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about 5 months ago

Grand Canyon: Cyclist visits direct-to-consumer giant Canyon

By PETER STUART, Cyclist Magazine, February 2018

‘I  think the world has to change,’ says Roman Arnold, founder and CEO of Canyon. ‘I have been a retailer and I have been a dealer. I know this sport and the industry very well, and I want to make cycling better for the consumer.’

Arnold is speaking about criticism that his company’s online-only model has hurt smaller retailers by cutting them out of the loop. Canyon, which has built a reputation for making WorldTour-standard bikes at competitive prices, may seem like any other bike brand, but there’s a crucial difference. It sells directly from the manufacturer to the consumer, bypassing the usual supply chain from manufacturer to distributor to retailer to customer.

For consumers in the age of e-commerce, the difference between the two models could almost go unnoticed, but here at Canyon’s vast headquarters in Koblenz it’s clear just how complicated and challenging the task has been.

‘On average, we ship 400 to 500 bikes per day, but we can ship 1,200 bikes at full capacity,’ says Martin Wald, Canyon’s chief production officer. ‘During the Tour de France we hit that number.’

Wald has a history in automotive production, where he spent years at General Motors overseeing production lines across 30 manufacturing assembly plants. Perhaps that’s one reason why Canyon feels less like a bike factory and more like a laser-focused facility of mass production.

The company is spread over a handful of monolithic warehouses, with the creative staff housed in stylish design suites that sit above the showroom at Canyon’s enormous whitewashed main building. ‘We have a team of 50 product managers, engineers and designers,’ Arnold explains. The real showpiece of the Koblenz headquarters, however, is the industrial production line at Canyon’s nearby assembly plant, a 10-minute drive away.

CHECKS AND MEASURES

Many European brands not only have their frames fabricated in the Far East, but their bike assembly is done there as well. Canyon, by contrast, assembles all its bikes here in this vast facility, and while it may be less efficient than simply shipping complete bikes from the Far East, the process is designed to ensure there are no nasty surprises when the customer opens the box.

In 2016, Canyon came to international attention when it suffered a major breakdown to its computer systems while migrating to a new IT platform, and consequently the company was unable to link orders to consumers despite having a warehouse full of bikes. It caused chaos and ended with a lot of unhappy customers, so today each bike goes through a series of rigorous checks, even to the point of recording the torque of every bolt.

‘We measure certain critical torques that we must achieve,’ says Wald, pointing to an enormous digital torque wrench being used by the assembly team. ‘This is an error-proofing device. This wrench has a Bluetooth connection, and it records the vehicle ID number of this individual bike. So if a customer buys the bike and there’s a problem on a critical torque we can verify what torque we set here.’

This tracking and traceability is part of what Wald describes as ‘automotive-level error-proofing’. Every component has a QR code, and every bike can be linked to each component and each worker involved with it. Even cardboard bike boxes are tuned to the specific requirements of each bike, to ensure no problems on arrival.

‘We have five boxes, in different sizes,’ Wald says. ‘Each bike is set in this specific gear so the rear derailleur doesn’t get damaged from impacts to the box,’ he tells me, pointing to the positioning of the rear mech, which sits comfortably 1cm off the box’s wall.

Everything within the factory is clinical and precise. Today, signs around the building warn the workers of Cyclist’s visit and tell them not to let our presence affect their work cycle.

In the warehousing section Wald points to a QR code on one of the bike boxes: ‘This is where we won the German award for logistic innovation. Here we scan the box and load it onto the trailer so we can move it into storage.

‘As soon as the technician scans it he can connect it with the build and know what shipment it came with.

‘We know the weight and dimensions of the box and the computer finds the best location in the warehouse by size and also when we need it next. If we don’t need it for a long time it goes further and higher in the stacks, so what we need tomorrow is more accessible. That’s all built into the system.’

Could Canyon go one step further and roboticise the entire process? ‘That will be the next step, maybe,’ says Wald. ‘But there has to be a good reason to do it because it takes away a lot of flexibility.

‘That’s a discussion we keep having – how much automation do we need?’

As he talks, a forklift travels along a magnetic guidance strip and then disappears among a tower of boxes that looks like something from the final scene from Raiders Of The Lost Ark. 

QUALITY CONTROL

Canyon’s determination to double-check every aspect of the bike’s build and delivery extends out beyond its German facility to the Asian factories where its frames are made.

‘We can’t influence what carbon fibre suppliers like Mitsubishi are doing,’ says Gordon Koenen, Canyon’s head of quality. ‘We can just take the best fibres we need, then it’s up to us to work with our production partners to make a good design and then produce it as quickly as possible.’

Once the frames and components are built, Canyon examines each one using an x-ray scanner to check for flaws.

‘In terms of what we do with our test labs and CT scanner, no other manufacturer works like we do. When we see quality levels have stabilised we drop down our own testing to 10% of each component, but in Asia they keep going for 100%.’

Not only does this process check the quality of components, but it also checks the quality of the checks themselves. ‘Each fork has a serial number, which we scan when we inspect the fork.

