The largest Czech bicycle manufacturer, BIKE FUN International (BFI), has been forced to cut production due to a shortage of bicycle components. Due to the lack of parts, the company cannot keep up with customer demand. Delivery times for components have more than doubled, now the company is ordering parts for 2023. In addition, prices also went up significantly, which will also be reflected in the prices of finished bicycles.
The company, which has almost 500 employees, now makes around 4,000 bicycles a week. Last fiscal year, which ended in June 2020, it produced 165,768 bicycles and e-bikes and achieved a turnover of 87.8 million euros (over 2.2 billion crowns), with a year-on-year increase of four percent. In the current fiscal year, however, production is slipping by 25,000 laps compared to the plan.
“We could manufacture 5,000 bikes on eight production lines, but we currently only produce on seven. We have orders from customers for large numbers of bikes, but we are limited by the supply of material, which currently hinders us the most, “said Krkoška.
The capacities of the parts manufacturers are not enough for the current demand. Complications also occur during the transport of parts – there is a lack of shipping capacity and empty containers. Another drawback is that due to the covid and quarantines, there is a shortage of people in the large ports, and thus the unloading time has been extended. “It so happened that the crew of one ship was quarantined and could not enter port. One container also remained on the ship in a clogged Suez. It all adds up, “said Guráš.
If the company expects that the material that is on the way arrives, it is already starting painting or pre-assembly. “If the delivery of components that are mounted on the bike is delayed at the very end of production, it complicates the situation for us a lot,” said Krkoška.
In order not to take up capacity, they also produce wheels that are not complete. “Of course, they must be components that can then be easily mounted on the bike, for example, we would not be able to produce without a frame. Then we finish the wheels when the components arrive, “said Guráš. Delivery problems are, for example, with brakes or derailleurs.
Last year, at the time of the pandemic, the situation was quite the opposite. “In February, we faced declining sales. Our customers were afraid of the situation, they did not know what to expect. So we reduced production to 50 percent and we tried to stop all supplies of materials that were not needed for the reduced production and leave them to the suppliers, “said the director of logistics.
Guráš said that this situation also came at a time when the company usually has the most bikes in stock before the season, and had no idea when customers would take their bikes. Production had to be reduced due to full warehouses. When bicycle repair shops and stores opened, the situation reversed and customers began to order bicycles to an increased extent. “People could not travel and were looking for an alternative to spending their holidays. A lot of people who didn’t have bikes at all until then bought bikes and e-bikes, “said Guráš.
However, increased demand for components has run into a lack of production capacity in Asia, where most parts are made, as well as the raw materials from which the components are made. There are not many producers of certain commodities, so delivery times have gradually been extended for all suppliers. “We were looking for alternatives and we also found some, but unfortunately today these alternatives already have long delivery times,” said Guráš.
Whereas previously standard delivery times were between six and nine months, currently it is a year and a half and for some components up to more than two years. “Basically, all manufacturers are now trying to order in advance, but not one year in advance, but two or three years in advance,” said Krkoška.
However, the paradox is that even if they order parts two years in advance, suppliers do not confirm deliveries. “They will just confirm receipt of the order and say: we will confirm later. And not only delivery time, but also price. But if we did not order today, we would not get into their capacity calendar at all and we would be without material, “said the director of logistics.
According to him, most suppliers are trying to expand production, so capacity is gradually increasing. “But we’re running out of material, whether we’re talking about steel, duralumin, paper, plastics, chips, batteries, battery cells. These are all limited commodities. This results in higher prices. And the price increase is really a jump. We are talking not about percentages, but about double-digit percentage values, “said Krkoška.
Guráš said that the cost of labor and transportation is also rising. “Containers have become several times more expensive than they were a year ago. And we will have to reflect on all this. We will have new prices from July 1. During June, we should calculate the prices, we are waiting for the latest price lists from our suppliers, and then we will see where it moves, “said Guráš. According to him, the increase will certainly not be only in percentages.
“We are still thinking about alternatives, how to make a product as simple as possible, so that it can be manufactured in a good time. Whoever delivers bicycles to the market earlier today gains a certain competitive advantage, because today there are really no bicycles. It can be said that across all categories, bicycles are a scarce commodity, “said Guráš. According to him, there are also waiting lists for shops on some bikes. “Customers are willing to pay for a bike, for example, half a year in advance and then wait for it,” said Guráš.
This month, they reorder parts to cover production in 2023. However, their customers are in a similar situation. “Our customers have not yet seen some 2021 models, but they have already ordered the 2022 season models and will already be ordering the 2023, so they are actually ordering something they have not seen for the next two years. But if we waited now, we wouldn’t have production, the components wouldn’t arrive. Customers understand that, “said Guráš.
Krkoška said that the pandemic significantly reduced negotiations with business partners. “We do not meet suppliers, we buy 60 percent of the material from Asia, and we are not able to travel there. Everything is solved remotely and it is even more complicated. You don’t have the opportunity to get your own picture of what it looks like with capacities and deliveries, it’s about a huge trust between the supplier and us, “said Krkoška.
According to Guráš, the pandemic in the Czech Republic has significantly accelerated the cycling trend of recent years: the expansion of e-bikes. “It is growing all over Europe. In some places, standard bikes are already sold in a 1: 1 ratio to e-bikes. In the Czech Republic today, approximately a quarter of bicycles sold are electric bicycles. It would not have happened so quickly without a pandemic, “said Guráš. He expects that within a few years, the sale of e-bikes will be comparable to classic bikes in the Czech Republic.
BFI was founded in 2001 by a group of Dutch investors, from whom the Czech company ConsilTech bought billionaire Tomáš Němec last year. The company produces around 200,000 bicycles a year, about half of which are its own brands. These are the Superior and Rock Machine brands focused on mountain bikes and Frappé focused on city bikes. BFI exports bicycles to more than 20 countries. It also has its own development, such as its own frames or the Sport Drive electric drive.
The company wants to produce over 300,000 bicycles a year in two years, the long-term plan envisages up to 400,000 bicycles a year by 2030. “We want to increase the share of our own brands. For the 2023 season, where we are now collecting orders, the share of our brands should be higher than those of foreigners. Increasing the share of our brands is also the goal of our new owners, “added Guráš.