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Shimano Europe MD Frank Peiffer on Omni-Channel and Shortening Lead Times

Sales & Trends 3966

EINDHOVEN, the Netherlands – Frank Peiffer leaves no doubt whatsoever about the transformation by the bicycle industry needed to meet the requirements of ever more consumers ordering online. “That has to happen,” he says. Regarding how to make it happen, the MD of Shimano Europe’s bike division presents a clear view, including the ifs and buts that come with it.

Shimano Europe MD Frank Peiffer on Omni-Channel and Shortening Lead Times
Frank Peiffer, ‘Changes must come fast as online sales grows fast.’ – Photo Bike Europe

Bike Europe interviewed Frank Peiffer for its January/February, 2017 print edition. The complete text is published here. The interview took place at Shimano’s new European HQ exactly one week after its official opening. It’s an office that stands out design-wise as well as location-wise. He explains what it expresses about market expectations by the world’s biggest manufacturer of bike parts.

“Of course we believe strongly in bicycles and their future. What growth lies ahead is something that nobody can predict precisely with regard to ‘consumption’ and bike sales. But that there is and will be a strong growth in usage is clear. That’s also expressed in the latest trends. It used to be fun and technology related to mountain bikes. Nowadays Europe is setting the trends which are more function-focused.”

What does this new HQ say location-wise with regard to future Shimano products?

“That bikes will have more electronics like many more products used daily. Bicycles will become more high-tech, like cars that have functions such as ABS and traction control. Such accident avoiding functions will also come in bikes. And to create that we are at the right location for forming partnerships with high-tech companies.”

Is it correct to see this new HQ also as an expression of the fact that Europe is by far the largest market for Shimano?

“Correct; Europe is by far the biggest market for Shimano sales-wise. Whether it accounts for close to 50% of all our sales or over 50% is also a question of currency fluctuations.”

Next to e-bike systems I think that soft goods are also getting more and more important for Shimano Europe regarding the Lazer acquisition. What’s the strategy here?

“Lazer is another step in completing our soft goods range. Here’s still quite something to gain for Shimano. We are currently focusing on brand positioning and at this new HQ we are bringing together all soft goods functions for creating more synergies.”

Let’s switch now to the latest trend in the EU market; do you agree to the claim that increasing the speed to market of bikes and bike products will become essential in the coming years when taking changing consumer behavior and rapidly growing online sales into account?

“What’s clear here is that consumers are expecting more nowadays. In particular when taking into account the online services offered for instance by Amazon. The industry has to catch up here with regard to secured availability.”

Increasing the speed to market ability of bike makers in Europe means that lead times have to be shortened. Is this possible for Shimano?

“It’s possible for everybody as this is foremost related to planning. That needs more attention than changing production locations. Basically everybody needs to focus more on planning. However, the industry is relatively bad in planning. What also comes into play here is that everybody looks at their own plate instead of the whole chain. Coordination and accurate numbers is what counts.”

One of the leading bike makers in Europe presented a goal for shortened lead times – it eventually must come down from 26 weeks to 8 weeks. How do you comment on this ultimate goal?

“Shorter is better; also for Shimano. We are adding a 3rd major shipping and logistics base in Europe; in Lyon, France for faster deliveries to our customers in France and Italy. But of course there’s a limit to stock-levels. Also you have to define lead time. Does it, for instance, include raw material purchasing? Including that you cannot come to 8 weeks.”

Is more production in Europe an option for Shimano to meet the industry’s need for speed? And what are you currently producing in the Shimano Czech Republic facility?

“Currently only the 7-speed internal gear hub is produced at the Czech plant. Whether production here is to be expanded is an option. ‘Japan’ has to decide on that. It’s a big facility so we don’t want to exclude this possibility. Also, production in Europe will help to increase supply chain flexibility and speed to market. But I want to emphasize the fact that the attention to planning is of the utmost importance.”

Are there other ways with which Shimano can meet the supply chain flexibility/increased speed to market needs of the industry? A supply chain expert said that collaborative planning could also offer a suitable solution. Do you agree?

“Collaborative planning is a good tool. But I am not sure to what extent this is realistic. It calls for cooperation at many more steps in the planning process. It also looks further in the future. It requires a real one-year ahead forecast including the production planning in numbers. Next to that collaborative planning includes discussions on market expectations that go two years ahead including factors such as technology developments, product planning and production needs. It’s an integration process which is used by the car industry. You could say that e-bikes are touching on collaborative planning nowadays as more industries are involved like electronics, batteries, and software. And it is also being pushed by big growth in working capital.”

Final question; would collaborative planning be in the interest of Shimano? In particular when looking at the huge ups and downs in Shimano‘s production levels in 2014/2015 and 2016, according to a recent Credit Suisse report.

“Yes, it would definitely be in the interest of Shimano. Because of the ups and downs in production levels we offered this years ago to our customers. At that time it was not regarded as an issue. Now we are still far away from production planning standards used in the car industry.

“Getting to an 8 weeks lead time is something that needs to be achieved. Dealers have presented a time buffer and still do. Online sales require a much shortened supply chain. We need a position on that in which all hands must be working together. It also requires a vision on future products and where to have them made.

“Switching to omni-channel is not an easy step also when taking logistics into account. But as an industry we cannot afford for such a switch to take too long. Changes must come fast as online sales grows fast and with that consumer expectations for delivery within one day. It has to happen. Otherwise others will take-over the business.”

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