My friend Arnold Kamler, Chairman and CEO of Kent International,Inc., a high-volume, mass-market bike supplier to Walmart, Toy’s R Us, Target and other retailers, sees what lies ahead. Kamler is a third-generation bike man (his son Scott is generation four) whose grandfather Avram emigrated from Poland 100 years ago, landing on New York City’s the Lower East Side not far from the Manhattan Bridge.
Avram, like so many refugees from pogroms and hardship, started small, repairing bikes in a little shop, but his son, Phillip, grew the business, moved it to New Jersey and built his company when the U.S. had hundreds of competing bicycle producers.
Arnold Kamler, however, inherited quite a different challenge. “When I joined the business in 1972, there were eight American bicycle manufacturers and about 40 bicycle importers. All eight American companies that were manufacturing either went bankrupt or just gave up and closed," Kamler recalls. "Of the forty importers at that time, only Kent and Raleigh still remain, and both of those companies are financially sound."
“But by 1979, our bicycles that were coming from Taiwan were showing pressures of extreme upward price movement, and China was far from ready," he adds. "So we began to assemble and then manufacture bicycles in the U.S.”
Kamler has been through good times, consolidation, off shoring, and now he’s looking homeward. With Kent’s new plant in Manning, S.C., Kamler’s approach to his workforce—all of whom he knows by name—and automation, with new machinery arriving to take over various aspects of the nearly forgotten bike-making process, is worth watching because it represents major re-shoring work that is designed to rebuild the U.S. bike industry.
But as many candidates for re-shoring discover, you can’t go home again, at least not to the exact point and time when everything stopped. The machines are gone—tooling moved offshore along with manufacturing intelligence. Traditional manufacturing centers that trained the workforce died out, gradually supplanted by non-union workers in the American New South.
Fortunately there is real help. Kamler, for example, had the kind of government assist getting started that suppliers in other states envy. “I had expressed to the people in the South Carolina Commerce Department that we couldn’t find a building with natural gas,” he recalls. “They connected with Governor Haley, and a few hours later she called me.” Even though his preferred location had none, the Governor guaranteed that Kent’s energy needs, as well as other physical and training requirements, would be filled. And they were.
"It’s exciting to see a leading manufacturer like Kent Bicycles choose South Carolina to manufacture bicycles, a mainstay of an American childhood."
-- Nikki Haley, Governor, South Carolina
Kent Bicycles made headlines with its plans to produce 500,000 bikes annually in its new South Carolina factory in Manning. Production began in the fall of 2014; at full capacity in 2016, Kent expects to have added 175 jobs in assembly and parts production.
“We are proud of bringing production to South Carolina,” Kamler said. “Our company moved all manufacturing overseas in 1990 because it was so much more cost-effective. When Walmart made its commitment to U.S. manufacturing last year, it opened our eyes to restarting some manufacturing here. We attended Walmart’s August 2014 manufacturing summit and were able to focus our efforts quickly and make things happen with South Carolina.”
“It’s exciting to see a leading manufacturer like Kent Bicycles choose South Carolina to manufacture bicycles, a mainstay of an American childhood," South Carolina Gov. Nikki Haley said. "We celebrate the company’s decision to create at least 175 new jobs and produce a half a million bicycles annually in Clarendon County, and we are pleased that Walmart’s commitment to domestic manufacturing is accelerating real progress on the issue.”
It’s About Volume
The business proposition, according to Mr. Kamler, is twofold:
1. Bringing pieces of the operation back to the U.S., plus all which that entails;
2. Maintaining a steep growth curve. The bicycle manufacturing process will never revert to his grandfather Avram’s hands-on approach of a century ago. Neither will we see the crowded marketplace sourced by smaller, partly manual, partly automated processes of his father’s manufacturing business fifty years ago. And the business that off-shored twenty years ago will not mirror China’s production methods.
Kent's Challenge, Kamler's Vision
Kamler has come to realize that one of his challenges is to invent a new process, starting with the assembly of imported parts, and then moving into areas where U.S. manufacturers have lost or forgotten the recipe, as with aluminum rim assembly. Localizing a supplier network that will guarantee the manufacturing and delivery performance that Kent requires will be an ongoing challenge.
