Omni-channel sales and the increasing complexity of bicycles require a different supply chain structure. To this end, some year ago we started developing a completely new framework for supply chain management and the creation of a supply chain team at group level. In 2017, we filled the final vacancies in the supply chain and the team, which comprises around 20 professionals in the field of procurement and planning, is now fully operational.
A more centrally directed supply chain has major benefits on multiple fronts.
1. Reduction of delivery times and increasing delivery reliability
- More flexibility to respond to consumer demand and preferences across the season
- Improved and faster service to consumers and dealerships
- More even inventory development across the season and lower stocks at dealerships
- Less having to say 'no'
2. Use of scale and procurement benefits
- Stronger negotiating position as a group vis-a-vis suppliers
- Better agreements and purchasing terms
- Structural cost savings
- More cooperation with suppliers in the field of innovation
- Greater control of chain responsibility and sustainability aspects
3. Reduction of working capital
- Reduced capital utilisation inventories throughout the year
- Improved capital efficiency and cash conversion
Implementation new supply chain framework
Accell Group developed the new supply chain framework in close cooperation with the brands and their procurement, marketing and product development teams.
In 2017, we began work on the implementation of a Sales & Operations Planning (S&OP) process. The purpose of this process is to improve the alignment between sales forecasts and inventories and available production capacity. In line with the introduction of the S&OP process, we have also started organising workshops with a number of suppliers to exchange planning information. These workshops have provided us with improved insights into the entire supply chain, the dependencies and bottlenecks. This intensive cooperation and exchange of know-how has in some instances already resulted in improved reliability of deliveries and reduced delivery times. Suppliers have responded positively to the workshops and the greater transparency we provide, which makes us a trendsetter in the sector.
In 2017, we structured our procurement entirely on the basis of category management. Per category, we took stock of both the internal needs of the various Accell brands and the external market. Based on the outcome, for each category we outlined the potential for more efficient and lower-cost procurement as a group. At this point, implementation processes are underway in various areas and the cooperation with the Accell brands will be key factor in the success of this project.
In order to make data collection faster, more uniform and more accurate, we began standardising our master data pertaining to both suppliers and components. This is a key prerequisite to increasing our insight into the components used and to improving our procurement contracts on the basis of these insights. In terms of planning, we worked with the brands to create clearer insight into market demand. The insights we gained into consumer preferences can be translated into models we can use to align our production and supply chain to current demand ever more quickly and more effectively.
More complex bicycle is an extra challenge for supply chain management
In the coming years, the ever growing complexity of bicycles will create an additional challenge for supply chain management. The integration of what are frequently more expensive components (such as batteries, motors and displays) and connectivity will lead to more advanced frames, and the use of more digital technology and electronics in our bicycles. This creates an extra challenge in terms of optimising our supply chain.
We have noticed that by combining procurement volumes, we are immediately more visible to our suppliers as an important client.
The majority of our components were acquired in Asia the traditional way in 2017. In order to increase delivery reliability and further reduce delivery times, we are looking at ways to reduce the distance between the production and inventory management of our suppliers and our key markets in Europe and North America.
In 2017, we conducted exploratory talks with various suppliers on this subject. In concrete terms, this has resulted in a number of projects with one of our suppliers, who has invested in the construction of a new and fully-automated production facility for aluminium frames in Portugal. This is not the only initiative we are following with great interest. We are also discussing production and inventory management in Europe with a number of other parties.
Our scale puts us in a position to encourage other players in the supply chain to respect human rights, sound labour practices and environment protection. In the talks with suppliers about agreements and purchasing terms, which we now conduct at group level, we also include our terms and guidelines with respect to chain responsibility.
We have our own code of conduct and we ask all our suppliers to subscribe to that code. Some 90% of the main international suppliers have now responded positively to this request. We consider certain parts of corporate social responsibility as pre-competitive and wherever possible we look to collaborate with our industry peers and sector organisations. For example, we do this on the compliance with agreements front by means of audits.
We conduct audits among suppliers under the umbrella of the WFSGI (World Federation of the Sporting Goods Industry). This approach is known as the ‘Responsible Sport Initiative’ (RSI). Based on a risk analysis and in consultation with procurement, each year we determine which suppliers will be audited. As a group, we want to conduct at least 15 audits a year.
The audits are conducted by an externally accredited organisation. In 2017, we added someone to our own team who is in charge of supervising the progress of the audits and monitoring and implementing improvements.
In 2017, we had a total of 17 audits conducted at suppliers and therefore achieved our target. The main findings of these audits were comparable with previous audits and are often related to buildings (such as escape routes, fire prevention and storage of chemicals) and the handling of personnel and wage administration and keeping to the correct working hours. We work with the supplier to make improvements on the basis of a Corrective Actions Plan. At some suppliers, these actions plans have now been successfully implemented.
Audits for chemical substances
Audits for chemical substances at our suppliers are conducted on an ongoing basis. These substances are used to paint parts such as the frame and front fork, and they are also used in plastic components such as saddles and handlebar grips. Whenever possible, we use 100% water-based paints and alternative substances without hazardous components.
We operate in compliance with REACH (Registration, Evaluation, Authorisation and Restriction of Chemical substances) and aim to use only registered substances in the right conditions and with the right protective measures in place. We have our own test laboratory in Hungary to check whether components and parts comply with legislation. We also ask our suppliers to sign a REACH compliance statement.
In 2017, our REACH laboratory tested a total of 116 complete products and components, on which the lab conducted a total of 540 analyses. These new and existing products were selected based on risk estimates. The lab found (often small) deviations in 25% of the cases, and it was generally possible to resolve these issues quickly in consultation with the supplier involved.