Cyclermate Ltd. Part 1
Historical background
In 1988, Lewis Llewellyn and Dai Armstrong were made redundant as a result of the closure of their town’s steel works in south Wales. Both had been employed by the firm for more than 20 years. Lewis had worked his way up from apprentice to be chief mill engineer, and Dai had progressed from “office boy” to a senior marketing post. The men belonged to the local cycle touring club, and through this had become close friends. As the prospects for continued local employment were poor, they decided to use their savings to set up a bicycle manufacturing business – an obvious choice, given their shared interest, and combined expertise.
The product they selected was a “traditional” upright cycle, following a design typical of the 1940’s and 1950’s. They believed that there would be a strong “niche” market for such a product, given the upsurge in interest in cycling, and increasing consumer interest in “retro” styles.
Working in Lewis’s garage, they built their first prototype. Dai persuaded a local cycle shop to put this on show. Within week they had two orders, and the business was launched.
By the end of 1990, the business had grown to such an extent that they were unable to meet demand. Taking advantage of the relatively low prices of commercial and industrial property, they purchased a disused 15,000 square feet warehouse with an included 2,000 square feet of office accommodation for £240,000. The buildings were big for their needs but they were optimistic about growth and expansion. The business was moved into this new space, and three employees were taken on to assist in production, packing, administration and selling.
Over the next fifteen years, the business continued to expand. Demand was strong, despite little marketing. Occasional small adverts placed in national newspapers stimulated mail order sales, and Dai continued to be successful in persuading small cycle shops in Wales and in England to take one or two machines for display, or at least to keep a stock of brochures. The high quality of the hand-made product, and word-of-mouth reputation seemed to be enough to maintain sales.
By 2010, however, the business is in trouble. Prices have been reduced to maintain sales, but demand continues to fall. There are increasing numbers of complaints about quality and faults in the product. One customer is even threatening to sue after an accident purportedly caused by an incorrectly assembled front brake. A recent visit by a health and safety advisor after a minor accident in the factory (a potential customer was hospitalised after falling over a loose cable) has resulted in a requirement to implement a series of changes, only some of which had so far been made. Costs are rising, and the bank manager has expressed concern about the overdraft.
Production
The cycles are made in the open former warehouse. To the untrained eye, the process looks to be somewhat shambolic, but Dai insists that there is a clear order to everything. Dai himself still makes all the frames, using the original jigs constructed in his garage all those years ago. Special steel tube stock is cut to size using an old but automated tube cutting saw and an ancient but effective tube bending machine. He used to be able to make eight frames a day, but is finding it hard to keep up this level of production, both because of the physical demands of the task, and because of his other duties as factory manager and business director. He has frequently discussed the merits of a robotic flash butt welding machine with his colleagues, but they always conclude that they could not justify the investment risk. Fortunately for him, if not for the business, reduced sales have meant that frame construction is not a constraint at the moment.
Maldwyn Jones, also a former steel worker, paints frames as and when required. As the standard model of cycle is always painted black, Maldwyn can paint the frames in batches, usually once or twice a week. He generally also paints batches of the mudguards and chain guards at the same time. Complete frames are spray painted in a corner of the space, in a booth partitioned by plastic sheeting. Until recently a “traditional” cellulose spray technology was used, but Dai hoped to get a better and more durable finish by changing to a modern “two-pack” automotive paint which involves careful paint mixing, rapid spraying, and then baking in a low heat oven. When it works well, this paint system has provided excellent results, but a number of frames have had to be scrapped because of paint quality problems. There are also some concerns that the elderly compressor and extraction equipment will not adequately protect against the dangers of highly toxic paint materials. Dai is now wondering if it might be worth changing yet again to a highly efficient electrostatic powder spraying technique, but this would involve considerable capital investment. The present process is limited by the oven capacity, to 25 frames at a time, although this is not a problem at the moment with relatively slack demand. When he is not painting, Maldwyn helps in other areas of the factory. Although Maldwyn is not a director of the Company, he is seen by Dai and Lewis as a senior member of the team, and often consulted on management and production matters.