What Kamler is doing in bicycle manufacturing exactly parallels what transplant automotive producers engineered in the 70s and 80s. When Honda executives flew over possible locations in Ohio searching for the best place to build an assembly plant, they were thinking ahead from aluminum forging and motorcycle builds, to the high-volume, multi-product automotive lines developed in Marysville. They knew they had to start small to get big. It was a learning process.
Everyone, including the executives, took a turn working on the assembly line, and everyone developed a common language and problem-solving approach—The Honda Way—that grounded the shared learning experience from those early years.
Initially all vehicles were assembled in Marysville from imported parts, but for a variety of reasons—strategic objectives, the cost-management formula and government regulations—management wanted the entire vehicle—frame, tires, electronics, seat assemblies, etc.—produced domestically. Getting to almost 100% U.S. content, however, was a big purchasing challenge, one that required rigorous upfront planning and control, and few surprises, because a line-down event at that time cost $26,000 per minute.
High Volumes from Day One
But a major difference between Kent's and Honda's U.S. starting points is volume. Kamler knows that any production he does will come in from the start at high-volumes because that is his market.
“We do business with most of the majors, but Walmart sells half the bikes sold in this country, Kamler explains. "When I go into a Walmart store, I’ll see many many bicycles; they’ll have 100 different models. I’ll see maybe 25 at Target. Walmart loves bicycles—to them it’s apple pie and the Fourth of July."
He continues: “Overall , it’s about economy of scale. This year we will import 2.8 million Kent bikes into the U.S. My Dad, Phillip Kamler, who passed away twelve years ago, he’d be pretty excited.
Kamler, a student of the Chinese economy and factory life, has insights into the quick-and-easy way to open a new factory. “In the beginning, when a new factory opened in China, [its] management would go to another existing bicycle plant, overpay and steal 100 workers from the other factory," he says. "That made for ease of entry.” he said. “But at this start-up, we don’t have that luxury—even aside from the morality of it—because there has been no mass production of bikes in the U.S. since Huffy shuttered its Ohio and California factories."
Both Huffy operations were unionized. “The combination of union plants [with] a small plant start-up in Mississippi didn’t work out for Huffy; they went right to China—too much too fast," Kamler says. "But our company has been in this for a long time, while Huffy went bankrupt."
He continues: "Although Huffy has since reorganized, the ownership is mostly Chinese shareholders. They just rushed, and it didn’t work for them.”
Kent's 100 Years of Experience
Kent’s history spans a century in the bicycle industry, including over fifty-seven years since the 1958 founding of Kent on Kent Street in Parsippany, N.J. “We were a wholesaler of bicycles and bicycle parts. We survived because my father was bookkeeper and shipping clerk," Kamlin says.
“In 1958, a trading company that represented a factory in Holland approached Dad [asking] if we were interested in buying from them and re-selling in the US.," Kamler says. "Well, in 1958 that was unpatriotic, but Dad wanted to grow, so he decided to take a chance."
"[At the time] the business was not doing so well, the market was small and limited to the New York area. By going to import, the business would be freed of all restrictions," he continues. "And that’s how the bike business started: very modestly. We built up slowly. When I joined in 1972, sales were about $4 million—which is roughly one week’s sales today—about 100,000 units. It was rough. Back then, there were 40 bicycle importers in business and eight American factories, all eight of which are gone now."
When I joined in 1972... It was rough. ... there were 40 bicycle importers in business and eight American factories, all eight of which are gone now."
— Arnold Kamler, Chairman & CEO, Kent International, Inc.
Kamler recalls that he never intended to go into the family bicycle business with his Dad, as it promised conflict. “In college I majored in marketing and advertising,” he said. “And I really didn’t have the best relationship with my father—it was strained, so I knew it was going to be a struggle. I was never going to work for the family business. I wanted to do market research, but Dad begged me to try it for two years. We had some rough times starting out. Early in my first week, Dad asked me write a business letter. ‘Didn’t they teach you how to write a business letter at American University?’ he asked. Well, what can I say? It was the Sixties, there were protests going on in D.C. Nixon, Vietnam, other distractions."
