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Old 09-14-08, 03:20 AM   #1
lukeC
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Economies of Scale in Bicycle Manufacture?

Suppose I wanted to get X bicycles manufactured for a community based cycling project, so that the bicycles would be as cheap as possible.

What would X be? 1000, 100,000, more, less?

And does anyone know where I could get these manufactured?
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Old 09-14-08, 05:32 AM   #2
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Originally Posted by lukeC View Post
Suppose I wanted to get X bicycles manufactured for a community based cycling project, so that the bicycles would be as cheap as possible.

What would X be? 1000, 100,000, more, less?

And does anyone know where I could get these manufactured?
I suggest you go directly to one of the manufacturers who build for major brands like Giant and Specialized. They are almost all in Taiwan. Some have web pages that feature their product, but my understanding is that they can build almost anything. My understanding is that they sell and export by unit quantities that typically fill a standard ocean shipping container. As built bikes (I'm guessing, you didn't say) would likely cube out vice gross out a standard 8x40x9.5 ft container, shipping lots would probably be on the order of a hundred complete bikes per container.

Maxway is one such Taiwan-based manufacturer.

Last edited by CHenry; 09-14-08 at 05:41 AM.
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Old 09-14-08, 05:34 AM   #3
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If you are asking about what number of bikes to make, well, coming up with that number will be hard. I did plenty of similar number crunching in my Man Econ class with derivatives and such and it all seems to be such a moot point since real life in no way resembles our economic models.
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Old 09-14-08, 05:37 AM   #4
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Also, there are a couple of BFers on here that work and/or manage factories and/or are otherwise industry "insiders". Not sure exactly who they are, but I'm sure they'd be more helpful - unfortunately I don't remember seeing any of them venturing into the mechanics sub forum.
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Old 09-14-08, 07:03 AM   #5
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Do you want a "custom" frame or are you willing to take a stock frame? If you will accept something already built in quantity the cost will be much lower since your order will be just more of the same set-up and tooling.
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Old 09-14-08, 07:08 AM   #6
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You might want to contact someone like Mike, at Bikes Direct. Maybe he could help, of direct you to the right people.
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Old 09-14-08, 08:48 AM   #7
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You can always try Alibaba. Hooks you up with the Manf. direct
http://www.alibaba.com/showroom/Bicycle.html
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Old 09-14-08, 09:24 AM   #8
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Originally Posted by lukeC View Post
Suppose I wanted to get X bicycles manufactured for a community based cycling project, so that the bicycles would be as cheap as possible.

What would X be? 1000, 100,000, more, less?

And does anyone know where I could get these manufactured?
Since it's "as cheap as possible", might I suggest that you ask for donations from the community? There's usually hundreds of bicycles sitting unused in the backs of suburban garages. These can be cleaned up, reconditioned, and returned to usefulness with minimum investment.

This is how Portland's Community Cycling Center operates. They've been successful for quite a while.
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Old 09-14-08, 09:33 AM   #9
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Even Giant from Taiwan uses manufacturing plants in China for some of their product. There is no way one can figure out what Giant's economies of scale are.

They have fixed and variable costs as any other company. Your request for a production run would let the Giant industrial engineers figure out the price points. They will tell you, not you tell them.

As an alternative to Taiwan/China, give Craig Calfee a call in the Santa Cruz area. I believe Craig is involved in using bamboo or other raw materials for building bikes in under developed nations like in Africa. Its supposed to be really inexpensive.
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Old 09-14-08, 09:37 AM   #10
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You might want to work through a broker of some sort. Pacenti Cycle Design does this type of work - you work the design with him and he gets the manufacturing sources (or at least he used to do this type of work).

To answer your question, there are economies of scale but at some point that diminishes. Commodity prices fluctuate quite a bit so getting a large contract established would seem to be a logical idea.
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Old 09-14-08, 09:31 PM   #11
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Homework?

Better ask sum1 with a degree in manufacturing management.

Of course these days, one don't have to manufacture anything themselves, they just outsource the frame making to sum1 and ask for $breakpoints.
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Old 09-15-08, 03:51 AM   #12
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This question is impossible to answer because there are too many variables missing. Shipping is a HUGE concern and that will depend upon multiple variables:

1. are components sourced from same location as frame-manufacturer?
2. are bikes shipped assembled?
3. what are exchange-rates between source and destination countries?
4. what are differences in labour-rates between source & destination countries?
5. at what port is container arriving?
6. how are bikes delivered to final destination?
7. who pays freight-forwarder? Duties? etc.

