Shadow optic: the manufacturing partner paradox

Who really makes your bike? It is a simple enough question. Country of origin has traditionally been a touchy subject for brands that rely on Asia-based ‘manufacturing partners’, let alone revealing who the partners are. Discovering the factory behind the brand is a stubbornly topical pastime amongst bicycle consumers. What’s all the fuss about?

Or, perhaps the first question should be “who cares?” After all, does it really matter where a bicycle is made if it meets a consumer’s definition of value? Why are cyclists – myself included – so fascinated about who stuck the tubes together?

Perhaps it’s because our favourite brands continue to beguile us with origin-based hyperbole, long after migrating to an environment bearing little resemblance to the brand story. After all, what do “heritage” and “prestige” have to do with a factory in China? It’s the question – and image – that shadows every bicycle brand with a hidden-from-public-view manufacturing presence in Asia.

As explained in the ‘vertical limit’ series, bicycle manufacturers can be split into three major categories – Original Brand Manufacturer (OBM), Original Design Manufacturer (ODM) or Original Equipment Manufacturer (OEM). OEM factories produce most of the brands that we see in the Tour de France, and it has been this way for many years. Here’s a condensed (following three-paragraphs) recap:

Original Equipment Manufacturers (OEM’s) are responsible for taking a bicycle brand’s unique design and fabricating it into a finished product. Depending on the client’s requirements, “finished product” can mean different things. It could be:

–        tubesets
–        a raw, unpainted, frame
–        a commercially-ready frameset, boxed in after-market packaging
–        a commercially-ready complete bicycle, boxed in after-market packaging

Relationships between bicycle brands and Taiwanese OEM’s began flourishing in the 1990’s, catalysed by Giant Manufacturing Co Ltd’s capitalistic push into westernized regions not previously troubled by yawning gaps in market price settings. A factory that branded and sold its own product was not a new idea, but the sheer scale of Giant’s operations gave it significant competitive advantage against its much smaller peers.

On the consumption side, emotional connection, status projection, exclusivity, ideals and brand loyalty – to name a few factors – would always prevent Giant’s homogenization of any given market. Naturally, smaller brands (with production in the tens of thousands of units or less) grew curious about the possibility of tapping into scaled-up manufacturing processes – such as Giants – in order to reduce their costs whilst improving upon their hallowed place at an end of the market not regarded as primarily price-influenced.

Today, the outcome of that curiosity is plain to see. Well-known bicycle brands are now effectively sales and marketing departments, with varying degrees of in-house R+D capabilities. Swift progression towards information symmetry – the state whereby a consumer has equal information about a given product – is dissolving brand stories into product-based arguments. Often, the purchase of a high-end bicycle centers around discussion as sophisticated as a pre-school sandpit fight.

And fair enough. Look at what’s happening at the top of the supply chain. Pursuit of all-important market share has distilled consumer feedback into a basic output axiom: create the perception of quality at the lowest possible price. The brands created this mess.

Pushback against road bicycles of Far East origin softened many years ago. Broadly speaking, consumers of high-end road bicycles now accept that the finish quality of Taiwanese-made road bicycles is of the same, or better, standard than the Italian- or US-made products previously accepted as qualitative benchmarks. However, the same consumers generally don’t accept bicycles of Taiwanese or Chinese origin should cost as much as their European or US-made counterparts. Isn’t this simply bigotry?

When Colnago made the decision to partner with Giant Manufacturing in 2005, it was precedent setting. Today, the company produces two-thirds of its annual production (15,000 framesets) in Asia and the rest in Italy – based on value-added origin. Long-term fans of Colnago knew instinctively that a ‘Made in Taiwan’ or ‘Made in China’ sticker could debase “their” hallowed Italian brand. However, Colnago remains a sought after brand which still attracts a premium price. Could this possibly be attributed to Colnago’s openness and modest ambitions, relative to industry peers?

Perhaps if bicycle brands were to focus on the competencies of their manufacturing partners, they could simultaneously regain the trust of their customers and showcase the qualitative aspects that are hidden behind a veil of secrecy; but which make their products valuable to consumers. Could it work?

