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by The Secret Industry Insider
March 10, 2020
Greetings from the underground biohazard bunker I had specially built here in China last month! Shit’s getting real over here, and if you thought this whole coronavirus thing has been wreaking havoc on the race schedule and trade shows, wait until you start thinking about how it’s affecting the actual bikes you might have been hoping to buy this year.
In short, you might want to consider reallocating that money you set aside for a new bike this season for something more useful in the near term. From what I hear, toilet paper is in high demand (because in a global epidemic, clearly it’s extremely important people are still able to wipe their butts).
Most of you are likely pretty familiar with how global supply chains work these days. In perpetually seeking to cut costs and maximize efficiencies in every way possible, everything is interconnected now. A frame might be welded in one factory, but painted in another. A component might be forged in one location, but final machining work is done somewhere else. And then there’s the anodizing, the laser etching, and so on. Oftentimes, those processes cross international borders.
I know, you’re smart and you already know all of that.
So let’s dive a little deeper.
Pretty much without exception, every bike and component you can think of is made up of multiple parts, all of which are explicitly laid out in something called a bill of materials, or BOM. You might only care about the final product, but BOMs are what our product people use to make sure we have everything on hand to actually make the thing. And right now, a lot of those BOMs are missing things.
Ok, so you might think a company that makes their carbon frames in Taiwan — or the United States! — should be immune from all of this. But when was the last time you thought about stuff like cardboard boxes? Owner’s manuals? Cables and housing? Cable ends? Water bottle bolts? Inner tubes? Rim strips? Decals???
A ton of that crap comes out of China, and the factories that are running at all are still only operating at about one-quarter their normal capacity. Not so much because the workers are sick, but more because they’re under strict quarantine instructions from the government, or are just too afraid to go outside.
Yeah, yeah, so you’ve already got cable ends at home, and spare bottle bolts (which you prefer to have in titanium, anyway), and you’re running tubeless so you don’t need those tubes, anyway. Plus, those stupid Velominati rules might not include anything on reflectors (which is shocking, to be perfectly honest), but you wouldn’t be caught dead having those things on your bike as it is.
But you know what? It turns out that your local consumer product regulating bodies care. A lot, in fact. As far as I’m concerned, I can’t ship that Dura-Ace bike anywhere unless those stupid little things you’re going to throw away, anyway, are in the box (which I also don’t have). Because it’s illegal.
Luckily, we heard about all of this insanity pretty early on from our vendors, and we’ve been doing a decent job scrambling to find alternative sources for everything. We’ve had pretty decent luck on that front, but then again, we’re also pretty high on the industry food chain so when we call, people tend to pick up the phone. But the big problem as far as the industry is concerned is that everyone else is also doing the same thing, and there’s only a limited number of those sources to go around. Sorry, C-level brand, you only need 5,000 cheap headsets instead of 50,000? You go ahead and take a seat over there, buddy. Don’t call us; we’ll call you.
I’m pretty grateful at the moment that my company is big enough to weather the storm, but we’re still feeling the pain. Remember that BOM thing? Our systems are such that if any one thing is missing with no ETD, we never even start production so it’s not like we have a ton of money sitting in almost-complete bikes that are waiting to go out the door.
When all is said and done, we’ll be ok. I think. However, that still means we don’t have bikes to sell to our dealers and distributors, which means we’re not making money that we forecasted, which means we also have less money for R&D to make new stuff next year.
We’ve also already canceled a bunch of product launches for this year, and pretty much every other company is doing the same. Trade shows? Done. Dealer events? Done. Races? Only if Zwift is involved. Like a growing number of companies worldwide, we’re on internal lockdown, too; none of our employees are allowed to fly anywhere. Lots of Skype calls.
So what does this mean for you, the end consumer?
The long lead times of global manufacturing mean that you might not have noticed a whole lot yet. But you will. If no one is really showing off bikes, and companies don’t really have bikes to sell, anyway, basically it’ll be like this year never happened, at least in terms of product. Stuff that was supposed to be introduced as 2020 stuff will now just be launched as 2021 stuff.
Now, you’re probably saying to yourself that this is all crazy talk, that I’m being super alarmist and overreacting big-time. Maybe I am.
But the thing is that no one is certain right now how all of this is going to go, and it’s the uncertainty that’s the real issue. Just look at the stock market: the one thing companies hate more than anything is uncertainty. Hell, if you know things are going to be crappy, at least you can plan for that, right? If you have no idea what’s going to happen, everything is on the table, and that doesn’t make anyone feel good — particularly investors.
From what I’ve been hearing, the rate of infections is starting to slow in China, which is obviously a good thing. But we’re far from having this thing under control there or elsewhere. And it’s too late, anyway. The ripples are already on the water and everyone in the industry is going to feel them, whether they’re just a tiny little wave or a giant tsunami.
My advice to you? Don’t hold your breath for that shiny new bike you were thinking of getting. Maybe you’ll be able to get it, but there’s a good chance you won’t. Then again, the bike you have right now probably works just fine, anyway, but you didn’t hear that from me.