Staying local: Why two bike brands are sticking with domestic production
Now more than ever, the business of building bikes, components, and accessories is an international operation with various aspects of the process scattered across the globe in an effort to reduce costs, increase profits, and meet customer demands for price, quantity, and quality. There’s more to the business of making things than pure economics, however, and many companies are deciding that staying local makes more sense in the long term than saving a few pennies — and in the end, it’s everyday riders who stand to benefit the most.
A changing tide
Few segments of the bicycle industry exemplify the predominance of global supply chains better than carbon-fiber frames. With the exception of Time, Look, and a handful of smaller builders, the vast majority of composite chassis are produced in China or Taiwan. Even Trek — at one time, a major manufacturer of carbon frames in the United States — has shifted the bulk of its production overseas, reserving only its most premium models for production within its Wisconsin factory.
There are plenty of reasons why things have developed this way, but none more important than the costs of doing business. Comparatively speaking, skilled labor is much cheaper in Asia than it is in developed Western nations. It’s also fairly plentiful, and perhaps most importantly, the Asian manufacturing industry has proven that it’s just plain good at making an awful lot of stuff in large quantities and at consistent levels of quality.
That said, there are inherent disadvantages to having design, engineering, and manufacturing elements spread apart by thousands of kilometers. Also, labor costs have increased as the Asian manufacturing industry has matured — by as much as 10-20% per year — largely eroding the huge cost advantage the practice once held. Some companies are already looking to alternatives such as Cambodia, Laos, India, and Bangladesh in search of cheap manpower.
HIA Velo: Bringing manufacturing back to the U.S.
Having research and development, and manufacturing, separated by great distance isn’t just a matter of moving materials from one place to another; there’s also a time element, in particular how long it takes to bring a finished product to market. For example, it commonly takes a full two years from the moment a company decides to develop a new bike to when it is actually available on a shop floor. A lot can change in two years, however, and in a rapidly changing market, that delay can feel like an eternity.
One new American bike company, HIA Velo, aims to flip the accepted manufacturing norms on its ear, headquartering its R&D facilities and manufacturing operations under a single roof in Little Rock, Arkansas. The brainchild of Orbea USA founder Tony Karklins, HIA Velo was practically started on a whim after Karklins and a few investors were able to acquire the assets of failed Canadian custom bike company Guru at auction for pennies on the dollar. The company’s name is an acronym for “Handmade in America.”
“[My motivation] was how difficult it was getting to do business that way: how far out in the future we had to be ordering, how much more expensive it was getting, the cost of labor was coming up, all the hidden costs of doing this, the transport costs, the import fees, throw in a port strike, a missed March delivery, and going straight to close-out lists. Building warehouses full of this model-year tagged product that was a ticking time bomb.”
For now, HIA Velo’s sole offering is a “Founder Edition” carbon road frame based on a tube-to-tube model that Guru fully developed, but wasn’t able to offer for sale, before shuttering its doors. Ultimately, Karklins says that the HIA Velo brand will refer only to the manufacturing side of the business; the company will soon unveil a new in-house brand called Allied Cycle Works, which will offer a full range of road, mountain, cyclocross, and other types of bikes using a wide range of materials and construction methods.
Despite the name, Karklins hasn’t necessarily embarked on this endeavor for matters of national pride, or any sort of anti-Asia sentiment, nor does he plan on saddling HIA Velo or Allied Cycle Works customers with any cost premium related to doing business domestically. In fact, he’s envisioning that his company’s bikes will be fully competitive with similar bikes from major established players like Trek, Specialized, Giant, and others.
A key part of that equation is HIA Velo’s focus on semi-custom, rather than the fully custom bikes that formed the backbone of Guru’s business model. Instead, Allied Cycle Works will offer models that are off-the-shelf in terms of frame construction, but with semi-custom options such as paint and build kits across the board. In many ways, Allied Cycle Works will mirror what Trek has done with its Project One program.
“Fully custom-geometry bike business is not scalable,” Karklins said. “You can’t have a competitive brand out there if your transaction time is three to six months. I give a nod to everyone who does that kind of work in the United States. Guru was definitely fixated on that, all the way to offering custom lay-up, custom paint, custom geometry. This Founder’s product was [US$6,700, when it was the Guru Photon RX], and was only available as a custom piece. We got it back here, and we were able to put it in a fixed-geometry setting with six sizes, and have it at US$3,000 retail.
“We’re going to concentrate on the meat of the premium market: US$2,500-7,500,” Karklins continued. “We’ll do fun projects above and beyond that, but this is the range where people actually buy bikes. I believe it’s absolutely going to be cost competitive because we’ll be able to do just-in-time manufacturing here, we’ll have a larger inventory of raw frames that can go immediately into a Trek Project One-style customization process, and it’s just a much more modern and healthy way of doing business than shipping massive ocean containers of bikes all painted the same color with the same spec.”
fi’zi:k: Staying put in Italy
Whereas Karklins is seeking to bring bicycle manufacturing back to the United States on a mass scale, saddle company fi’zi:k started out 20 years ago making high-end saddles in Italy as a premium sub-brand of giant saddle conglomerate Selle Royal.