Cycling iQ contacted– in all cases, by actually picking up a phone; as opposed to “contacted” in the asynchronous Gen Y sense – the communications departments of Specialized, Pinarello, Scott, Felt and Kona with the view to discuss the above proposition. No voice messages or emails were returned.

Interestingly, the 9am to 5pm, Monday to Friday, availability of the above brands was embarrassed by the 24/7 efficiency of their respective OEM’s in China, Taiwan and Cambodia. All were happy to discuss their relationships, but only to a point. What was their view? [Note: where requested, I’ve chosen to keep the identity of individuals private, out of respect for their trust in me and to guarantee a continued dialogue in future].

ADK Technology (with operations in Taichung, Taiwan and Guangdong province, China), was one of the first factories contacted. ‘ADK’ is an OEM to Felt Bicycles, CSG Group (parent of Cannondale and GT, amongst others), Advanced Sports International (parent of Fuji and Kestrel, amongst others) and “many other OEM customers; there are five main customers whose bike teams have been racing in Tour de France for many years,” according to ADK’s spokesperson.

When asked why bicycle brands were so sensitive about naming their manufacturing partners, ADK’s representative stated it was “because these OEM customers have advised ADK not to mention their information so we need to keep it confidential.” Deducing this was the probable conclusion of the discussion, I moved on.

Ideal Bike Corporation (also with operations in Taichung, Taiwan and Guangdong province, China), is an OEM to Fuji, BMC and Pinnacle (Evan’s Cycles in-house brand), amongst others. A spokesperson confirmed their production lines leading into MY2013 and MY2014 were fully booked by existing clients. Ideal’s Chinese operations produces in excess of 400,000 units annually; the majority of which are for European and US brands. This was all the information given, due to requested “client confidentiality.”

Taipei-based OEM Fairly Bike produces and exports “around 120,000 units” for clients such as Willier and Felt. Fairly’s representative offered to speak to me off the record at Taipei Cycle Show next month.

Advanced International Multitech Co Ltd, OEM for Bianchi, Dedacciai, Look, Decathlon and Specialized (until MY2012) recently featured on Cycling iQ. AIM created headlines – at least in our little industry – by announcing its relocation of bicycle production back to Taiwan. The romantic notion of AIM extending its brand relationships into the public realm was quickly vanquished.

“Cannondale [CiQ: a previous client] and Specialized always want a cheaper price.” said AIM’s representative. “They don’t want to move back to Taiwan (with AIM) but the future will make it all the same. We cannot offer the same price from (our Taiwanese facility), so they need to find another supplier.”

After several more conversations [CiQ: with Hodaka, ATI, A&J, Giant, Merida] similar to these, I grew despondent. Was nobody open to the idea of “coming out” to the market?

Refreshingly, one brand has already embraced a deeper meaning of “manufacturing partner”. Fuji, Advanced Sports International’s (ASI) headline bicycle brand, engages two manufacturing partners in full view. Ideal Bike Corporation owns a majority stake in Fuji, and also acts as the brand’s Chinese distributor. ADK Tech features prominently on Fuji’s 2012 Altamira Geox Team Edition road bike in the form of a logo on the chain stay.

Fuji OEM, ADK Technology, gets some deserved praise for its hand in the creation of Fuji’s 2012 Altamira Geox Team Edition

 

Though coy about revealing too much, Chris Lintaman, Vice President of Advanced Sports International (ASI), guessed that some brands may be reluctant to openly discuss their OEM relationships “for competitive reasons – perhaps they are working with a vendor to develop future models and the vendor being used might reveal something about the nature of the product.” ASI’s VP went on to say that ASI collaborated with vendors based on their ability to “upgrade production technology meeting our design needs, or focus better on certain product categories which fit our plans.”

Whatever the case for other brands, ASI’s collaboration is a rare exception to the bicycle industry’s “manufacturing partner” paradox – ie, an OEM being good enough to make products that provide a brand’s livelihood, but not good enough for said brand to co-operate with publicly. Potentially, this is damaging to brand image as consumers are not able to understand what “it” is that they are investing in. Will any more brands step out from behind the shadow?

Video