By 1978, most of Kent's bikes were coming from Taiwan, but the cost there started to skyrocket. "But Dad had always wanted to manufacture bikes," Kamler recalls. "I protested, ‘I don’t know anything about manufacturing bicycles!‘ so he arranged for me to visit three bicycle assembly factories in Japan."
He continues: "You see, from 1968 to 1975, we had purchased from Japan—‘leave with handshake,’ Dad always said—and they were more than happy to show us what they were doing. It was more of an assembly plant in which parts from other companies came together for assembly. I looked at it and thought ‘it’s not that crazy, there’s no painting, no welding,’ but all other functions were going on there. It was a small factory producing maybe 600 to 800 bikes per day with 60 people to do assembly work. And, hey, I was born in 1950—I was young!"
Then the bike world changed again, as Kamler’s Dad had predicted.
One day you will be in a country having a very nice dinner, enjoying caviar and fine wine in an elegant hotel. And when that happens, you need to find another country!"
— Phillip Kamler, founder, Kent International, Inc.
“One of the stories my father always told me was that he had purchased over the years from twenty-five different countries," Kamler says. "He said, ‘One day you will be in a country having a very nice dinner, enjoying caviar and fine wine in an elegant hotel. And when that happens, you need to find another country!’"
“And I remembered being in Taiwan, drinking fine wine in an expensive hotel, eating chateaubriand, and Dad’s warning: 'I hear you, Dad, I hear you.'”
The year 1978 was a turning point. By the time the Kamlers saw the Taiwan currency upshift and resulting cost increases signaling another change, they were ready. “We rented 30,000 square feet in a building in West Orange, N.J., formerly owned by Thomas Edison, next to the museum. There we tried assembly work," Kamler says.
After three years, the Kamlers were pleased with their experiment. The next move to a 100,000 square-foot facility in Kearny, N.J., funded further expansion. Next, they purchased a former bike factory in Brooklyn and started doing steel fabrication, painting and welding. “We bought the company and all the equipment, painting, welding, etc., and by 1981 Kent was doing 250,000 bikes per year in the U.S. Kent was producing its own frames, forks, handlebars and chain covers in Brooklyn; all other parts were imported from Asia and Europe.
From Offshoring to Reshoring
Think of it. As late as 1991, only 25 years ago, when production ceased, the U.S. still had the ability to manufacture bike components. Kent tried reducing costs by 1% per year, but costs in China were dropping by 5% per year. “The prices there were just so low it made no economic sense to continue, so in 1991 we stopped production, sold off the equipment, shut the doors," Kamler recalls. "We were never, ever going to manufacture again in the U.S. That was 23 years ago, our very final decision.”
And then along came… Walmart.
“But things change. Fast forward to 2012. Business was fine, booming in fact, when a buyer from Walmart called me," Kamler recounts. "[They said]: ‘We want you to meet with some of our people. We’ve got these giant IDCs, and we’d like you to consider bringing bikes back from China, put them together and deliver them fully assembled.’"
Instead of bringing in imported bikes, this would be a complete knockdown shipment from China. Kent would completely assemble the bikes—not box them—and when complete, the bikes would be ready to ride.
“That was the idea; they would arrange some special trucks to pick up and deliver to the Walmart stores fully assembled," Kamler says. "But as nice as it sounds, logistically it just wasn’t going to work. And we took a hard look at that for several months. The country is pretty big, and they were talking about supplying five big IDCs."
He continues: "But the important part is, that idea got me thinking about assembly and manufacturing. I kept thinking about it. Meanwhile the import business was growing every year. I looked at our bikes in stores and thought, ‘Yeah, our bikes look great.’ (Make a note—try never to fall in love with our own bicycles)."
“We kept thinking about it, and then along came Walmart in March of 2013, with their supplier meeting and the push for the 'Made in America' initiative," Kamler says. "The idea was to talk strategy with two or three of their top suppliers to bring jobs back to America."
The Walmart buyer asked whether Kent would be interested in meeting with South Carolina Governor Nikki Haley. Kamler, describing himself as "very much in the middle, politically," said he'd be honored to meet with her.