Fi’zi:k never left, and today, the brand manufactures about 550,000 saddles in its Vicenza factory, supported by a local network of subcontractors and suppliers. According to product manager Luca Viano, maintaining manufacturing operations in Italy is definitely more expensive than what it would cost overseas, but doing so also provides value in and of itself.
“There are two main reasons [we stay in Italy],” Viano said. “The first reason is kind of a circle: it’s a consequence, but also a benefit of having saddles produced in Italy. If we speak about fi’zi:k saddles, this year the cheapest saddle retails for €79. Last year, we were at €99. If you consider the panorama of saddles that we have today, €99 is extremely expensive; you can get a good saddle for thirty bucks. That’s because we produce in Italy, but also the reason why can sell them for so high, is because they are made in Italy. So it’s a balance.”
“The other main reason why we keep on doing saddles here is that over time, Selle Royal has been able to create a group of vendors, a network of manufacturers, that make it really hard for us to replace it in Asia,” Viano continued. “When you go to Asia, you buy things. You go to the factory, you go with a drawing, you go with your request, but you have no access to the knowledge. You just buy something, and they can deliver it as good as you like, they can deliver exactly the right product that you want for the right price, but you don’t know how they made it. Instead, here, we have created this network which is completely open from design to engineering to raw materials. We speak with BASF or other big chemical companies, we know very well because they are nearby, the injection-mold shops, we know very well the people who physically make the molds. So that’s a very big added value, because every time we start a new project, thanks to our history but also thanks to the experience of every single person involved in the process, we are pretty sure of where we are landing before doing it.”
Localized manufacturing: An engineer’s dream come true
One common theme expressed by both HIA Velo and fi’zi:k is the advantage local manufacturing provides in terms of product development. Maintaining everything closer to home may be more expensive in terms of manufacturing costs, but it can save money elsewhere while also gaining back a critical commodity that no amount of cash can buy: time.
HIA Velo’s director of product and engineering, Sam Pickman, spent more than a decade at Specialized before moving over. There, he had some of the most extensive resources available to him along with a deep well of support talent and the financial benefits that go along with working for one of the largest bicycle companies in the world. But as with any big company, things sometimes didn’t move as quickly as Pickman would have liked, and the prospect of developing products at a pace closer to real time was too appealing to pass up.
Pickman says that he and fellow Specialized engineer Chris Meertens had already planned on launching something on their own — even going so far as to register a limited liability company and planning a move to Boulder, Colorado — when Karklins reached out.
“I have the utmost respect for Specialized,” Pickman insisted. “I think they have an awesome team, and the talent there is incredible. I believe in their products and I had a great experience there. Having been anywhere for 11 years, though, you sort of start to wonder what else is available. More and more, I started to see the opportunity that Tony had. You could do something here where there was more opportunity on the process side than on the product side in terms of innovation. Every time we tried to chase those innovations on the process side [at Specialized], we were chased away because we didn’t own our factories, or those sorts of projects would die on the vine because you’d start it up, the factory would agree that this was a great thing to do, and then you’d go back and forth, sometimes for years, trying to get these process improvements in place. It became really exhausting.
“It’s tough when you come up with a design and you create this whole book of instructions and ingredients and you send it off to a whole different kitchen to get cooked.”
With HIA Velo’s more compact structure, Pickman and Meertens can literally walk a few steps to make a change themselves, instead of sending countless emails back and forth, sitting in on conference calls at odd hours in the day to accommodate disparate time zones, or hopping on an exhausting international flight.
“Let’s say you don’t have to do a hard tooling revision where a new tool doesn’t need to be made; you’re just dialing in the strength and stiffness,” Pickman said. “A tooling revision in Asia generally takes about one month where you communicate what’s wrong with the revision, they produce some samples, they do some testing in their lab, and then they send it back to the U.S. for testing and approval. That cycle takes about one month, and it generally requires a plane flight to Asia, which can be pretty expensive and tiring as well. Here, we’re doing revisions in about 24-48 hours.”
According to Pickman, work on an all-new platform for Allied Cycle Works began last April, and production is already slated to begin in February: a development timeline of just eleven months, or less than half the time it would normally take with international manufacturing.
That condensed timeline will allow HIA Velo to react more quickly to emerging industry trends and consumer desires, and also reduce the risk that comes along with trying to predict where things will be two years ahead of time. Case in point: the new SpeedRelease thru-axle system that Mavic recently purchased and began pushing earlier this year as a faster and safer alternative to conventional thru-axle systems.
“We were going down the development on a thru-axle road disc platform, and the Mavic SpeedRelease came up,” Pickman said. “We went and spoke with those guys, immediately thought it was the right thing to do, in two days adjusted the CAD, sent it off to tooling, and we’re going to be one of the first ones out with that product. You just have the advantage of moving a lot quicker when you’re here. Some of that just has to do with the scale you’re dealing with. Right now, we’re not making 20,000 units of something, so that’s an advantage for being nimble as well.”
It’s the same story for fi’zi:k.
“Just even in the matter of time, [producing locally] is huge,” Viano says. “In Asia, a prototype mold in silicone or aluminum takes three weeks. Here, we call the guys on Tuesday, and Thursday morning we go there to take the piece. Time is sometimes even more important than the product itself.”
