, with higher costs to boot. I think we're doing well to buy able to offer a 3 week-ish turnaround on most builds for which we have parts in or on the way in, but what used to be a nice cash cushion is now.. thin.

(edit - a bunch of this got trimmed bc my browser logged me out as I was typing it. I think we'll see a global movement away from JIT and towards resilient supply chains. The smart investment guys - Vertical Doug, Veloduffer et al - can say what ramifications this will have on corporate profits etc but my take is that a huge slice of shops and smaller brands across a ton of industries won't make it through)

[charliedid]

Just in time does not work during a Pandemic but having product on hand or at least in the states does. The industry doesn't care if they can't get they dude with 7 road bikes a new derailleur they want/need new bike units sold.

Who pays for an additional years worth of bikes sitting in a warehouse in SF or NJ? Maybe what Cannondale is doing with assembly in SC is one part of the solution? Maybe shipping complete bikes (all eggs in one basket) is too big of a hedge in an unpredictable world.

Balance.

[charliedid]

That said, it hasn't stopped customers from buying bikes and waiting 3 months so why change a thing besides consumer expectations?

[batman1425]

Originally Posted by charliedid

That said, it hasn't stopped customers from buying bikes and waiting 3 months so why change a thing besides consumer expectations?

The only reason things are still working for manufs. is because demand is so intense that they can sell every unit that lands regardless of when that happens. As that demand starts to cool - which for some categories it is, they have to start pivoting. This is also part of the reason why manuf are being picky about what they send over. Shipping costs are one part. The other is that they have guaranteed sales for the high end stuff - people still in the queue and margins are better for the manuf. on the expensive bikes. The market for entry to mid level stuff is cooling off. Phones aren't ringing off the hook for $600 hybrids like they were a 12-18mo ago. Plenty of people still waiting for 5K+ carbon.

[charliedid]

Originally Posted by batman1425

The only reason things are still working for manufs. is because demand is so intense that they can sell every unit that lands regardless of when that happens. As that demand starts to cool - which for some categories it is, they have to start pivoting. This is also part of the reason why manuf are being picky about what they send over. Shipping costs are one part. The other is that they have guaranteed sales for the high end stuff - people still in the queue and margins are better for the manuf. on the expensive bikes. The market for entry to mid level stuff is cooling off. Phones aren't ringing off the hook for $600 hybrids like they were a 12-18mo ago. Plenty of people still waiting for 5K+ carbon.

You are right demand is still very high and it's anyones guess as to when it will cool. Forecasting and predicting this is a job I'd rather not have right now. E-Bikes are the big question and category everyone still wan't to bet on for a true shift/boom but I still sell $800 hybrids and $3000 road bikes all day long.

Time to make the donuts.

[earlfoss]

IMO businesses are going to find any excuse they can to justify constantly jacking up prices. I hope they all go out of business and the industry faces a correction.

[HenryA]

This not about anyone in this thread or even this entire forum.

But there is going to be some sadness where consumers are putting up deposits with retailers who may or may not be around when the product finally does ship. I think especially of the RV and boat business. But also any business where there's lots of demand backed with money and retailers willing to take that money against the prospect of getting the product someday.

I've had doors on order since May and still no doors (that are paid for). Bright spot is I'm pretty sure Lowes is gonna be around for a little while yet. Joe Bob's Trailer Emporium, maybe not. Pay attention.

[peanutgallery]

Cost of doing business has increased across the board. That increased cost gets passed on to the consumer as everyone deserves a living wage

As long as consumers will pay, game on

Originally Posted by earlfoss

IMO businesses are going to find any excuse they can to justify constantly jacking up prices. I hope they all go out of business and the industry faces a correction.