TAIPEI CYCLE SHOW: Japan's reliance on just-in-time production sends jitters around bike industry

Japan’s disaster could have ripple effect on global bike industry

From high-end groupsets to e-bike components through to carbon fibres, the global bicycle trade relies on Japan and its just-in-time production philosophy.

The lean supply concept – perfected by Toyota and used by Shimano, too – works perfectly when conditions are, well, perfect. When conditions are less than perfect the production system risks collapse.

Last week’s earthquake, tsunami and then the later nuclear power plant fires have left Japan reeling.

There have been 5,178 earthquake and tsunami related deaths, with 8,913 people still missing.

Damage to infrastructure has been immense, including to Japan’s capacity to generate electricity. The world’s third biggest economy is facing power black-outs, some voluntary, some compulsory, and ports are struggling to land raw materials. Roads have been ripped up and Japan’s famously punctual railway system is suffering from severe delays.

While bicycle manufacturing takes place elsewhere in Asia, any supply issues in Japan can have knock-on effects for the global bicycle business. Shimano is based in Japan and the biggest three of the world’s top five carbon fibre suppliers are Japanese.

And computer chips, essential for everything from iPhones to e-bike control units, could soon be in short supply. Japan is a dominant supplier of silicon chips.

Shimano is struggling to keep pace with developments, which change daily.

Soon after the quake Shimano issued a statement.

"Our thoughts are with the victims of this tragedy," said Shimano, adding that deliveries remain unaltered.

While Shimano is putting a brave face on the raw materials supply issues it could soon face, other Japanese corporations are having to shutter factories, especially because of the enforced power outages in Tokyo and the northern part of Japan.

Sony and Toyota curtailed operations for a while, as did Toray Industries, the world’s biggest producer of carbon fibre.

At the Taiwan trade show Shimano chairman Yoshizo Shimano spoke to about the ripple effects of the earthquake:

"It’s a very, very difficult situation," he said.

"Osaka is 600 kms from Tokyo, and is less affected.

"We have turned off our electricity supply voluntarily to share it with the northern part of Japan.

"Trains are running 100 percent in Osaka. This is a great help in completing our production schedule. This is why we’re saying we’re OK, luckily. We can make our production as scheduled, unless something else hits Japan again.

Bob Margevicius, vice president of Specialized, said:

"I am sure Shimano will adhere to its promises to deliver on time. But I have concerns on the impact on other parts of the supply chain. Chemical companies that supply everything from saddle manufacturers to tyre makers are having to scour Asia for alternative supplies of basic materials.

"There’s going to be a ripple effect as other layers in the supply chain start being impacted. As a company, we’re alert to the ramifications of all this. We’re looking at how aggressively companies are going about sourcing alternative supplies of raw materials.

"We’re also keeping an eye on the currency markets. It was 73 yen to a dollar yesterday, with a lot of equity taken out of the market. Today it’s recovered back to 78 but this is something we’ll be monitoring closely."

International investors are worried that Japan won’t be able to contain its nuclear crisis.

Japan’s stock market lost 20 percent in the two days of trading after the earthquake and tsunami.

Economists say the market sell-off is just the beginning of long-lasting effects we could see in the global economy with the disaster in Japan leading to higher prices for products worldwide.

At the Taipei Cycle trade show Rick Stanforth of new electric bike supplier Ebco, said: "If any country can recover, it’s Japan. But it’s going to take a long time."

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