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Rick Vosper: No Model Years (Part 2)

Published August 21, 2012

 

To read Part One, click here.

That Was Then, This Is Now. Fortunately, those 240-day lead times from back in the early 2000s are a thing of the past. As discussed previously, it’s more like half that nowadays. Marketing communications can be developed and deployed at internet speed. Plus components haven’t changed every year anymore since the early 1990s; nowadays they change every three years, on average.

And while this year’s latest-and-greatest equipment may be a big deal on thousand-dollar-plus high-performance machines, it’s hard to believe the typical $500 bread-and-butter consumer really cares whether his shift levers are gray or black this season.

But we still find ourselves stuck with every-year model years at every price point, not to mention the bulimic pricing mentality that accompanies them: Binge and purge. Force more inventory into the channel, then puke it up at discount and start all over again.

All of which brings us to the second pincer of the Model Year Trap: when it comes to preseason “risk sharing,” the lion’s share of the “risk” almost always devolves onto the last person left holding the inventory: the retailer. (In really bad years, like 2009, the distributors take a hit too, but only as needed to move their excess inventory along the supply chain.)

So here’s where the model year concept remains so important: it forces retailers to blow out existing inventory, often at a loss, to make room for the new stuff coming down the line.

And that’s the real reason we still have model years: they’re a way of forcing inventory through the supply chain. But as I said way back at the beginning of the previous post, that’s a false benefit, especially when compared to the very real advantages of acting like a grown-up industry and actually making our supply chain more responsive in the first place.

So what should we do about the problem? Four simple things:

  1. Eliminate model years, at least on sub-thousand-dollar bikes.
  2. Time the introduction of model changes to minimize obsolescence and allow the existing stuff to move through the distribution system and out retailers’ doors with minimal price disruption.
  3. We’ll still have to build a lot of inventory in the third and fourth quarters of each year, to level-load factory production and to have enough product to supply demand through the spring and summer months. But the total amount of that early-season product should be significantly less, because it’s now easier to just order more in-season.
  4. Without the artificial deadline of the new model year forcing unnecessary obsolescence into the market right in the middle of each summer, seasonal adjustments for consumer demand can be made more easily and gradually, with less disruption of production schedules. And that means huge savings for the entire industry.

Build For Refreshment, Not Obsolescence. Elimination of model years will still leave four months of lead time “daylight” between the time when new products are ordered and when they’re available to consumers…plenty of time to see seasonal changes coming, make adjustments, and keep the right amount of supply flowing into the market.

Best of all, minor changes in colors or spec become just part of the ongoing model refreshment process, not a looming inventory crisis and potential sales disaster each time they happen.

At its heart, the elimination of model years acts as a safety valve, a gentle buffer on a constantly fluctuating supply/demand dynamic:

  • In good seasons, the system can respond in enough time to supply product without having to sit idle waiting for the next model year’s components to become available. More bikes get sold to more happy cyclists, and everyone in the supply chain ends up with more dollars in their pockets.
  • In lean years, product can move through the system in accordance with demand and without the necessity for slash-and-burn discounts and market disruption.

Which brings me to the Bottom Line. Once we’re off the model year treadmill, we can focus our efforts as an industry on making the entire supply chain more responsive to the real needs of consumers. And that's a very good thing. For everyone involved.

This renewed focus becomes a huge win-win. Without model years creating arbitrary deadlines that obstruct the entire supply chain, component suppliers and bike factories still have plenty of time to plan their production; suppliers will have less product to warehouse (or store at retailers and subsidize with extended dating terms); and retailers have a more flexible, responsive, and reliable supply of product at more consistent pricing and profitability. Consumers win too, because bikes are available when they want to buy and because industry-wide savings can be reinvested in offering them better bikes at a better value.

 

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