ERP at Simplon: How It All Began

Simplon’s story begins in 1930, when Josef Hämmerle opened a bike shop in the Austrian town of Hard on the shores of Lake Constance.

This is the first in a four-part series about business management using a cloud enterprise resource planning (ERP) solution and the opportunities this creates. Here, we look back to a time when computers were unheard of and clouds were simply masses of water vapor in the sky. Read the other parts of the series:

In the 1950s, as the popularity of road bikes was rising, Hämmerle and his sons Kurt and Heinz were becoming increasingly dissatisfied with the models that manufacturers were asking them to sell. They decided to build their own bikes to incorporate their own quality and design ideas. In 1961, they founded Simplon, choosing to name the company after the Simplon Pass in the Swiss Alps partly because Swiss-made items were known for their quality.

By the end of the 1970s, the Hämmerles had produced an entire range of road bikes and established their brand in the Austrian market. They designed the bike frames themselves and third parties manufactured them. In 1981, Gerhard Zadrobilek won the Tour of Austria bike race with a Simplon bike.

Since then, the company has blossomed into a small but mighty market player that builds bikes for those people who like to push themselves — and their bikes — to the limit.

Premium products come at premium prices. “That is why our prices have to be transparent and justified,” explains Markus Geiger, director and CFO of Simplon. “Because one of the questions customers ask is ‘Why are the bikes so expensive?’”

Lightest Frame Weighs Merely 717 Grams

One of the answers is because the bikes are so light. When it comes to performance bikes, only a few of Simplon’s models have aluminum frames; almost all the others are made of carbon. The lightest one of the road bikes weighs just 717 grams. Back in 2017, Simplon was one of the first companies to bring an e-bike onto the market that weighed less than 20 kilos.

The top end of the market is growing strongly and Simplon wants to grow, too. Currently, the company builds around 12,000 bikes per year, but this number is expected to reach 30,000 in the future.

Geiger is confident that the demand is there. “And we have the resources and logistics to be able to keep up,” he says. But processes need suitable IT tools to be able to handle the changes. Simplon didn’t have those until October 2017.

But it’s not just about growing the company, it is also about being able to deal with two developments disrupting the bike market. The first is the trend — or the triumph — of e-bikes. In 2015, 10 percent of Simplon’s bikes were e-bikes and this is expected to rise to 60 percent in 2019.

It Takes More Components to Build an E-Bike

The shift to e-bikes represents huge challenges for the entire organization — for bike configuration and the logistics behind it, for bills of materials, and so on — because it takes significantly more parts to make an e-bike than a traditional bike. The company must be able to order, store, stockpile, and use these parts. Manufacturing an e-bike is also much more complex. While it takes around two hours to assemble a conventional road bike, assembling e-bikes takes around three-and-a-half to four hours. The company can only manage these changes if its processes can handle them.

The same applies for the second disruption, which is just as radical as the first: online shopping. For a long time, selling bikes on the Internet was considered virtually impossible, because they would need to be delivered in big, heavy boxes, and because not everyone wants to assemble a bike and then adjust it to be able to ride it. The aversion to selling over the Internet quickly vanished when a large German manufacturer successfully tested the process.

For Simplon, the exact set-up of a bike is extremely important because every bike is unique. This philosophy does not suit an online sales model, which is why the company decided to sell its products only through a network of roughly 350 dealers, which then set up and adjust the bikes for customers.

Simplon bikes are not just unique, they are also customizable. “Our configuration model introduces a level of complexity similar to that in the car industry,” says Geiger.

Body Scanning at 40 Dealers

The Internet is a platform especially well placed to enable bikes to be configured. Customers can customize Simplon’s bikes on its Web site, but instead of the bike being sent to the customer directly, it is delivered to a nearby dealer, who then adjusts the bike for them. And for those customers looking to make their dream bike even more unique, 40 of the dealers offer a digital body scanning service that adapts bikes to their riders.

There was no shortage of challenges for Simplon’s ERP system when, in 2016, the company began to future-proof its structures using the SAP Business ByDesign solution.

Next week, we look at ERP at Simplon before the project started and why Geiger and his colleagues chose this solution.

This story originally appeared on the German SAP News Center.
Top image via Simplon.