“The next day, we had a meeting with Greg Hall, at the time Walmart's Sr. VP in charge of the Made-in-USA initiative," Kamler says. The governor, who attended the meeting, advised Kent: "‘If you are considering production in the US, let us show you the incentive packages,'" according to Kamler.
“Toward the end of that short meeting, Governor Haley turned to the bike buyer and said, ‘If Arnold builds this factory, you’re going to buy the bikes, right?’"
To which Kamler recalls saying: “Governor, it doesn’t exactly work like that, but I’m sure if we build this factory, Walmart will support us." Then, Kamler recalls, the governor wrote down her cell phone number, saying "If you want to call or text me, anytime, here’s my number." He adds: "I’ve never had a governor on my contact list!"
So, Kamler promised to go look, but he also planned to check out other sites. One of his friends, a Senior VP at Deloitte, put Kamler in touch with people who ran a division that helped businesses review possible sites and negotiate the best deals. Kent looked at Georgia and Florida. Kamler knew they needed to be reasonably close to a major port, because initially, all parts had to be imported, but Kamler also wanted to be able to export. The new plant had to be on the East Coast.
Kamler’s team met with government officials from Georgia as well. The deals with Georgia and South Carolina were about the same, but the tiebreaker was direct contact with Governor Haley.
Room to grow
Finding the right building was Kent’s next big challenge. Although Kamler’s team saw many buildings around the state, none of them had everything they wanted. “We couldn’t find the right building and the right workforce," Kamler explains. "Remember, we were trying to compete with China, especially in light of Chinese wages rising."
He continues: "There was one building—it was just perfect, but it was too big. We were looking for 80,000 to 100,000 square feet on 5 to 10 acres, but this one was 204,000 square feet on 52 acres, more than enough room to grow. We began to study it—I remember noting that this particular building had no natural gas line, which I knew we would need for welding and painting processes.”
A young South Carolina Department of Commerce official, Warren Darby, accompanied the visitors. “Darby called the governor’s assistant, Rachel Card, who contacted the governor and explained the situation," Kamler says. "Five hours later, when I was having dinner, my cell rang: ‘Mr. Kamler, this is Governor Haley’s assistant. Would you be able to speak with the Governor?’"
Kamler picked up his phone and stepped outside. It was Governor Haley asking if he would move his company into the building if she could get natural gas to it. To which Kamler replied: “How could I say 'no'?”
In the end, Kent paid less than $2 million for the building, then sunk more than $3 million in renovations (to-date). “But it’s still the right building," Kamler declares. "We love the workers in South Carolina. They call me Mr. Arnold, and they work hard. Sixty-five percent are women. You know, most of our workers were already employed, but in really rough jobs. A lot of people came from a chicken processing plant twenty miles away—48 degrees inside, brutal smells, plucking and processing chickens."
Kamler is proud of his employees, as well as the plant they work in. Both represent big investments for Kent. “Working conditions are very good," he says. "We spent a lot of money to air-condition the building—we promised to keep the temperature no higher than 75 [degrees], so it’s very workable. We had settled on a starting salary of $12 per hour, plus benefits, including a very generous health-care package, pretty good in a depressed area.”
The Manning site did not meet every spec, however. Although Kamler’s goal was to locate no more than fifty miles from the Port of Charleston, Manning is actually eighty miles northwest. “But I just liked the work ethic," Kamler says. "Coming from New Jersey, I have to say we were surprised. We thought the Southern workers would be slow and lazy. And we didn’t want to be too close to BMW. We knew we were competing with China, but not BMW too!"
Kent's Made-in-America Strategic Plan
Kent’s strategic growth plan for its new Made-in-America site is aggressive. The goal is to assemble 175,000 bikes in 2015, then to double that in 2016 to 350,000, and get to 500,000 in 2017.
Kamler emphasizes, however, that the idea is “not to steal our own business."
"We want to 'steal' from other importers," Kamler declares. "We want to continue to grow, and we want the growth fueled by bikes produced in the U.S.”
We want to continue to grow, and we want the growth fueled by bikes produced in the U.S."
— Arnold Kamler, Chairman & CEO, Kent International, Inc.
