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Supply Chain Woes of 2021

by John Neugent

Tech articles | Commentary articles |

John Neugent probably knows more about bicycle wheels than anyone else alive. Maybe more about bikes as well. He's spent his life in the bike business, at every level. He now owns Neugent Cycling, a firm devoted to delivering world-class equipment at the lowest possible price. If you are in the market for a set of wheels, please, check out John's site. He really knows his stuff. —Chairman Bill

John Neugent

Author John Neugent

Supply Chain Woes of 2021

As most of you have probably already read, there are many supply chain issues facing not only the bike industry but also many other industries. Depending upon who you listen to, the causes are Covid-related factory shutdowns, a lack of trucks to unload the containers, a lack of containers, or an opportunity to price gouge. Shimano is now quoting 2023 delivery times for some of their products. The cost of raw aluminum in Taiwan has risen 30% in the last month. The costs of shipping are two - four times as much as pre pandemic.

Container ship

Where is the the supply-chain bottleneck? Raimond Spekking photo

Call me a skeptic, but I believe a lot of these price increases are most likely due to predatory business practices. While sales for the bike industry are up, they are not up that much and one of the major growth categories is electric bikes which don’t share that much in common with regular bikes.

I think there are two key factors causing a lot of these problems. One issue is most likely the fact that the large well-financed brands are placing orders well in advance of when they will need product in an attempt to keep the smaller brands from getting regular deliveries. I don’t know if that is illegal but even if it is, we are mostly dealing with imports and telling a manufacturer in Asia that it’s against American law isn’t going to do much good. I once had an Asian factory tell me one of their larger customers didn’t want me purchasing from him. The factory told the brand “OK no problem” and proceeded to open up my production in another building.

But I think there is also a good chance that something much more insidious is happening. A consumer calls up five bike shops to find the bike they want. The four that lost the order think it’s a lost sale. Those four shops contact three - five suppliers (you pick a number) who all think they are lost sales, those suppliers do the same with multiple brands and those brands do the same with the factories they use for production. So one guy can create a perceived demand for lots of nonexistent orders. There is no way to track anything like that. If this is indeed happening, the whole thing will come crashing down at some point in the not too distant future.

As Frank Schwinn, the second chairman of Schwinn bikes said, “Business and trouble are the same thing. You can’t have business without trouble.”

John Neugent was was one of the first to establish quality hand building in Taiwan around the turn of the century. He now owns Neugent Cycling, a firm devoted to delivering world-class equipment at the lowest possible price.