Painted frames are moved to the assembly area, which is central to the factory space. Assembly is a complex process, which takes two to three hours for one person. The two assemblers, Janice Jones (Maldwyn’s daughter) and Ffred Gregory often have to work overtime to ensure that orders are met on time. Fred, who is 18 years old, is fairly new to the process, and training him has further slowed production recently.
Completed cycles are tested in the yard (usually by Fred), before being partially disassembled and packaged for dispatch. Packaging is undertaken by anyone who has spare time. When he is not travelling, Dai will often help out, although Maldwyn, who mostly has time for packing, complains that Dai makes a very poor job of it.
Wheels, mudguards, chain guards, stays and other necessary hardware are manufactured in parallel with the frames. Wheel manufacture is a highly skilled, time consuming task. Idris Pugh, the wheelwright, was recruited from a local cycle repair shop that closed some years ago. Idris is a perfectionist, whose wheels are always absolutely true, and never the cause for complaint. He is now in his seventies, however, and not in the best of health – a cause for concern, as the only other person with the necessary skill is Dai, and he is not always available. On occasions, the firm has commissioned a cycle shop in Cardiff to build the wheels for it; these are of reasonable quality and are always delivered quickly, although the direct cost is somewhat higher than the materials and components used by Idris.
Mudguards and chain guards are cut and pressed in batches alongside the wheel-making jig. Fairly heavy machinery is used to cut the sheet steel to pattern and then fold and press it into shape. A small amount of brazing and riveting is also necessary to attach brackets to guards. Emlyn Morgan, also a former steel worker, undertakes this work, creating batches of components when the assemblers run out. Emlyn’s background means that he also has the skills to undertake all of the factory maintenance, and he can turn his hand to steel pressing, painting or assembly when required.
Most of the smaller high value components used in production (bearings, levers, cables, lights, etc..) are stored in a locked warehouse cage near to the production area. Larger inventory items, such as sheet steel and frame tubing are kept in racks on one wall of the factory. There is a rudimentary card based stock control system, but Janice and Ffred usually notice when stocks of components are running low, and tell the office staff. “Stockouts” are fairly common, however, and this can disrupt production considerably. A recent shortage of wheel spokes, for example, left Emlyn with nothing to do, and resulted in a build up of incomplete cycles in the factory.
The only other employees are two part-time workers; Ianto Prichard works weekday mornings, as “odd-job” man and cleaner in the factory, and Gladys Wells cleans the office twice a week for an hour or so.
Administration
The office is run by Frieda Schlock, with the help of Gwyneth Morgan (Emlyn’s wife). Frieda has a strong grasp of all aspects of the business, and deals effectively with invoicing, credit control, disbursement, and the bookkeeping system. The handling of wages and salaries is managed using a software package provided by the bank. Gwyneth works on a part-time basis, and deals with internal and external enquiries, data entry, and other routine tasks. She has recently been put in charge of purchasing, in the hope that this will avoid disruption from stockouts; she is not clear, however, just what constitutes a low level of inventory for many items, so has significantly increased re-order levels on the card system, “just to be sure”.
Management and Corporate Structure
Cyclermate Ltd has three shareholders, Lewis Llewellyn, Dai Armstrong and Linda Llewellyn. Shares are held equally between the three shareholders. Linda Llewellyn was Lewis’s wife, but they are now divorced. Although she took no part in the running of the business, she invested a legacy from a family member, and was given shares in return. Since the divorce she has been pressing Lewis for return of her money; more recently she has, perhaps under professional advice, argued that she should be given one third of the value of the business. Lewis has yet to respond to this demand. No dividends have been paid recently, a matter adding cause to her complaints.
A former colleague of Dai’s, Geraint Williams, agreed to invest his part of his redundancy settlement by way of a long-term loan to the business.
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