Easier Riders

The Bicycle Corporation Story

Corporate takeovers can be like coups d'etat, where one government pushes out another. Leaders of the old regime can sometimes find life not to their taste under the new masters. That was the situation for three executives at the iconic Australian bike maker Malvern Star after it was taken over in 1984.

Geoff Ward, Geoff Haydon and Kevin Mitchell could have taken their packages and shuffled quietly off the stage. But instead they took the risk of founding their own bike business - The Bicycle Corporation, known as Bikecorp - to wholesale bike parts and accessories.  

Such impetuous start-ups can be fraught with danger. Senior executives may know their business area well but not understand other key areas such as sales or marketing or human resources. Capital is tight and cashflow uncertain as the business flaps its wings frantically trying to achieve take-off. Geoff Ward remembers that start-up phase as: "We were the directors, the salesmen, the clerks and the storemen."

Fortunately, it was a good time to get into the bike business. Cycling soon boomed in popularity as more people took it up as a leisure activity. Mountain bikes and then hybrids became important sales niches. Bikecorp soon made itself a market leader in hybrids and expanded into providing parts and accessories.

But that was where the problems really started. As orders flowed in by phone, fax and later online, backlogs and errors began to accumulate in the warehouse and back-office operations. Mistakes were more frequently made in processing deliveries, which often took far too long to get out the door.

Geoff Ward says: "Under the old manual system, we had to rely on Bert or Charlie remembering which box and shelf things were in. You could have two or three people looking for an hour and a half for a minor part that was worth $1."

The Challenge

To increase efficiency and accuracy in the warehouse.

The Solution

Geoff Ward says that by 2005 the business needed to double output capacity to keep up with orders. One option was to throw more staff at the problem, especially in the warehouse, and hope they could sort it out. "But the warehouse supervisor said it would just cause a human traffic jam and would still have human error mistakes."

Ward decided to investigate buying the advanced warehouse module of the Pronto software (used by Bikecorp). He asked his international connections to arrange for his warehouse second-in-command to visit a Seattle-based bike wholesaling company - Seattle Bicycle Supplies - to see how it operated using radio frequency scanning procedures and advanced warehousing. That and visits to other parts businesses convinced Ward that the investment would be worthwhile.

Ward says: "[An aerospace parts business] had 18,000 product lines and an accuracy rate of 99.99%. They could also do a stock take in a day. At Bikecorp, we had 2,500 product lines and an accuracy rate of 89%. We decided to go for it."

Implementing the new warehouse system was another matter. Ward was warned that it would take 12 months to get it right and that proved true. They began by applying the new systems to their existing warehouse layout, but after a year they realised that it was not working efficiently. After a full consultation with the warehouse floor staff,  a better design was developed.

The revamped warehouse has new racks, palettes and a different style of forklift that can stack higher. Everything is bar and bin coded. Bikecorp squeezed more into the warehouse by going higher and spent $80,000 on capital equipment and software, including eight radio frequency units that cost $1,600 each.   

The new system has allowed staff to reduce the amount of lifting and walking they do by combining orders (or bulk picking). Warehouse staff learn all facets of the job including storing, packing and ordering.

Bikecorp tries to foster a committed work culture by sharing profits and engaging staff in any changes so that they work for them too.  It gives bonuses when business is going well. There are regular BBQ lunches and birthday cakes for all staff. Some staff have been there for 15 years. Ward says: "It is the people who make things work." Kevin Mitchell, one of the directors, says: "I spend more time with the people at work than I do with my wife. You have to have a good work culture."

The Result

The whole business is working smarter, which has helped increase productivity. Output has doubled in the 18 months since the new system was implemented, with the business moving from processing 8,000 items per day to 15,000 a day.

The accuracy rate has increased from 89% to 98%

Bikecorp now aims for a 24-hour turnaround time from receipt of an order to delivery to the customer. Ward says: "It has been a fantastic investment - paid off in the first six months and has given staff the most modern tools to work with."

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