You need to model the costs from beginning to end for the ENTIRE process and plug in numbers based upon juggling the variables around.
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Old 09-15-08, 06:55 AM   #13
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Thanks for the responses from everyone. The question is about the actualities of this idea (post):
http://www.bikeforums.net/showthread.php?t=465386

I live in Hackney in London (UK) and had the idea of a community (or all of London) drive to purchase a whole load of basic bicycles, (ie < 100,000) for commuter use.

I'm trying to understand how impracticle / practical it would be.

i.e.Suppose London City Council wanted to offer a Budget Bicycle Scheme to all residents where the Coucil Sources a Standard Basic Bicycle (from somewhere?): The Bicycle would be hardy but simple. single speed (or SA-3sp), step through, basic steel frame, tough wheels, basket) say an updated Pashley Post Office Bicycle. (see pics attached).

Now if the council could source these bicycles for a cost of <50 per resident. This would be a solid hardy bike, that would last. (compared with other cheap bicyles at Target/Halfords/Walmart/kmart)

And it woudl be at a price range that would undercut the current stolen bicycle market. (and hence put the theives out of business.)

is this a pracitcal idea?
how woudl one source a manufactureer / supplier for these bicycle?
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Old 09-15-08, 06:57 AM   #14
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eith attachments
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File Type: jpg Pashley.jpg (54.5 KB, 9 views)
File Type: jpg 041005_cb_mp_his_strlf_750.jpg (70.0 KB, 5 views)
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Old 09-15-08, 08:04 AM   #15
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Originally Posted by lukeC View Post
Thanks for the responses from everyone. The question is about the actualities of this idea (post)...
While I do encourage the idea of promoting bike commuting and bike use in London....

50 per resident? For a reliable bike? No way, not without massive subsidies that would dwarf the cost of the Velib program. Especially since Velib is financed by an advertising deal with JCDecaux.

One advantage of Velib and similar schemes is that while there are some financial implications, the fleet itself is actually fairly small. Velib is currently around 20,000 bikes - for 2 million residents and 30 million tourists. Even if it goes up to 40,000 bikes, that fleet is less than half the size of your proposal -- and requires significantly lower distribution, storage and management costs.

Plus, bike manufacturers would be climbing the walls when you basically destroy a chunk of the entire London bike commuter market.

Flooding the streets with bikes will not stop bike theft, if anything it would probably encourage it. The thieves would just ship the stolen bikes out of London or out of the UK altogether.

And who exactly gets the bikes? Obviously 100,000 couldn't possibly cover all of London. Do you have to own a home? Can renters get one? How long do you need to live in London before you're eligible? How many per household? How many new bikes per year do you need to buy for new residents? Do you just drop them off at people's houses, or do they have to go somewhere to pick them up?

I think you'd be much better off either working on a tax credit for bike commuters, or putting in better cycling and bike-storage infrastructure, or working on some sort of variant of the Velib program, modified to better suit London and try to fix any issues facing Velib.
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Old 09-15-08, 08:09 AM   #16
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Luke C,

Here's the web site about Craig Calfee of Calfee Design in California. He designed a high end road bike using bamboo. In addition, he is also involved in a bamboo bike project in Africa where they desperately need a low cost, low maintenance transportation vehicle.

http://www.bamboobike.org/Home.html
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Old 09-15-08, 10:23 AM   #17
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why is this an impossible question to answer?-- you guys..... you smart guys......
hey....... if you find a manufacturer ( with a patent?) willing to sell you a shtload of bikes (frames?)
with parts (shimano compatable?) go for it----- but----
A. I will never buy or ride a mass produced low end product anymore....
B. good luck.........
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Old 09-16-08, 09:29 AM   #18
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50 per resident? For a reliable bike? No way, not without massive subsidies that would dwarf the cost of the Velib program. Especially since Velib is financed by an advertising deal with JCDecaux.
This is one of the things I'm trying to understand. if you remove all the markups and profit margins etc. what sort of price could you source a basic bicycle for?


Quote:
Originally Posted by Bacciagalupe View Post
Plus, bike manufacturers would be climbing the walls when you basically destroy a chunk of the entire London bike commuter market.
I know, this is also something I've thought of. they might not be keen on that.

Quote:
Originally Posted by Bacciagalupe View Post
And who exactly gets the bikes? Obviously 100,000 couldn't possibly cover all of London. Do you have to own a home? Can renters get one? How long do you need to live in London before you're eligible? How many per household? How many new bikes per year do you need to buy for new residents? Do you just drop them off at people's houses, or do they have to go somewhere to pick them up?
well the idea was that it would be ongoing. (assuming that the subsidy didn't need to be too great).
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Old 09-16-08, 09:34 AM   #19
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why is this an impossible question to answer?-- you guys..... you smart guys......
hey....... if you find a manufacturer ( with a patent?) willing to sell you a shtload of bikes (frames?)
with parts (shimano compatable?) go for it----- but----
A. I will never buy or ride a mass produced low end product anymore....
B. good luck.........
I don't expect someone who wants a high-end racing cycle to be particularly interested in this kind of bike. Its just intended to be something practical to ride to the shops. / down the road - like the Velib system in Paris but the bicycles are owned by individuals.

