A-Team Rides Power-of-Partnership to Summit in Upmarket Bicycles

As the slogan "Think Taiwan, Think Bicycle" has gradually proved to be more real than wishful thinking in the past two or three years because the island has become the world's most important and largest supply center of high-end bikes, many people might not recall that Taiwan's bicycle exports plunged to only about 3.9 million units in 2003, from about 10 million in the early and mid-1990s.

Customs statistics also confirm Taiwan's leading role as a supplier of upscale bikes: the average selling price (ASP) of Taiwan-exported bicycles have exceeded US$250 in the past two years, remarkable considering that the figure was only about US$150 in 2003. In fact, Taiwan bicycles exported to the U.S., Japan, and EU markets in 2007 commanded ASP of US$388 (compared with US$187 in 2003), US$241 (US$106), and US$169 (US$134.53), respectively.

Most would also neglect the brutal truth that Taiwan's bicycle sector once peddled the formidable race against mainland China, which replaced Taiwan as the world's No. 1 bicycle production nation in volume in 1991, and in both volume and export value in 2001.

Such discouraging memories aside, Taiwan has definitely evolved into the undeniable manufacturing citadel of upmarket, top-end bikes worldwide, an intensive, commendable effort made possible, without being aware by most outside the circle, by a small group of ambitious, foresighted bike and parts makers in Taiwan. This small group of like-minded suppliers that put teamwork to good use: they formed the A-Team, an industry-first alliance composed of only first-class players who eagerly aimed to upgrade their operations, as much for survival as to carve out a top-end niche that would be beyond the reach of emerging rivals as mainland China.

A-Team's Genesis

The A-Team was established on the 1st of 2003 with 13 initial members, and by 2006 the membership had grown to 20 companies, with another seven international bike brands having joined as sponsor members.

"The essence of the A-Team is a dual-core system backed by satellite plants comprising the top-two assembled-bike makers-Giant Manufacturing Co., Ltd. and Merida Industry Co., Ltd.-as well as 11 leading bike-parts suppliers," points out Simon Lin, executive secretary of A-Team, with the "A" having dual implications: the best and attack."

Many people might wonder how the two leaders in Taiwan's bicycle making sector came to boldly work as partners. Lin says that Giant and Merida, besides the former's commitment to upgrading the local bike sector, actually do not have seriously overlapping customer lists.

"The desperation to survive in the local bike sector sealed the bond among the team members, who revealed their bottom card without reservations," the executive secretary says, "because every member realized that cooperation works better than competition."

The A-Team took another key step: to adopt the Toyota Production System (TPS), synonymous for lean production or lean manufacturing. The main goals of the TPS are to design out overburden, inconsistency, and eliminate waste. "Through the introduction of TPS," claims Jeffrey Sheu, special assistant & spokesman of Giant's general office, "each A-Team member's manufacturing capability could be strengthened."

As the proverb goes: "God helps those who help themselves," Sheu says, Taiwan's bicycle exports enjoyed clear growth shortly after A-Team's establishment due mainly to European Union (EU)'s anti-dumping punishment on bikes exported from mainland China.

Power of Partnership

The growth in bike exports further strengthened the A-Team's confidence, Sheu recalls, and drove the membership to 22. "However, the A-Team's core spirit is 'Power of Partnership,'" Sheu stresses, "which has a dual meaning: the alliance aims to create very strong collective power as well as build powerful leadership by Giant."

Not a profit-making alliance, the A-Team is a platform initiated by Giant to upgrade not only itself but also, may be more significantly and altruistically, all the members in the team, the special assistant says. The team never forces anyone to join and take application from only first-class parts makers focused on pursuing the best.

The A-Team members are subject to seasonal inspections, with the alliance upholding stringent disciplines, including ousting unqualified members, according to Lin. Enforcing such "power of partnership," in fact, helps to weed out companies not dedicated to upgrading the industrial caliber.

After adopting the TPS, the A-Team also brought onboard the TQM (total quality management) system, a set of techniques to improve the quality of processes and such system emphasizes constant measuring and statistical techniques to help improve and then maintain the output quality.

In addition to the mainstream methods to upgrade manufacturing capability, the A-Team also commissioned the Taiwan Design Center (TDC), a national design center, to help train members' aesthetic sense.

"The greatest value realized by the A-Team include the introduction of outside resources and the utilization of local high-quality labor," Sheu says. "In addition, we promote the made-in-Taiwan image globally to inform people of the island's unmatched strength and advantages in producing high-end bikes. The effort has paid off: currently about 70% of top-end bicycles worldwide are made in Taiwan."

"The limited membership of the A-Team means that each member benefits from unadulterated resources," Sheu comments. "The resources we find and try to introduce to the members are not force-fed but recommended as we see fit."

Rooted in Taiwan

Another key motivation behind the formation of the A-Team, Sheu points out, was that, after intensive observation, Giant recognized the excellent potential for Taiwan to become the production base of high-end bicycles.

"Though Japan is the world's major supply center of high-caliber bicycle parts, yet most famous Japanese assembled-bicycle brands, which are often small business divisions under gigantic conglomerates, pay little attention to aggressive global business development. King Liu, chairman of Giant, found that Taiwan holds great potential to replace Japan as an exporter of high-end bikes to the United States for its cost advantage. In addition, Japan's major bike brands can do well supplying its domestic market that has an annual volume of eight to nine million units, compared with only about 600,000 in Taiwan, while Taiwan makers have no option but to aggressively develop export."

"Demand drives change," Sheu points out. "A few years ago, the key to survival for Taiwan's bicycle sector was upgrading into the high-end segment, as well as improving production efficiency and lowering cost to cope with underselling rivals. The A-Team has proven to be the best solution."

According to Sheu, Giant chairman Liu recognized many years ago that if Taiwan strives to move upmarket in the bike segment, the "industry root" has to be kept at home. However Giant's orders might be too small to entice major parts suppliers to stay in Taiwan, so, the special assistant says, chairman Liu invited Merida to join the A-Team for more efficient economy-of-scale.

Upgraded Competitiveness

After considerable effort in the past few years, according to Lin, Taiwan has succeeded to become the supply base of high-end bicycles-capable of supplying quality products at reasonable prices. Taiwan suppliers have effectively tapped the global high-end bicycle segment by optimizing the advantages of well-established division-of-labor manufacturing strategies in Taiwan and China. "With unmatched ability to fill small-volume, large-variety orders and rapid response," Lin says, "the island is without doubt the world's largest and dominant supplier of high-level bikes."

More importantly, Lin continues, the A-Team has successfully drawn a price margin between Taiwan-made bikes and counterparts made in China. A Taiwan-made bike priced at US$150 would see its counterpart from China tagged at only US$100, Lin says. "More and more international brands now realize that finding contract partners in Taiwan equals trouble-free business, contrary to the high likelihood in China where brand image may be ruined by questionable practices and quality," Lin explains.