The Transformation of Baltik Vairas
SIAULIAI, Lithuania – The Baltik Vairas bicycle factory has seen a major transformation in the past few years. From a mere production plant, Baltik Vairas has changed into a fully operational and market-dedicated OEM using the latest production technologies.
CEO Peter Jensby came to the company one and half years ago, without experience or background in the bicycle industry. He speaks openly about the history and future strategy of the company and doesn’t view his unfamiliarity with the industry as a handicap. Since the factory was acquired from Panther Group by the Danish investor Niels Peter Preztmann and the Lithuanian capital fund LIT Capital in November 2013, the facility has been turned around completely.
Turning around B2B businesses
“My first impression of Baltik Vairas was a high quality production facility creating poor financial results thanks to an old production style using too much manual labor and no IT or LEAN technology at all. My expertise lies in turning around B2B businesses.”
In this field Baltik Vairas is his seventh assignment, which has many parallels with previous projects – like a communication technology company or a factory for slaughterhouse machinery.
“Our main target is to transform Baltik Vairas into a mid to high-end bicycle and e-bike manufacturer,” says Jensby. “We will not market own brands but dedicate ourselves completely to our customers’ requests.”
A factory tour soon makes clear on what scale Baltik Vairas used to work. The huge halls and warehouses were once packed with people and inventory. But those days are over. Peter Jensby analyzed the situation of the company and drafted his plan.
“An important step was the standardization of our components range. Thanks to this measure we managed to reduce the number of components by 50%. At the same time we performed a physical and financial clean up of the inventory, which also resulted in a 50% reduction. In order to improve our buying power we brought down the number of suppliers substantially. Altogether we have cut our costs on the average by 20-25%.”
Trimmed product portfolio
Also on product level Peter Jensy implemented some major changes. The product portfolio has been trimmed as Baltik Vairas stopped producing 12 and 16-inch bikes as well as low quality e-bikes. The company has said farewell to the low-end market.
“We don’t supply loss making customers like supermarket(s) anymore,” explains Peter Jensby. “In the past Baltik Vairas fully depended on a small number of large volume customers. That’s not a future-proof situation for any financially sound company. We are putting a lot of effort into diversification of our customer base and aim for some big customers in combination with both mid-size as well as small size clients.”
In-house product development
“The development of new products and especially e-bikes is an important tool for us to create more business at existing customers and to find new ones. This included the creation of an in-house product development and testing department with a clear product innovation strategy. We are an OEM. In case of e-bikes this means for example that we will not develop electric components, but only specify standard e-bike systems and no more component mixes as we did in the past. Today our business is fully export-oriented as the local market in Lithuania and the other Baltic countries is only marginal. Cycling is starting here but only very slowly.”
The transition of Baltik Vairas included improvements in management skills and training of the employees. “It was important to get more involvement of the people with their work and Baltik Vairas. Looking at the history of both the company and this country it was not easy to get this done. The implementation of Kaizen where people can point out new ideas and suggestions for improvements on any level within the company created a lot of response. Initially the ideas came in slowly but once we really implemented their suggestions or explained them why not, the system proved its value for the company. On a management level Zilvinas Dubosas was appointed COO and responsible for the internal transformation process. To identify the needs and requests from the European market, Peter Broløs Kristensen, former CEO of Bike & Co from Denmark was appointed Chief Innovation Officer.”
For continuous improvements Jensby also implemented the Toyota Production System, also known as LEAN. The upgrade of the IT system is visible throughout the company, including the assembly lines.
Increased production efficiency
One of the efficiency improvements made as part of the turnaround process is immediately visible at the first stage of the assembly. Today 100% of all frames are sandblasted and checked before painting in order to avoid waste, while all frames now get a primer which includes an anti-corrosion ingredient. Also, in the next stage the waste is reduced.
All water-based transfers are kept in humidity-controlled storage which is connected to the company’s ERP (enterprise resource planning). Once the transfers have to be put on the frame each working station is fully paperless and has its own computer screen showing the correct positions of the transfers. These computer screens are also installed at each assembly station showing which component should be fitted including necessary technical information.
“This system is now fully operational at one assembly line and resulted in a 20% increase in efficiency,” explains Jensby. “To get the best out of the assembly lines each handling has been filmed and analyzed. In the past all parts and components were collected for one shift. Now everything is prepared for two hours based on our inventory management system. That’s the optimum, one hour proved to be too short. Everything is unpacked and the screens support them with instructions on what to do. In the past we had to rely on people’s memory, resulting in too much waste.”
The turnaround is on track, bikes are delivered on time, Baltik Vairas is becoming a sustainable company, and the new management team is getting closer to the customers.