Vienna Producing again in Europe instead of in Asia: So-called reshoring was not just a buzzword during the pandemic, but also a concrete project at the Austrian children’s bicycle manufacturer Woom. The management even had ambitions that went far beyond their own company. In February, the management was still talking about setting up a bicycle cluster in the middle of Europe. The center of international bicycle production is currently in Taiwan.
But the reality of global manufacturing is more complicated than Woom’s management anticipated in recent months. After a look at the books, the decision has since been revised: for the time being, Woom is only partially relocating production to Europe. “Every era has its overreaction,” says Woom CFO Paul Fattinger self-critically on the discussion about the globalization of production and the stability of supply chains.
The company, founded in 2013 from Klosterneuburg near Vienna, had grown even faster during the pandemic than in previous years. Last year sales increased from 65 million to 86 million euros; Woom now has 237 employees. For well-off parents, it is almost de rigueur to equip their offspring with one of the relatively expensive Woom bikes.
So far, these have been manufactured almost exclusively in Vietnam, Cambodia and Bangladesh. An Asian specialty is the production of frames, especially since they are made of aluminum and carbon instead of steel. In Europe, the profession of aluminum welder has almost died out.
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In the pandemic, however, production in Asia proved to be a disadvantage. For example, container prices skyrocketed to such an extent that just transporting a bicycle temporarily cost more than selling it brought in.
Poland instead of Bangladesh
At the time, this encouraged the Woom management to reorganize production. The production facilities in Asia should continue to supply the countries of the region, for the European markets Poland was chosen as the new production location. Strictly speaking, Woom planned a kind of mixture of reshoring and nearshoring – but the business considerations behind it are the same.
In Poland, however, labor costs are around four times higher than in Vietnam. If Woom produced there in the same way as in Southeast Asia, the bikes could not be sold at competitive prices. Guido Dohm, then head of Woom, announced a year ago that everything that could be automated would be automated. From 2023, only robots should be used in frame production in Poland.
But Woom has now made significant changes to this plan. The company now has bikes assembled for the European market in Poland, so it does the so-called “assembling” there. Contrary to the original intentions, the frames are still sourced from Asia. Woom is no longer talking about a Central European bicycle cluster.
“Most bicycle components come from Asia,” says Fattinger. “Producers aren’t moving to Europe just because of us.” Woom also considers the investment costs for the use of robots to be too high: Especially since the company is continuing to grow, but is still a medium-sized company that has to weigh up its investment decisions carefully.
Robot manufacturers are also currently not overly keen on cultivating relatively small companies as customers. Their most important customers are the major manufacturers in the aircraft and automotive industries.
During the pandemic, their orders dwindled and robot makers looked for new customers. They also began to be interested in small companies as buyers, explained the then Woom boss Dohm, who has since left the company, a year ago. However, with the post-pandemic upswing, customers with smaller order volumes are now having to step back into the second tier.
“Don’t base the business case on container prices”
Other circumstances have also changed. The supply chains are now working more reliably than they did during the pandemic, says Fattinger. The transport costs are still high. “But you shouldn’t just base a business case on container prices,” says Woom’s CFO.
Fattinger states that the business environment in Europe has become more uncertain. Energy prices, for example, have skyrocketed because less gas flows from Russia to the West than before the Ukraine war. Logistics can therefore also come to a standstill if the transport routes are shorter than those connecting Southeast Asia with Central Europe.
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“Companies’ risk assessments have recently shifted again,” says Jan Grumiller, professor at the University of Applied Sciences in Krems in Austria. Investments are long-term, but the pandemic, which has intensified the discussion about reshoring, was a more short- to medium-term issue for companies.
This also applies to Woom: the pandemic has fueled demand for the bicycles, and the situation has now returned to normal. This also reduces the urgency to turn production inside out.
However, one magic word from the times of the pandemic has survived: resilience. However, companies do not blindly emulate this principle by relocating production to the supposedly safe old continent. Instead, according to Grumiller, they have increased warehousing and the number of suppliers. Woom also relies on more component manufacturers today than in the past.
Reshoring remains a hot topic
Despite this, Woom has not given up on the idea of regionalizing production, also for reasons of sustainability. “The question, however, is how quickly and to what extent this should take place,” says CFO Fattinger.
Reshoring or nearshoring, on the other hand, are definitely issues when it comes to the state’s security of supply. The USA, for example, launched the “US Supply Chain Strategy” program under President Joe Biden in 2021 in order to guarantee it in selected areas.
The government is paying particular attention to semiconductors, certain metals, batteries for e-mobility and active ingredients for medicines. Here, the USA not only wants to cooperate internationally with reliable partners; It is also planned to expand domestic production and to invest in the training of the workforce.
But these are politically oriented initiatives. However, companies decide where and how to produce based mainly on economic principles. Grumiller calls this “market-driven reshoring”. “There will definitely not be a big wave here,” says the scientist.
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