National Bicycle

Topics: Bicycle, Safety stock, Cycling Pages: 6 (1630 words) Published: September 23, 2011
Executive Summary
As National Bicycle transitions to the production of a customized bicycle, employing a concept of mass customization, the Company must ensure that its supply chain is responsive enough to handle the characteristics of an innovative product. Demand will be highly unpredictable and the final product, with over 2 million options, will also be unpredictable.

Given National Bicycle’s current high level of automation, the transition to the POS system should be smooth. Its current supplier and delivery arraignments will accommodate the product switch.

The final critical factor to the success of the customized bicycle is a business decision: determining how much order lead time to incorporate into the production of the bicycle that will both match the production requirements and capabilities of the Company and also satisfy the demands of the consumer.

After careful analysis of National Bicycle, examining its production capabilities and business goals of the product, a lead-time of 10 days will help the Company achieve its goals. It is long enough to provide the Company some flexibility in production and delivery without straining its resources. And it will meet customer expectations of providing them a unique product in a relatively short time period.

To meet this goal, National Bike will have to amend some of its supply chain, including requiring all dealers to use fax machines to facilitate bicycle orders. In addition, the Company will have to develop a more robust delivery process to ensure the reliable delivery of its bicycles without straining company resources with regular single item deliveries to the Honsha. In addition, the Company should seek better relationships with its suppliers in an effort to mitigate some of the business risk associated with the imperative of having the right parts available.

However, with these slight modifications to its supply chain, National Bicycle should have few difficulties transitioning to more responsive manufacturing. The Company has an excellent opportunity to innovate the Japanese bicycle market.

Analysis and Recommendations
Misuru Komoto, the new president of National Bicycle, has proposed dramatic innovations to Company operations in an effort to resurrect its flagging sales. Komoto has directed National Bike to expand the Company’s high-end sport bike business, moving the Company from building traditional, functional bikes to an innovative custom bike. To make the transition successful, National Bike must consider the fundamental differences between the product characteristics.

At the center of Komoto’s new initiative is the concept of mass customization, building a large volume of high-end, custom-made bicycles featuring over 2 M different options, while avoiding the high manufacturing costs and high lead times traditionally associated with customized products. In addition, National Bicycle must avoid the costs associated with keeping large inventories of parts on hand.

The POS system gives National Bicycle the opportunity to innovate the bicycle market by allowing the Company to offer a true customized product to the public. The POS system is perfectly tailored to supporting an innovative product:

Uncertain demand
Inventory Obsolescence
Stock outs
Short product lives

To achieve the goals of the customized bicycle product, National Bike must examine its supply chain and achieve some fundamental changes in order to achieve better efficiencies.

The key consideration is order lead time: To make mass customization work, National Bike must deliver its products within a reasonable amount of time. People will wait for customized goods, but the Company must be wary of their customer’s patience threshold. Currently, the critical factors for lead-time include:

Order receiving and processing
Production capability
Supply chain responsiveness, including stock outs
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