The flexibility of staying local
Touring fi’zi:k’s operation in Vicenza is an eye-opening experience. Given the sheer number of saddles produced there — roughly 2,000 per day — one would expect banks of computer-controlled machines tireless pumping out product. However, instead what you see is hundreds of men and women doing things the old fashioned way. The hydraulic presses are operated by human beings, the saddle covers are stitched or bonded one at a time.
By Viano’s estimates, every fi’zi:k saddle passes through 25 sets of hands. It’s a romantic way of doing things, but also one that he says makes the most sense from a production standpoint.
“The case is purely mathematic,” he said. “For fi’zi:k, 50% of the orders we receive on our web shop are custom saddles; 100% of the saddles we make for OEM are custom made, so the quantities of saddles of the same type which are made everyday are not big enough to scale up to a computerized plotter or anything.
“The bigger volumes [for Selle Royal] are computerized, and if you have to do 200,000 black saddles, then you do that. But for fi’zi:k, that never happens. There are days that we do 60, 70 saddles [of one type]. It’s small quantities of many different SKUs. For our quantities, it takes more time to set everything up [on the computerized system] than to just cut it by hand. It’s very complex, but it’s what makes fi’zi:k still able to sell high-end saddles. It’s the ability to really make your own colors, make your own saddle, which is a big, big part of our value for the market.”
The social aspect vs. the realities of the global economy
The business argument for local manufacturing may not be cut and dried, but there’s undoubtedly a community component to the practice as well. Local production, after all, means a local workforce. It’s something that doesn’t necessarily show up on a balance sheet, but can pay long-term dividends in terms of employee turnover and loyalty. A worker who is proud of their job and satisfied with their lot in life is also more likely to do high-quality work.
“In the end, you have a big, big added cost — the labor — but this is something that also makes me very proud,” Viano beamed. “The owner, Barbara [Bigolin], she really thinks social. We have 250 workers in the company, and some, both husband and wife work here, they have kids, they all live in the neighborhood. This small village lives because of Selle Royal, and that’s always, always a big discussion. Of course, we sit sometimes at the table and we say, ‘ok, this is the price that the market wants to pay for that saddle’. The [production] cost of that saddle in Italy is sometimes equal to the retail price that the consumers would like to pay, and so we have to cope with it. As managers, we say, ‘ok, where is the solution?’ We try as much as possible to not compromise the product. Every time the discussion ends up like, ‘ok, we have to do it in Italy’. I’m happy with it. I’m very happy with it. You could feel sometimes like the factory is a limit, but it’s also beautiful history in this territory so I’m happy it stays like this.”
Nevertheless, even fi’zi:k has to be competitive to stay relevant in an industry whose manufacturing core is undoubtedly centered in Asia. Last year, the company launched a pilot program with Giant where unmounted rails and shell, padding, and cover sub-assemblies were manufactured in Italy, but then shipped as separate components to China. From there, the two parts could be put together as needed to satisfy different complete bicycle orders in a fraction of the time it would normally have taken by doing the entire process start to finish in Vicenza.
“We have done a project called ATO — Assembly to Order — where basically every component was shipped from Italy and it was only for Giant, for a couple of models: Arione and Tundra,” Viano said. “We shipped the shell, the foam, and the cover already made but detached from the rail, we shipped to China, and they assemble the shell on the rail and deliver to Giant. By keeping the rail and saddle separated, we were more dynamic in terms of the color and type of rail. They could just assemble when Giant was asking. Giant agreed on having only a few colors already made so they can pick super quickly. One of the biggest requests of the OEM today is time.”
Fi’zi:k plans to expand the program to another one or two OEM customers beginning in February 2018. What happens from there is anyone’s guess.
Faster turnaround times equals better products
Ultimately, the story of local manufacturing isn’t about moving away from Asia; it’s about how a condensed supply chain can yield better products that are more inline with what’s happening in the sport.
Almost by definition, the bespoke industry is a firsthand look at what people are asking for, but can’t find, in an off-the-shelf product. Events such as the North American Handmade Bicycle Show invariably serve as two- to three-year predictors of what will eventually be pushed out by the mainstream brands. Over the years, those categories have included all-road/gravel/adventure bikes, stylish commuters and townies, electric bikes, cargo bikes, fat bikes, you name it — but almost without fail, the small builders did it first, and the mainstream followed years later.
Local manufacturing has the potential to dramatically shorten development timelines and help even bigger companies regain some of the nimbleness they lost as they grew in volume. It would also allow them to make improvements (and correct mistakes) more rapidly, and generally stay on top of what’s going on.
Similarly, it’s only through this more compacted supply chain that larger component companies such as fi’zi:k can provide a fully customized saddle on the same line as its standard product in just two to three weeks, and at a surprisingly modest upcharge.
Complete bikes from mainstream companies — at mainstream prices — with features offered by the small guys? Mainstream components with small-company levels of customization? The upheaval such a revamp in manufacturing structure would require would be anything but simple for bigger companies with longer legacies, but the idea is certainly something to get excited about.