Steve Flagg founded Quality Bicycle Products, a manufacturer and distributor of bikes and cycling parts, in his Minnesota garage in 1981. Flagg imported mountain bike parts from Japan at a time when others weren’t, and then shipped them the same or following day to customers across the country.
Flagg credits fast shipping times with helping the company reach 2014 sales of more than $200 million and to grow from selling bike parts from his garage to distributing complete bicycles, some of its own manufacture, as well as parts from hundreds of brands from three warehouses in Utah, Pennsylvania and Minnesota. The Minnesota facility, the largest of the three, holds approximately 40,000 SKU’s from more than 400 brands, says Adam Clarke, manager of I.T. applications.
Quality Bicycle sells to 5,000 mainly independent bike shops across the country, though its wholesale customers also include outdoor sports gear and apparel retailer Recreational Equipment Inc. REI is No. 72 in the 2015 Internet Retailer Top 500, which ranks companies on their annual e-commerce sales.
The privately held company doesn’t report sales. But in 2014, Quality Bicycle earned between $200 million and $400 million in total revenue, Clarke says. 90% of the company’s orders from retailers are processed online at its B2B e-commerce site, QBP.com. The other 10% are called in from independent bike shops, either due to customer preference or because the buyer has a question for one of the technicians who answer phones in the company’s customer service department.
10% of Quality Bicycle’s client base, or about 650 customers, are companies located in Europe and Asia, which is where the company forecasts much of its growth in sales. These clients are primarily interested in purchasing one of the 14 bike brands that Quality Bicycle Products owns and manufacturers, and these customers almost always order online, Clarke says.
In January 2014, Quality Bicycle launched a new web site to support continued online and international growth. The new site uses hybris Software as its e-commerce platform, and SAP AG as its enterprise resource planning system, for managing inventory, financial and customer relationship management applications. Previously, the company used Infor SX Enterprise, formerly NX-Trends, as its ERP system. SAP acquired hybris in 2013.
The upgraded ERP and e-commerce technology helps international customers by allowing them to place large orders through the e-commerce site, such as for the entire 2016 bike line of one of the nine brands that Quality Bicycle exclusively distributes. Previously, a client would have had to call in such high-volume orders because the prior e-commerce site wasn’t set up to handle such large bulk orders.
For the bicycles and products Quality Bicycle manufactures—including mountain bike brands Salsa and Surly—the items are made in Taiwan, which is the manufacturing hub of the bike industry, Clarke says, and then shipped to the U.S. where an in-house bike technician assembles them. Quality Bicycle relies on warehouse management software from HighJump Inc., which it has used since 2004, to coordinate manufacturing and shipping from Taiwan to the company’s three warehouses in the United States, Clarke says.
The warehouse management software has been integral to Quality Bicycle’s growth, Clarke says. “If we wanted to grow and scale our business we had to have a warehouse management platform that allowed us to be efficient and accurate,” he says.
The HighJump software, which Quality Bicycle has upgraded several times, allows the company to refine its picking process so that warehouse workers can more accurately sort items in the warehouse into individual orders. Before deploying the software, Clarke says that sometimes pickers were so used to picking one of an item that they would forget to add more when an order called for it. The company added a “beep” noise to the mobile devices warehouse workers use to receive order-picking instructions, to alert pickers’ to orders in which the client ordered more than one of an item. Initiatives like these have decreased the company’s order error rate by 20%, Clarke says, and achieved a 20% savings on returns and preprocessing due to increased accuracy. Clarke estimates that Quality Bicycle now has about eight errors for every 100,000 picks.
The ability to handle orders more accurately also helps Quality Bicycle’s fulfillment workers to process orders until 6 p.m. for shipment the same day, Clarke says. And by using a feature in the warehouse management system through which workers count sections of inventory every day, Quality Bicycle has been able to increase the accuracy of its inventory records for each item it carries, he adds.
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