by Barry Render

Kent International plans to produce 500,000 bikes in the U.S. in 2017, and more than 1 million by 2020.

After decades of offshoring, bicycle manufacturing is coming back to the U.S. as overseas costs rise and companies realize the value of “local for local” production. “From hand-crafted boutique brands to high-volume manufacturing, U.S. bicycle makers are reshoring bike production,” writes Industry Week (Dec.8, 2016).  A confluence of factors are giving rise to new opportunities.

The move of American-made bicycles offshore began with industry leader Schwinn shifting manufacturing to Asia in the 1980s. In an effort to take advantage of low wages, other large bicycle manufacturers like Huffy and Trek soon followed. By 2015 only 2.5% of the 12.6 million bikes sold in the U.S. were made here. (The U.S. was in the top 5 for bicycle production in 1990 at 5.6 million units, but production fell to 200,000 units in 2015).

Now, though, the trend is looking up. Driven by rising offshore costs, the cost savings of automation and innovative processes, and the benefit of “Made in USA” branding, reshoring began to make good economic sense.

For example, in 1991, Kent International shuttered its New Jersey plant, and moved all bicycle production offshore. However, offshore costs began rising enough to make reshoring some manufacturing to the U.S. feasible. Then, in 2013, at the Walmart U.S. Manufacturing Suppliers Summit, Kent began discussing the possibility of opening a factory in South Carolina. With an annual employee turnover rate of 120% at its Shanghai factory and costs soaring, Kent turned to automation to close the total cost gap and return work to the U.S. It took innovative operations management ideas, like thousands of feet of overhead conveyors, the latest wheel-building equipment, and other process improvements for the reshoring to make economic sense.

Today, Kent is a high-volume, mass-market bike supplier to Walmart, Toys “R” Us, Target and other retailers. This year it will roll out 350,000 bikes from the S.C. factory, operating with 115 employees and assembling bikes at a rate that would require twice as many workers offshore.

This post provided courtesy of Jay and Barry’s OM Blog at www.heizerrenderom.wordpress.com. Professors Jay Heizer and Barry Render are authors of Operations Management , the world’s top selling textbook in its field, published by Pearson