Re-shoring a redefined production process in itself is a big enough challenge, but Kamler sees an open road ahead. “The U.S. bike market is 16 million per year, of which 12 million are sold in the big-box stores like Toys R Us and Target, so we know there is plenty of room to grow.“
The Bicycle Manufacturer's Winning Strategy
“The bicycle business is high volume with a small profit margin. Keep overhead low, be smart and willing to work on a small profit margin, because the volume is large, and the business is not high risk for obsolescence.
Unlike the toy and gadget business today that is always churning, bikes have been around for hundreds of years. When people get on a bike they say ‘Wow, this is fun!’ It takes you back to being a kid, and it’s freedom, real freedom.
But there are challenges to being in the bike business:
1. Getting adults back on a bike: If we just get adults back on a bike for an hour, they inevitably become more serious riders.
2. Getting kids off their cell phones: The big challenge in the kid’s bike market is that they don’t want to get off their phones! It’s an addiction–they’re attached and fear being unconnected. Texts coming in at night? Friends photos? When you sleep with your phone, as many teens do, your friends are always there! And that’s hard to beat."
Arnold Kamler, Chairman & CEO
With new machines and trained workers in place, Kamler believes that Kent’s expansion plans are not only realistic, but they fit the workplace shift he is seeing now in the U.S., in great contrast to what is happening in China. In fact, Kent’s bike factory in China has experienced the same workforce and wage shifts chronicled in the book Factory Girl.
What Kamler sees is that Chinese manufacturing jobs are losing their respectability: “Chinese girls and children are led to believe that they owe their parents, and as a way to repay they leave the small farm towns for the cities. But now, working in a factory is beneath their dignity. Five years ago, when our China factory needed fifty workers, we would post a sign in the cafeteria, and the next day 500 people showed up at 6 AM! Today however, factory turnover is 10% or 25% per month because people job hop. Or they might take a pay cut for a city job, where working conditions are nicer.
Kamler understands that China’s workforce shift will mean big implications for Kent in the not-too-distant future. When an opportunity came to restructure the company’s stock ownership, Kamler took it. In 2010, Kamler sold a minority share of the company to his major supplier in China. “They’ve been terrific partner—so they own shares and, therefore, own part of the South Carolina factory.“
Long-term, in addition to training more workers, the CEO wants to improve process efficiency. “Long-term we feel that if we do this right, we will need fewer man-hours to build a bike," Kamler explains. "Right now, we know the process is too manual, so we’ll be looking to improve the automation level of our factory. Each year, we want to make a bike with fewer man-hours."
He continues: "Welding, for instance, is an opportunity area. Even in China, most welding is done by robot, and the cost of robots has dropped. Painting is another opportunity area where we are looking at a similar solution; where we would once have had 30 people doing paint and touch-up, with automation that number would drop to 12. Yes, it’s real expensive, but I don’t care, because I know the initial investment will take us out 15 to 20 years."
The Next Generation
In 2010, as Chairman and CEO, Kamler was joined by his younger son Scott, whom he persuaded to sign on as Kent’s fourth generation. The younger Kamler is now president, second in line at an up-and-running factory with big expansion plans. When the Manning, S.C., plant opened October 15, 2014, with 48 workers, including management, the executive team foresaw 175 to 200 workers and more machinery by 2017.
Ironically, twenty years ago, at the height of the outsourcing craze, Kent’s current building was occupied by MTD, an Ohio-based riding-lawn-mower operation that consolidated back to Ohio, shuttering the Manning plant and losing 800 workers. MTD also owned the Columbia Bicycle Company of Westfield, Mass., shuttered about 30 years ago.
There is risk and opportunity and, Kamler believes, advantage in being the first to reshore bicycle production. “Should the situation in China deteriorate faster, my competitors will ask themselves, ‘Now what do we do?’ But we’ve got an insurance policy, we’ve got flexibility now because the worst thing you can do is nothing," Kamler asserts. "If we’re wrong, it won’t kill us. I love it, although I’ve definitely had some sleepless nights. But if I weren’t nervous about what we’re doing, there would be no point in doing it."
He concludes: "I said to my wife one night, ‘I feel really good about this, but I have to admit I am a little bit nervous,' and her response was, ‘Arnold, if you weren’t nervous, I’d be nervous!’’