It is time to unveil one more elephant I see emerging these days. This elephant is complex to see because it has the power of chameleon to hide in the plain sight.
This time it is not a dominant supplier-brand or crisis or shipping or overstock or wars around the globe… We can all see these elephants very clearly and everyone is talking about them to the point of exhaustion. Don’t get me wrong they are all a real threat to our industry and we must be vigilant on these topics as well.
But there is one thing we all need to think about in order to remain competitive and I already criticized us in order to recruit people to think and act.
To give you a little background on how I came to be writing about this let me explain my thought process.
The market situation is that Europe is suffering from expensive energy, high inflation, difficult financing, skilled labor shortage and so on. Compared to Asia there are increased costs which are giving us headaches, but when you dig deeper the difference is not that huge. On top of that compared to Asia there is no complex and expensive transportation in between taking place plus all import duties and procedures on top.
I was really confused by this point, what is our problem? Why are we not efficient and competitive more?
Then I was analyzing and saw that some countries are more competitive than others here in the EU, for example Poland. Why is that I wondered ?
Is it the work ethics? There are many countries in Europe with pretty good work ethics.
Is it the wages? Wages there are among the highest in Europe.
Is it the government and tax policies? There might be some differences and subsidies but bottom line many countries have similar policies due to membership in the EU.
If you look most of the bankrupt companies these days were not a classic bike maker and the ones in trouble were experimenting with mega complex non standard e-bikes.
Then it hit me. The bikes produced in Poland are mostly all made with standardized, well established and mass produced components. There are of course some odd bikes and companies who are trying to change the concept but 99% of the companies are making mass produced types of bikes from entry to high end.
You might ask, why does this make them competitive?
First it is very easy to do development with standardized components, huge cost saved.
Second, the tooling is cheap and standardized as well, small cost saved.
Third, workers are easy to train and they are much faster due to experience with standardized components, amazingly huge cost saved.
Fourth, cost of these components is much lower than the small quantity, new modern, cutting edge ones. Every component has a development cost, tooling cost and administrative cost which spreads over the quantity made. This cost is diminished almost to zero with the standardized components.
Fifth, the quality is much more stable both for the quality of components and quality of bike assembly. Again a huge cost saver in the long run.
Sixth, maintenance in and out of warranty is hugely simplified and efficient, potentially a big cost saver.
Seventh, interchangeability between the components can be a life saver for a company in case one supplier can’t deliver or goes out of the market. Potentially a critical inflection point for the “our own system” component. We can remember this one very well in 2021.
Eight, service network training is not required at all, huge savings.
Ninth, standardization of the bike and component costs. With all of the testing, paperwork, lab costs it burdens the end price of the bike as well.
Tenth, end user satisfaction with your brand means new business in the future. All customers like to get a good price for a product they enjoy which means more business in the future and again profit.
Eleventh, standardized products are much more sustainable and better for the environment making our industry better and more competitive on this topic as well.
….and there are surely some points I am not aware of.
All of this compounded makes a huge difference bottom line. There are two perfect examples for comparative purposes within our industry’s bike assemblers but due to confidential information I can not share this here.
What do we need to be done? Shouldn’t we innovate? What if there is nothing new on the market every day?
We should definitely invest in the innovation but invest a part of the money we saved in a product that improves all aspects of the bike, not only the performance. Only this way will it be accepted and used on a massive scale and enter a loop to competitiveness.
Bike industry should have it’s own board similar to Confederation of the European Bicycle Industry – CONEBI and Cycling Industries Europe to make the standardization a very important part of the bike industry. With standardized components and bikes they will have an industry to regulate and expand, otherwise we will fall back to the old routines and just import more competitive complete products from elsewhere outside of Europe.
We absolutely must cooperate with the entire world but we must do what we can and know best, have better control and just be damn competitive !
