Thread by @robertswinney

Lately I've been fascinated by the persistent shortages of bicycle supply, particularly from some of the big international brands. Some brands and retailers are saying bicycle supply will remain extremely tight through 2021 and into *2022*. This is incredible!

We've seen the supply chains for some items, like N95 masks, continue straining a year into the pandemic; this makes sense, because the demand for these increased massively. The US consumed 50 mil N95s per year before the pandemic, and this has increased >10x during the pandemic.

But... demand (probably) did not increase >10x for bikes, since these are expensive items ($100s to $1000s) that many people can't afford. So why I can't I buy a Specialized bike until 2022?

For one thing, they are harder to produce than something like N95 masks, so it will take longer to ramp up supply. Building factories (not just for assembly of the final bike, but also for all the components) takes more time the more complicated the final product.

This means that ramping up supply over the short term is really hard for bikes, but I would imagine it's doable over 1-1.5 years. So what gives? Why no bikes, still in 2021?

It is likely the case that big bike manufacturers don't think it's worth it to significantly expand capacity--they don't think the demand spike will persist after the pandemic. So they live with lost sales now, to avoid massive (over)-investment in capacity in the future.

It's possible they also estimate that the amount of time it would take to get new capacity online would exceed the pandemic--so if they decided to expand today, that capacity would not be useful to them until the demand surge is already over, at which point it's worthless.

I have to wonder about this strategy, though. If the universe gives you a massive, one-time surge in demand, how should you respond to that? Ignore it, or take the opportunity to reach many new customers and, maybe, keep them for a lifetime?

Put another way: there's a unique opportunity to get many more people into cycling, and perhaps *keep* them into cycling for many years to come. They are willing to buy the bikes right now! If there are no bikes to be found, does this surge just pass the industry by?

I think this shows one of the key challenges with strategic capacity decisions: how to respond to surges in demand (that may or may not be short lived). And it's not all about minimizing risk or cost: surges like this could be a unique, one-time opportunity.

CC cycling ops folks: @JanVanMieghem @RBoute