‘That means the partner in Asia that’s done the same inspection can upload the same angle picture and share it with us. So we do our inspection here and inspect their picture to see if the checks are being done correctly.’

The whole process is slick, meticulous and advanced – a far cry from the company’s beginnings in the back of a big blue trailer.

GAMBLE ON SUCCESS

‘You never have a clear picture of the future, but I had a plan 20 years ago that someday I wanted to have a global company,’ says Arnold as he thinks back to his early days.i

‘As a youth he was a keen racer, but the world of pro cycling was a little out of his grasp, especially considering his towering 6ft 5in stature. Instead he joined his father selling bike components from a blue trailer, which now sits by the door of the Canyon showroom, a physical relic from Canyon’s early days.

‘Of course I wanted to see my bikes someday at the Tour de France, and now we have achieved that,’ Arnold says with a smile. It wasn’t the easiest journey, though.

‘First we sponsored Team Unibet, which was a contract that lasted only half a year,’ Arnold says. Unibet was a betting company but after the team raced at the Tour of Flanders the ASO refused to invite them to races on French soil because of French laws on advertising gambling.

‘It wasn’t fair as the team had been licensed, but then it disappeared and two years later we started with Omega-Pharma Lotto.’

That first taste of WorldTour pressure taught Canyon about the demands at the top of the sport. ‘The team complained about our time-trial bike,’ Arnold recalls.

‘We were new to the business and the team DS said, “I want you to change the bike. Just copy the Trek bike!” But of course we didn’t want to copy something, we wanted to understand the aerodynamics behind it.’

The consequence was the development of the Speedmax TT bike, now considered one of the fastest on the market.

It reveals one of the unique benefits of Canyon’s business model. The company doesn’t need to consider the retail viability of each product across thousands of stores, so it can produce items that might only be sold in small quantities.

It gives flexibility and the opportunity to develop innovative products.

If there’s a threat to Canyon’s model, it could be the possibility of being beaten at its own game by other e-commerce giants such as Wiggle-CRC, many of whom are investing in their own bike and component brands.

NO SOUR GRAPES

‘You know, I was born in a small wine-making village,’ Arnold muses, in a roundabout response to that suggestion.

‘I would say Wiggle, Bike-24, Chain Reaction are like the biggest retailers for wine. But we have our own vineyard,’ he chuckles.

‘We are manufacturers and I would say none of these guys are really into manufacturing. When you go to our factory, everything you see there is in place because we made the decision that we want to be a bike manufacturer.’

In which case, perhaps that’s where Canyon’s biggest challenge will come from. Rather than e-commerce companies building bikes, the threat will be big-brand manufacturers beginning to juggle direct-to-consumer savings with the conventional retail chain.

Bringing us back to our first conversation of the day, it potentially leaves the small retailers with a troubling future.

‘There are still some bookstores here in Koblenz,’ Arnold says, once again addressing the issue from a tangent. ‘But 20 years ago there were 20 or 30 bookstores here. Now there are two. Now they’re doing things differently.

‘They bring the authors in, they do what they can to foster the book society here in Koblenz, and they are good for the culture here. In the same way, I think in the end we will bring business to the small retailers and in the end we will foster a passion for cycling.’

It’s plain that Arnold’s passion for cycling, and for selling bikes, is undimished even after 17 years of painstakingly building the Canyon brand.

It has come a long way from its blue trailer, and is showing no signs of slowing down any time soon.

BIKE HOSPITAL

Canyon’s own CT scanner offers a medical diagnosis of carbon fibre components

Tucked away at the back of Canyon’s vast assembly plant in Koblenz is a tiny carbon fibre hospital, where the company has its own CT scanner to improve quality control.

‘If you have a handmade process you need to show the process is stable otherwise you need to inspect 100% of the time,’ says Gordon Koenen, Canyon’s head of quality.

‘The CT scanner uses high-resolution x-ray imaging to display the inside of carbon fibre components. ‘It’s much stronger than a hospital x-ray,’ Koenen says.

These scans help to prove the effectiveness of Canyon’s production partners in the Far East with in-depth analysis of each carbon fibre component. ‘The main things we focus on here are wall thickness, delamination and wrinkles.’

Customers can also use the scanner. ‘If you crash your bike we’ll scan it to look for fractures. Then either you get a clear report from us or we tell you to stop riding,’ Koenen says. ‘Last year we did 65 scans.’

Surprisingly, the service isn’t exclusive to Canyon customers. There is a price, of course: ‘For now, we charge €300 to scan a frameset,’ Koenen says, although there is a silver lining.

‘But if we find something and you buy a new bike from us then this service is free.’

ROMAN'S EMPIRE

‘When we talk about consumer-direct, my company has been consumer-direct for more than 30 years. We started consumer-direct sales with a trailer, and this idea remains with us,’ says Roman Arnold.

The trailer was his father’s, which he took to races to sell components to racers directly.

Later the family opened a bike shop, Radsport, and started their first bike brand, Radical. The first Canyon bike appeared in 1996, and in 2001 Arnold had the company incorporated as Canyon Bicycles GmbH. The rest is history.

Article credit: Cyclist / Dennis Publishing Ltd 2018.