The forest for the trees in cycling’s supply chain woes: A chat with SRAM’s CEO
The forest for the trees in cycling’s supply chain woes: A chat with SRAM's CEO
There were a lot of big tech stories in the bicycle world in 2021, but intertwined through nearly all of them was the sad reality that nearly everything was hard to come by — if it was available at all. This didn’t just apply to new introductions, either; even mundane items like chains, brake pads, and cassettes were as good as gold.
The law of supply and demand offers a simple explanation for this, of course: too much demand, not enough supply. However, given the extreme nature of the shortages many people have experienced, is it really that simple? How can there possibly be that many more people buying bike gear, and why aren’t companies ramping up production in response? Don’t they want to make more money?
To help answer these questions, CyclingTips tech editor Dave Rome and I recently sat down with SRAM CEO Ken Lousberg. We asked about supply chain issues, but we also explored more tangential topics like how this struggle to keep up with demand might affect future research and development, and why the current pain might very well lead to enormous benefits when it comes to cycling in general — provided we take the right steps now to take advantage.
To be fair, Lousberg is but one person, and represents just one company in the bicycle industry. However, he’s also at the head of one of the biggest companies in the bicycle industry, and one that’s particularly interconnected at multiple levels on both the aftermarket and OEM side, so he’s in a somewhat unique position to comment on some of the broader issues at hand.
What follows are some brief highlights of the conversation, edited for clarity. You can listen to the full audio on the latest CyclingTips Nerd Alert podcast episode.
CyclingTips: The pandemic hit around winter 2019. What was SRAM’s initial reaction in terms of what it thought would happen to its business?
Lousberg: We thought that the demand for bicycles and bicycle components would probably go down 20 to 40, maybe even 50 percent for a two to four-month period. And then the pandemic would get taken care of and things would go back to back to normal in, say, six months from when we went into it. We went into pandemic mode in March of 2020. Customers were canceling orders into April. And then towards the end of April, we started seeing strong orders or the un-canceling of orders. And then we really started to see demand pick up through the June time period, and it really hasn’t stopped since then.
CT: Given how much people are having issues with getting stuff, is it really that crazy in terms of how many more people are buying bikes right now? Do you have any sense as to how much bigger the market has gotten?
Lousberg: If I had to guess, we know millions of people globally started riding a bike during the pandemic that weren’t riding a bike before or hadn’t written that bike in a long time. I was just in Ecuador doing some cycling, and there were cyclists everywhere. I was just shocked. The guide I was with said that there were at least ten times more people riding bikes than before the pandemic. I don’t think that’s out of line. I would say there’s anywhere from three times to 10 times more cyclists are out there. We continue to ramp up and we continue to add capacity, but we still haven’t been able to meet the complete demand, and I don’t think any of our competitors have been able to, either.
CT: How much more have you increased production capacity?
Lousberg: In many cases, we’ve more than doubled our capacity in the past year with investments coming online literally every week still. Some of the other some of our other lines, we haven’t been as fortunate to be able to increase capacity that much. But I would say the lowest would be in the range of 50 percent more. We’re essentially running continuous shifts at all of our factories. We’ve added millions and millions of dollars of capital equipment. We’re expanding facilities. We’ve followed a continuous improvement philosophy. We’ve really improved the productivity in our factories at unprecedented levels, all while really focusing on quality because you can’t ramp up faster than your quality systems. And so just all of those things are going on now essentially at the same time.
CT: You hear complaints from people online, and the perception is that you just walk over to a control board, turn up a dial, and more things come out. That’s obviously not what happened, but understanding that SRAM has increased production capacity as fast as you’ve been able to, what exactly is involved in making more stuff?
Lousberg: Going into this, we turned things up 30 percent almost instantly. We purposefully have that type of flexibility because we need to be able to meet a pretty big surge, say when we introduce a new groupset. But when you start going beyond that, it literally involves everything. Suddenly, your factories are no longer big enough. The number of million-dollar presses you have suddenly aren’t enough. To build a new factory depends on the country, but at minimum, it’s 18 months. We’ve added hundreds of team members, we’ve added line after line after line. Some things we’re able to get done relatively quickly. That 30 percent is pretty easy, but after that, there are just lead times involved that are very difficult to speed up. Where we’ve struggled the most is on things that we’ve never done before. Never in my life would I have thought we’d have to worry about getting aluminum, or getting magnesium, or getting 25-cent IC chips. The whole world is just different today.
CT: What about difficulties in shipping, just moving finished goods and raw materials around? Is this something SRAM has had to deal with?
Lousberg: Six months ago, raw material was our biggest issue. Today, it’s shipping. I’m almost positive this is going to surprise you that we have more finished goods on our shelves right now than we’ve ever had in the history of the company, during the highest demand ever. And that’s because our customers can’t get containers to put those finished goods in to ship either completed bikes from Asia to different parts of the world or components to factories in Europe. The supply logistics, whether that’s containers, ship space, intermodal — getting things off of trains onto trucks in the US, in different parts of Europe — it’s a really significant issue right now. The cost of shipping has… it’s unbelievable how much it’s gone up.
CT: Do you have any sense as to whether this current increase in participation and demand is something that the industry and the sport of cycling kind of just has to struggle through in a sense somewhat temporarily, or is this more of a long-term lasting change? Depending on how you view things, how does that affect your approach moving forward?
Lousberg: I think over the next year or so, supply and demand are going to come together and you’ll start being able to go into a bike shop and look at your choices and buy what you want. I also think that that we welcomed a lot of new riders, and we as an industry, we as riders, need to welcome them like we’ve never welcomed them in our lives to keep them riding because they’re the ones that are going to help us influence local governments and national governments to put in more dedicated trails, more protected bike lanes, things like that. And so I think that opportunity for us is unbelievable and it’s really at a rider-to-rider level as much as anything that we are just so welcoming to anybody who’s kind of joined us because of the pandemic.
So, what are the takeaways here?
It’s still rough out there in terms of finding the cycling gear you’re looking for, but companies genuinely are trying to meet the demand, and there’s light at the end of the tunnel in that respect.
But longer-term — and looking beyond just the issues of being able to get the stuff we want and need — the massive growth in interest in cycling has also positioned us on a massive precipice with enormous potential for positive change, and so while the last couple of years has certainly been interesting to say the least, what comes next might arguably be much more so.
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