Logistics module 4 structured learning project

¶ … polluted, emphasis is once again being placed on the return to the simpler ways. One of the most relevant examples in this sense is represented by the increasing usage of the bicycle, one of the oldest means of transportation. In such a context, the current project sets out to assess the bicycle industry within the United States through multiple lenses. The industry is briefly introduced, to then move on to the presentation of the extended supply chain and the retailers in the industry. Finally, Schwinn Bicycles is presented.

The product

The bicycles became most popular during the 19th century, when they were referred to as people vehicles, as they required human balance to function. Their popularity was due to increasing health concerns within the United States (Richard, 1978); yet the market quickly became saturated. Today, it is estimated that some 150 types of bicycles are produced within the U.S. (Industry overview, 2011).

The industry

The modern day bicycle industry is faced with a series of challenges, such as changing consumer demands, increasing global competition among producers or the advent of alternative means of transportation. Within the United States however, it is estimated that there still exist 2,000 companies actively engaged in bicycle manufacturing and distribution (Industry overview, 2011).

The bicycle industry is now characterized by quickly changing customer needs, as well as the need to create bicycles that respond to these needs, and also integrate the new traits of technologic innovation and social expectations. The industry is rather mature and stable and it includes various players, such as manufacturers, distributors or retailers. While these parties would be addressed throughout the following section, it is now important to note that traditionally, the manufacturers would also sell their products through a process of vertical integration (Cyclingiq, 2011). Nowadays, the bicycles are mostly sold through indirect distribution systems, the final link being represented by retailers.

4. The extended enterprise supply chain

Within general context, a supply chain is understood as the totality of elements and processes engaged in the creation of a product and its ability to reach the final consumer. Elements and activities along the supply chain include every operation to transform raw materials into finite products by people, technologies and information (Avagurney, 2006).

For bicycles, the extended enterprise supply chain starts with the raw materials, continues with their assembly, distribution, retailing and ends with them reaching the final consumers. This is revealed below:

The parties along the supply chain within the United States are complex, and, along others, they include:

Mining and refinery companies, which provide the raw materials (metal in particular) for the manufacturing of the bicycles

Transportation companies, which ensure that the extracted materials reach the manufacturers

The banking sector, which allows payments along the supply chain (Coyle and Langley, 1996).

Today, the supply chain of bicycle manufacturers tends to decrease due to a decreasing demand for bicycles, but also industry changes, such as move to carbon fiber. Additionally, bicycle manufacturers face financial challenges at the levels of raw materials, labor costs, initial investments and so on.

5. The retailers

The retailers represent one integrant element in the supply chain of bicycles and they are virtually the last link in ensuring that the products reach the final customers. Within the U.S., there are thousands of retailers and they create a multi-billion dollar industry. The chart below reveals the evolution of bicycle sales throughout the past two decades.

Source: The NBDA Statpak, 2011

The construction of the retailers throughout the past 20 years has also modified and now there exist five categories of retailers, as follows:

Specialty bicycle retailers

Mass merchants (they sell the largest volumes of bicycles)

Full line sporting goods stores

Outdoors specialty stores, and last

Other stores, such as supermarkets or electronic vendors.

Applying these categories of bicycle retailers to the initially presented supply chain, this can now be extended as revealed below:

At the level of leading retailers within the United States bicycle industry, one can pin point to the following companies:

Belmont Wheelworks, which has been activating within the industry for over four decades; it possesses and operates three outlets of a total space of 21,000 square feet and employs 1n estimated 90 staff members

Bicycle Haus, which has an experience of 80 years within the industry, and which only operates through a single 2,500 square feet location; it employs 7 staffs

Bicycle Sports Shop, which has been operating within the industry for nearly three decades; the company operates three outlets of a total space of 33,300 square feet and employs 150 staff members.

Other bicycle retailers include Century Cicles, Freewheel Bike, Gregg Cycle or Free-Flite Bicycles.

The average bicycle retailer sells an estimated 650 bicycles per year, but it also sells equipments, parts, accessories and provides complementary services (The NBDA Statpak, 2011). The very provision of these complementary services, combined with competitive prices, represents the means by which the bicycle retailers create points of difference, which are impossible to create through product differentiation. The quality of the services is enhanced through staff management and the costs are reduced through the creation of operational efficiencies, also along the logistics network. At the level of logistics, emphasis is placed on the identification of different customer needs and the creation of stocks based on these demands.

5. Schwinn Bicycles

Schwinn Bicycles is one of the oldest and most reputable bicycle brands in the world, having positioned itself as a valuable choice for both children, as well as athletes. The marketing strategy promotes Schwinn as a solution for enthusiastic as well as recreational cyclists, and the brand capitalizes on reputation and nostalgia.

"At Schwinn, we make bikes that allow riders of all ages and abilities to experience the joy of riding. From 'walk 'n' roll' kid's bikes to the Le Tour Legacy, we offer a comprehensive line of bikes that suit the needs of riders across the United States and around the world" (Our company, 2012, Schwinn Bicycles).

Despite its success however, the company also faces some challenges due to the need to keep costs down, its repeated change of location or its engagement with outsourcing operations, which have cast a negative shadow upon the company's image. In terms of location, this has been changed several times due to both cost considerations, but also the company's desire to better address the needs of its various customer segments.

In order to respond to different needs, the company produces bicycles in different price ranges, from $130, up to $1,000. The company sells its bicycles through both its own stores, but also through mass retailers; the approach helps the company to reach multiple customer segments and pursue its own marketing and corporate goals.

Historically, the evolution of Schwinn Bicycles was a tumultuous one, the company even coming close to bankruptcy. Then, the company faced problems of decreasing product quality, which was the result of outsourcing contracts, and which attracted customer dissatisfaction. The company's reputation -- its core asset -- was weakening and the company became less competitive within the market place (Schwinn Cycle & Fitness, 2012, Reference for Business).

In 1994 however, the company was acquired by the Scott Sports Group, in a $43.75 million transaction. The focus of the new owners was that of restoring product quality and company image. In 2005, the company was once again purchased by Pacific Cycle Inc. And the strategy of the new owner was that of brand segmentation and the presentation of the bicycles in a new and more appealing light (Sink or Schwinn, 2004, The Economist).