Bullwhip is Now in Full Effect
Just a few weeks after Eurobike 2022, we are beginning to see the bullwhip effect problems that were affecting USA bicycle and e-bike markets, begin to affect the European and other global markets. It will take a few more weeks for us to see the full extent of this effect on the manufacturing side, but it is clear that the bicycle and e-bike markets will need a long time to recover from excessive inventories and cash flow issues. Supply chain and market realignment will be the end result, but at a very high cost.
China had to bear the brunt of the initial bullwhip effect due to their heavy reliance on USA orders. Some factories have seen their forecasted production orders fall more than 50 percent as a result. The Chinese government Covid-19 policies of Zero Tolerance has also caused havoc for bicycle and e-bike manufacturing supply chains throughout China. Since nearly all manufacturing is affected, the resulting effect on shipping from China has only exacerbated problems for China-based manufacturers and their customers.
In Taiwan, where there is a fair share of USA and European bicycle and e-bike orders, we have seen the initial wave of order cancellations begin several weeks before Eurobike 2022 and then come into full swing immediately after the event. As expected, the initial waves were caused by USA customers, some of which have caused significant financial damage to their supply chain manufacturers due to the sheer scale of cancellations. The bullwhip effect following Eurobike 2022 has caused European and global orders to Taiwan to face significant levels of cancellations as well. Manufacturers for complete bikes, frames, and components that obtained forecasted orders well into 2024 and 2025 will likely see those numbers slashed by end of the year.
Supply chain and market realignment is actually good news for the majority of players in the bicycle and e-bike industry who had to deal with excessively long lead times for production followed by outrageous shipping costs due to Covid-19. While the entire supply chain benefited from unprecedented profits and growth, we expect to see manufacturers, brands, and retailers face significantly high costs for returning to market equilibrium. For those that played a safe game with their numbers, they will begin to see significant reductions in overall pricing and lead times towards the fourth quarter of 2022.
