Editor's note: Townley is a resident futurist at the industry consulting company Human Powered Solutions.

After listening to my webinar "Predictions for 2021 and 2022" for NBDA at the end of February, Steve Frothingham of BRAIN asked me the following questions:

"At the end of all this, will excess inventory be inevitable?

"How does the industry shift from ordering everything possible to something close to the real prediction?"

"When will we know that this transition is happening?"

"Do you have any suggestions for suppliers (bicycle brands, factories, component manufacturers) to ensure that the industry achieves a soft landing when the growth rate slows?"

At HPS, we bundle forecasts for 2021 and 2022, because according to our analysis, the next 10 to 15 months will be integrated. Our seasonality associated with the bicycle business in the United States, we may have become accustomed to it, has been disrupted throughout the global supply chain.

Seems familiar! We advise our customers that for the IBD trade channel, 2021 will be very similar to 2020-until the vaccine is distributed widely enough to stop the spread. For the health of retail employees and customers, we should observe social distancing, limit the number of customers in the store, wear masks and gloves... and be patient, respect shoppers and be smart until the Center for Disease Control tells us that it is different.

In 2021, the bicycle business supply chain will continue to face challenges, so we do not expect a significant increase in US on-demand inventory for most of this year.

We also recommend that wholesale and retail customers expect at least one round of price increases and further tightening of terms due to rising costs of raw materials, components, packaging materials, as well as increased shipping and domestic shipping costs.

These cumulative increases may become so severe that the possibility of several price increases before the end of this year cannot be ruled out.

The first wave of cost increases in the supply chain has caused retail prices to rise. If retail prices continue to rise, they may affect the market due to slower consumer demand-but this is still in the future and is to be considered in the ongoing risk assessment Possibility.

Between the fourth quarter of 2021 and the first quarter of 2022, we finally believe that the COVID-19 crisis will be brought under control, so that the regions that make up the bicycle and electric bicycle supply chain in the United States and the world will open up industrial, commercial, and retail industries. Able to operate without social distancing and wearing a mask.

Based on our current risk management assessment, we recommend that customers, from the end of 2021 to the beginning of 2022, the economic recovery affected by the weather is mixed. This is another topic. The recovery will include some permanent changes in consumer shopping behavior caused by the pandemic. Brick-and-mortar retailers, including bicycle shops, will have to accept these changes to meet the needs of shoppers and customers, as the supply chain is trying to find a foothold like bubble gum.

There are currently several "bubbles" in the US economy, but what we are most concerned about is consumer demand for bicycles and electric bicycles, and the ability of the supply chain to respond in the form of actual transformation. Lead to delivery.

Our analysis shows that what consumers and trade media call the "bicycle boom" in the United States, and the real surge in demand, measured by the actual conversion and delivery of products... is not the root of the "bicycle boom". We don’t want to get caught up in arguing about this now-although we are happy to re-examine it-because Steve's problem is more about the supply chain than whether there is a "bicycle boom" in the retail industry.

"At the end of all this, will excess inventory be inevitable?"

The short answer-yes... the increase in current inventory in wholesale and retail is an inevitable result of the current supply chain and replenishment, including the forecasting system currently used in the US bicycle and electric bicycle business. The real question is: the establishment of existing inventory will lead to "surplus"-is this "surplus" wholesale or retail, or a combination of both?

History has shown that most supply chains in specialized channels upstream of bicycle shops rely on providing generous terms to encourage bicycle shop owners to ignore turns and GMRI and absorb bicycle/e-bike inventory, even if this means using off-site storage. This is what we call "surplus".

A simple fact is that, according to the NBDA's cost of doing business surveys, typical (that is, in the statistical data) American bicycle shops have not realized the net profit before tax on the sales of new bicycles for at least 15 years. why? Because their new bicycle inventory turnover is less than twice a year.

Now, from 2020 to the present, due to the surge in retail sales of new bicycles and electric bicycles, we believe that the gross profit margin (net value before tax) of new bicycle sales in a typical bicycle store is reasonable.

"How does the industry shift from ordering everything possible to something close to the real prediction?"

My HPS partner’s experience is that most American bicycle and electric bicycle business forecasts are treated as black boxes, and those who are really good at developing their own methods or improving others’ methods are very valuable. But it is usually relegated to behind the scenes or to a small room along with others who handle the supply chain functions.

A common forecasting method used by management is to ask sales representatives and top distributors about their forecasts. Unless they are modified and redesigned by very good forecasters, these methods usually do not work well.

PeopleForBikes, a trade association focusing on brands and wholesalers, has a very real opportunity to hire and hire experts to educate and train its members' supply chain and logistics employees for data analysis, "learning" indicators, risk management, predictive planning, and more This training skill set will help establish true predictions throughout the U.S. bicycle and e-bike business.

NBDA has developed a P2 plan for bicycle shops to research, analyze and understand key performance indicators or KPIs, and use this knowledge to develop better business planning and management, including forecasting.

"When will we know that this transition is happening?"

If you measure consumer demand as accurately as possible, it is difficult to predict the transition from high consumer demand to normal or low consumer demand. PeopleForBikes is doing its best, but according to my observation, there are not enough funds and resources for the ongoing major consumer research to properly solve this problem.

Unless the PeopleForBikes board really wants to know the answer to this question, the bicycle and e-bike businesses in the United States will be guessing. It may guess it right, or it may guess it right. Unless one of the large companies that has the financial resources to study this question comes up with a qualified answer, most companies will find out after the incident.

"Do you have any suggestions for suppliers (bicycle brands, factories, component manufacturers) to ensure that the industry achieves a soft landing when the growth rate slows?"

For the upstream supply chain of retail, we recommend carefully analyzing the demand for orders compared with the production and shipments from 2015 to 2019, and creating weekly and monthly charts or graphs, which contain the quantity and individual revenue scale, and It extends from 2020 to 2021, 2022, if the delivery time is so long. Regenerate and analyze changes according to the current order status every 10 days to two weeks, and reschedule and advise customers as needed.

In addition, have your marketing and/or sales staff contact and talk to customers every 10 days to two weeks, and ask them about any changes in their on-demand orders and delivery times. This information should be consolidated in a regular report no later than every 10 days to two weeks, and cross-checked with the current order status and the above suggested graphs or charts.

Based on the data and KPIs from 2015 to 2019, bicycle shops should avoid holding more than 6 new bicycle inventory turnover. Bicycle shops should also investigate to become a member of the NBDA and join the P2 group.

A "soft landing" cannot be guaranteed, but paying close attention to the company's indicators and KPIs as well as current conditions and customer opinions will help make the landing as soft as possible, and hope that it will not rebound.

HPS is a unique consulting company that focuses on product development, procurement, logistics and operations for customers in the human transportation and micro-transportation fields. To learn more, visit humanpoweredsolutions.com.

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