This article is a case study of how knowledge helped a small factory struggling for four years to expand and increase it’s business by 750% in just two years.
When I first heard about this bike production the idea was to sell good quality bottom brackets to them. I went to their small rented warehouse production and we sat down in a small office used for everything, from purchasing, sales, accounting, photo studio, sample room and meeting room.
This company was producing up to 2000 bicycles per year and struggling to remain competitive or to earn a decent profit, they had to choose. Most of their bikes were being sold B2C online because they couldn’t reach the price good enough to be competitive and sell to the dealers or international customers. The bottom line was just a fraction better than to buy from other factories.
We had a good long talk and they were very open about their situation, maybe out of frustration or maybe because I was the first one to listen to them carefully and took them seriously.
So here is step by step what we did:
- Step 1: We arranged a small shipment of good quality bottom brackets made by Thun. This was to show the staff and owner how it feels to work with flawless components and how does it impact the production, warehouse and financial efficiency as well as customer satisfaction. The BOM cost impact of this was very small and they have learned not to struggle with bad quality components and claims just because of 1-2 euro difference on one bicycle.
- Step 2: We managed to find the missing components they were having in their production to be able to deliver the bicycles on time and to maintain optimal stock. For this it was imperative to use the industry contacts to find appropriate missing parts close and with fast delivery. Most components can be sourced with domestic component brands but some must be bought at a higher prices from traders. Traders were enjoying their problems while earning a very good profit margin knowing that the factory had no other choice. Purchasing managers know these companies very well and the price ranges when negotiating in time or when the component is urgent for production. This was a transitional short term move to start up the first year.
- Step 3: Change the existing suppliers which were charging this company with high priced components and bad service for their lack of knowledge. I connected the factory with various suppliers in Europe and in Asia that were appropriate at that time for them and with whom they could reach the min quantity terms while with others it was all about the logistically good choices to save the money and have the desired products for better overall price. This is still an ongoing process and it will change during their growth. Important was to have the optimal stock of specific brand components at the right time with the competitive average price.
- Step 4: With the new supplier structure they could make the bicycles with higher quality components and make them for a lower price. With their low cost assembly approach it made them a very attractive supplier. No big marketing needed when you have a good product for the right price.
- Step 5. Connecting the factory with the potential customers for their bicycles. When the factory was up to the standards and I was confident that they will deliver on the contracts while being competitive it was a pleasure to connect them to dealers and international customers who I saw compatible with them. The sales generated from this were only a smaller part of their overall production but most important was that it boosted their confidence to look for international customers and export out of the country which in return was the reason of their huge success. This thing changed their perspective on the business completely and it was a moment of breakthrough. They are, even these days, dealing with overbooked production.
- Step 6. Continuing support with advice in production, traps of specific points of company growth, news from the industry, technical support, new trends, future prospects etc. All this because they decided to take a leap of fait and trust me to take the Step 1 ! Important to mention is that none of the above wouldn’t be possible if the company owners were not hard working, smart and brave. They were the ones that enabled the financing, new location of the factory to accommodate the growth, constant search for the ways to reach the customers. This company would have probably succeeded but it would take them ten years instead of two. After two years 2021 and 2022 they have become more competitive, earned much more money, they assembled 15.000 bicycles in 2022 and will increase that number in 2023.It was a good partnership which has brought growth to both them and myself. You might ask: What was the benefit for me here? I made a customer for myself that was buying 1000 BB’s and now will require 20.000. My growth was also 750% which will further increase in the future. Secondly the suppliers I connected them with were helped along the way and are now friends who will always come through for me whatever I ask them. That is powerful. When the market is tough build yourself a customer.
