The bicycle manufacturing industry will need 18 months to recover from the supply chain disruption snarling up production around the world, according to the head of Brompton.
Will Butler-Adams, chief executive of the London-based foldable bike maker, said the industry’s supply chain issues have moved from parts shortages to problems securing raw materials.
“Over the past 18 months, the supply chain has retrenched further and further back and now the problem is you simply can’t get hold of aluminium, you can’t get hold of steel, you can’t get hold of these raw materials,” he said, speaking at the Financial Times Future of Manufacturing event.
“I think we’re about 18 months before it [the industry] reorganises itself,” he said, adding that supply disruptions had worsened in some respects.
Saddle makers have asked the group to order two years in advance, while some suppliers want payments upfront. About £10m of parts are also tied up in ships, warehouses and trucks, double pre-pandemic levels.
“Suddenly our cash has just gone,” Butler-Adams said. “And then the cost of goods has gone through the roof.”
The pressures have squeezed company margins, despite the surge in prices for its bicycles after demand soared because consumers wanted to avoid public transport and had spare cash.
Demand for Brompton’s two-wheelers has shot up close to 20 per cent this year compared with the previous one. with no let-up in consumer purchasing since lockdowns have lifted in some parts of the world.
Federico Musi, chief executive of France-based Look Cycle, which produces components and full bikes, agreed that the sector’s supply chain woes showed little sign of improvement any time soon.
“The tension on the global supply chain is not decreasing, with demand still high and Asian suppliers being incapable of further increasing capacity,” he said.
Brompton has resorted to using air freight to ensure parts are delivered to avoid production lines from shutting down, increasing its pre-pandemic spending on that type of transport from £45,000 to £1.7m.
It is not only the chaos caused by fallout from Covid-19 that is causing Brompton to readjust its supply chains.
Butler-Adams said the company was diversifying its network of suppliers away from Taiwan, where 35 to 40 per cent of its supply base is located, because of geopolitical tensions stoked by China.
Chinese president Xi Jinping has been “pushing out some scary rhetoric” related to the island, he said, which manufacturers reliant on suppliers there could not ignore.
“We are consciously looking for second suppliers outside of Taiwan,” he said.
Source: Economy - ft.com
