Real-Life Reshoring: How Vela Bikes, WOW Sports Brought Business Back to the United States
Welcome to Thomas Insights — every day, we publish the latest news and analysis to keep our readers up to date on what’s happening in industry. Sign up here to get the day’s top stories delivered straight to your inbox. For Justin Kosmides, founder and CEO of e-bike manufacturer Vela Bikes, one of the triggers to reshore was news that his factory in China had canceled Vela’s order in favor of a two-year deal to build bikes for a major U.S. retailer. Other woes of manufacturing in China included the COVID-19 lockdown, shipping delays, tariffs, and controlling quality over a long distance. Kosmides said, “That’s the short list. I could keep going.” The nightmare for Bryan Fournier, head of operations at recreational equipment maker WOW Sports, was the bullwhip effect of COVID-19 and a long supply chain to China. He said, “We saw a spike in demand, and we saw delays in production. We saw delays in shipping. And then when the goods did get here, then we ended up with too much inventory.” Not too long ago, U.S. companies accepted headaches such as those because the cost of production in China was cheap. Fournier said when his firm moved manufacturing to China, the average assembly line pay there was 450 renminbi per month. He said labor costs now can go as high as 4,000 renminbi per month. Rob Handfield, a professor in the supply chain management department of North Carolina State University agreed. He said: “Labor costs in Mexico are lower than they are in China right now.” When Kosmides ran the numbers, factoring in quality control, shortening timelines for production, shipping costs, and carrying costs of inventory, the totals were surprising. “It actually ended up being a lot cheaper for us to make the move. It was both a ‘Hail Mary,’ but also the safest decision that I made. And it paid off very quickly for us to make that shift.” To translate the savings seen on a spreadsheet into a profitable production, Fournier recruited help from Chris Roethlein, a professor at Bryant University. Roethlein found students to research sources for plastic and other raw materials as well as the equipment and capacity to cut and weld them into inflatable rafts to bounce behind a boat. Fournier said they realized they were building a whole supply chain “because there wasn’t going to be one supplier that can do soup to nuts. We took a very modular approach.” Kosmides also has taken a piecemeal approach, as building different models of Vela bikes requires 180 components, and they aren’t all available from U.S. suppliers. But he did find a bicycle builder in Detroit that would make and paint frames and assemble Vela bikes. That made a huge difference in responding to changing tastes. He said, “I can react to the consumer right now and I can decide on producing 40 bikes next month or 400 bikes.” Handfield said some U.S. companies are keeping a portion of assembly in low-cost countries while moving another portion to North America “because the nearshoring gives you that agility and flexibility to be able to react to things like consumer preferences or seasonal shifts in demand.” For those considering reshoring, Roethlein says supply chain management students at a nearby university can offer real support. He said, “They love the idea. They take a lot of pride in bringing business back to the United States.” More from Industry Trends