I'm just trying to understand if this would be at all feasible. It sounds as though the costs of the bicycles would be too high.
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Old 09-16-08, 09:37 AM   #20
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How good a bike do you want? From time to time, some of the "chain" sporting goods stores such as "Dick's" and "Oshmans" will stock one speed beach cruisers made in communist China. They sell them for $89 or $99. They are heavy, but very sturdy bikes. They really need better hub bearings, better headset bearings, better bottom bracket bearings, and a better coaster brake.

If "Dick's" told their supplier that they wanted one speed bikes with "heavy duty" bearings and brakes, the retail price would be closer to $150...a bargain for a bike that would provide twenty or thirty years of service, like the Schwinn bikes made in 1955. Unfortunately, most Americans won't pay $150 for a one speed bike, so we get the $89 bikes, of a less durable grade.

The Kona "Afrika" model is designed for heavy duty use, and Kona buys them in quantity. Kona had an offer that for each Kona "Afrika" model sold in the USA, that Kona would donate one bike to community health groups in Africa. So, the retail price in the USA of the "Afrika" model is actually the price of TWO bikes, the USA bike, and the donated bike. A terrific program.

If a city or community wanted to buy a 1,000 bikes, they could contact Kona and probably get them for something close to the "factory" price...and a "tough" bike for around $150 is the best transportation bargain around.
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Old 09-16-08, 09:41 AM   #21
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http://www.bikeforums.net/showthread.php?t=465825
Velib in Vancouver:
Quote:
That is, if taxpayers or another party can come up with the $10 million per year to maintain a fleet of 3,800 bikes.
so i'm saying - why spend in on maintenance. just buy a bunch of bikes and give them away - the owners can look after them.
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Old 09-16-08, 10:12 AM   #22
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50 per resident? For a reliable bike? No way...
I disagree. 50 is about $80, which will easily buy a Wal-Mart bike. Remove the cost of sale, the profit margin, the bling, address the problem areas, and you have a usable bike. Of course, there would be other costs to the program besides that of the bikes themselves...

Quote:
Originally Posted by lukeC
Economies of Scale
lukeC, you're going about this the wrong way. Looking for a "break point" in economy of scale won't get you a break point (there isn't one per se), nor will it get you usable information. First you must set minimum requirements - including configuration - for the bikes.

Then you can approach this in one - preferably both - of two ways:
  1. How much money can I get, and how many bikes will that buy.
  2. How many bikes (minimum) do I need for the program to be viable? Then look for a best price.

Do each exercise for a range of numbers, e.g. assuming a best case, a worst case, and a probable value for the available money.
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Old 09-19-08, 08:48 AM   #23
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I disagree. 50 is about $80, which will easily buy a Wal-Mart bike. Remove the cost of sale, the profit margin, the bling, address the problem areas, and you have a usable bike. Of course, there would be other costs to the program besides that of the bikes themselves...
This is actually the crux of my question. Is this price for a solid trustworthy mass-produced bicycle acheivable?
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Old 09-19-08, 09:03 AM   #24
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http://www.bikeforums.net/showthread.php?t=465825
Velib in Vancouver:


so i'm saying - why spend in on maintenance. just buy a bunch of bikes and give them away - the owners can look after them.
A lot can be said for this approach. I'm talking about human nature. Its like the right to private property. Once you own something, then you want to take care of it. But if you know its not really yours to keep, then all of the sudden you don't care.

Take a look at the place of work or any public place. Or inside a movie theater after the movie is over, filty dirty. Those of you who go to church on Sunday. Take a look at under the pews. Lots of chewing gum stuck there.
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Old 09-19-08, 10:23 AM   #25
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Originally Posted by DannoXYZ View Post
This question is impossible to answer because there are too many variables missing. Shipping is a HUGE concern and that will depend upon multiple variables:

1. are components sourced from same location as frame-manufacturer?
2. are bikes shipped assembled?
3. what are exchange-rates between source and destination countries?
4. what are differences in labour-rates between source & destination countries?
5. at what port is container arriving?
6. how are bikes delivered to final destination?
7. who pays freight-forwarder? Duties? etc.

You need to model the costs from beginning to end for the ENTIRE process and plug in numbers based upon juggling the variables around.
All excellent points. Don't forget

8. hire an excellent attorney
9. hire and excellent accountant
10. incorporate, a must and probably the first thing you should do after doing # 8 & 9
11. get insured. You'll be the first to be sued if one of the budget bikes fails.
12. good luck
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