Mass production techniques

Mass production techniques applied in new ways: The benefits of economies of scale are traditionally derived by the manufacturer. The manufacturer obtains the orders and then produces a huge number of bicycles in a single run; the bikes are built up in Asia and shipped out and that is it for the year. The IBS takes delivery of the bikes he ordered (and paid for a few months earlier), tightens a few bolts and then goes about trying to sell them.

The company’s business model uses smaller manufacturers that can derive economies of scale from smaller production runs and who can do more than one production run in a year. The business model also allows the customer to order a frame directly from the company and have it shipped to the nearest IBS who is an agent for the brand; the model also allows the IBS to order a frame on behalf of a customer.  These features create the potential for significantly higher volumes and gives the IBS the opportunity to develop processes that generate economies of scale. 

For example, an IBS may find that customers are ordering the frame from the company’s website and having it sent to the IBS because the IBS is the nearest agent of the brand. Or perhaps the salesperson at the IBS has convinced a number of customers to buy the frame during the course of some promotional event. The result is that there is a high volume of frames coming in to the IBS. The IBS can then develop its own way of managing the work (develop a schedule, order components and wheels in advance or just in time, set a specific time etc) so that they obtain economies of scale. The significance is that the mechanics begin to develop expertise in building bicycles from the frameset to the finished product. They concentrate on this skill and they become better at it and processes are developed by the IBS to make the build up fast and efficient. Meanwhile, the sales person focuses on informing and assisting the customer with component and wheel selection. This strengthens the relationship with the customer. Ultimately, the company’s business model allows the IBS to increase volumes, lower operating expenses and improve cash flow.