Made in Taiwan? Turns Out Taiwan is a Hub of Bicycle Manufacturing

The most fascinating conversation I've had regarding international trade so far was with my flight companion who landed himself two seats away from me (literally). As there was no escaping me, we chatted throughout our long haul flight during which time he explained why he was en route to Taiwan. It turns out that Taiwan is a major player in bicycle manufacturing and he's a big wig at a high end bike company (prices range from the $400s to nearly $14K – yowzers!)

As he's done for a number of years, each Fall he travels to a town about an hour away from Taipei for two weeks – every two weeks – in order to sort out the logistics in terms of bicycle production planning. These meetings occur in the Fall because bicycles are a “recreation business” and therefore, planning needs to be finalized this time of year so that the new model can hit the stores right before the peak sales period which is during the summer months.

I wanted to know more about how decisions were made with respect to sales forecasts and price determinations. He explained to me the following.

The forecast is largely based on:

1)The sales history of a comparable prior product
2)The results from a poll of the sales force (via questionnaire), and
3)New features in relation to a proposed price, which is likewise analyzed with the sales force for their input on what can be sold (quantity-wise) and at what price point.

In determining a price, fact based costs are considered, such as raw materials, quotes from assemblers, and the rate of duty (which, though unverified by me, is apparently determined by characteristics of the wheels/tires interestingly enough.) Also considered is the profit margin in relation to the competition.

His tasks in Taiwan therefore, some of them anyway, are to identify material vendors, negotiate component prices with suppliers, and negotiate figures on the labor costs for assembling these parts.

Based on all of the above, the company will place 60 to 70% of its forecasted sales in its first purchase order. Thereafter, based on sales and "sales run" numbers, a decision will be made as to whether or not more will be ordered.

It is not often that I hear about production planning or sourcing though I would enjoy hearing more stories about it. Got a story for me? Post a comment below or email me at clark.deanna@gmail.com.