Enterprise -- Companies: ENTREPRENEURS
SUCCESS COULD BE IN THE BAG
Can a custom maker of bike knapsacks best the mass producers in efficiency?
In 1989, bicycle messenger Rob Honeycutt was slogging up the hills of San Francisco on a one-speed Univega beater when a realization hit him: "There is no long-term career in being a messenger," he recalls thinking. "I wanted to start a business." So with $89 he bought a Singer sewing machine, circa 1940, and started making bicycle messenger bags, the large, over-the-shoulder sacks that haul the bulky loads that are a messenger's stock-in-trade. An inveterate tinkerer from a family of architects, Honeycutt had made pannier bags for a cross-country bike trip, understood the messenger market, and knew there was little competition. He also knew that other people were attracted to the roomy, comfortable bags but couldn't buy them anywhere. "There was a guy making messenger bags in New York, and they were pretty crude, and a guy in San Francisco, and if you weren't a real bike messenger, he wouldn't sell you a bag," he says.
Seven years later, Honeycutt's company, Timbuk2 Designs, projects sales of about $1.4 million. Honeycutt and his partner, Brennan Mulligan, say the company is more than a bagmaker; it's an ambitious experiment in manufacturing. "Our ultimate goal is to make custom product more efficiently than mass manufacturers and to become competitive with offshore manufacturing," says President Mulligan.
And if that isn't challenge enough, Honeycutt, 36, and Mulligan, 26, want to achieve efficiency and profitability while paying their workers, "the sewing ladies," among the highest wages and best benefits in the apparel industry. So far, the company has realized several of its goals. Many bike shops say Timbuk2s are the best and most popular bags. "What makes these good bags is the construction, which is a lot tougher than the other bags, and they're waterproof," says Donovan Douglas, store manager of City Bikes in Washington. And Timbuk2 offers something no rival does: a three-panel construction that lets consumers choose from 13 colors--2,197 possible combinations. Yet the bags cost no more than mass-produced ones. Timbuk2's biggest-selling Dee Dog lists at $59.95. The comparable domestically mass-produced Cannondale Courier is $59.99.
ONE-MAN BAND. Meanwhile, Timbuk2 pays $8 to $8.25 an hour with full medical benefits. (Other apparel makers in the area pay about $6 an hour.) The company is debt-free and has gotten all its financing through friends, family, and cash flow. Still, Timbuk2 cannot yet be called an unqualified success. The principals lived in the Richmond (Calif.) warehouse until late 1994, taking a scant $6,000 in annual pay. Now, they say Timbuk2 has turned the corner: Salaries are up to $25,000.
At first, Honeycutt struggled as a one-man operation, sometimes sewing more than 100 hours a week but still unable to make the rent. He needed a business-minded partner. In 1992, he posted a flyer at a Berkeley (Calif.) business school that attracted Brennan Mulligan, who tore down the other flyers to assure he'd get the job. Despite an undergrad degree in business, Mulligan was nearly as inexperienced as Honeycutt.
Unsurprisingly, new management did not solve Timbuk2's problems. The original strategy was simple: Make more bags, make more money. Within six months of Mulligan's hiring in 1993, the company had grown to five employees. Yet with more bags came greater losses; salaries and overhead were killing them. Honeycutt was forced to fire all but Mulligan and one seamstress.
Timbuk2 wanted to do what Toyota Motor Corp. tried to do unsuccessfully with cars: mass customization, or making autos to order. It seemed workable because bags are simpler than cars. Not so. Although the company was able to rehire some staff, it remained barely profitable.
The partners fumbled along until August, 1994, when Honeycutt began experimenting with the Toyota Sewing System. He was introduced to the carmaker's method of upholstering seats when he saw a demonstration at a trade show. The scheme calls for each operator to move down a row of task-specific sewing machines instead of performing a single task and passing parts to the next operator. The method cuts labor costs because no "floor assistants" are needed to carry partially completed goods from table to table.
Inventory costs are low, too. The company buys just a week's worth of materials and ships bags daily. Suppliers agree to the small shipments because Timbuk2 buys each component from only one source. One-by-one production reduces waste, too, because mistakes can be caught along the way.
The company continues to refine the system, relying heavily on employee ideas. In 1993, it took 144 minutes to make a bag. Using automated sewing machines and employees' suggestions, that's down to 16 minutes. Mulligan believes the time can be shaved to 12 minutes, but the people doing the sewing will determine the speed. "If there is a problem, they will let us change things," says sewer Christine Liu. Mulligan says labor costs are about 16% of total costs, and he believes that can be whittled to 12%. That target could be hit now with cuts in pay and benefits, but, says Mulligan, "it's not necessary to pay dirt wages to achieve [our goal]." The company will look to automate more sewing instead.
TRADE-INS. The company's sales growth, up to about 40,000 bags this year, from 19,000 last year, has been won without much conventional marketing. Timbuk2 counts on the messengers' cachet. "They are hip, young, wacky nuts on bikes, and you can use that to market to the mainstream consumer," says Honeycutt. The company recently sponsored the Bicycle Messenger World Championships, which brought 600 racers from 25 countries, and even supplies bags as prizes for "alley cats"--races in which messengers speed through simulated deliveries for prizes.
The messengers aren't just billboards for Timbuk2; they are product testers as well. When a messenger company owner complained the bags weren't waterproof, within days Timbuk2 began lining them with vinyl truck tarp. Tattered bags are gladly traded for new ones--it gives the company a chance to study how bags fail.
The bags' popularity is spreading beyond messengers. GQ and Details magazines have been supplied bags for upcoming fashion features, and funky clothing stores, such as the Urban Outfitters chain, now carry Timbuk2.
The next step, says recently hired sales manager Chris Roels, is to get a marketing budget and improve service. Roels, whose service ethic was developed as a Nordstrom men's shoe department manager, phones the top 100 clients monthly. "If we spoil these people rotten, we are going to get the business," said Roels. Timbuk2 may branch out into other products. It has a prototype backpack and is considering making youth market clothes. If the experiment fails, Honeycutt consoles himself that he is prepared for a less stressful backup career: "Riding a bike was so much easier."By Roy Furchgott in BaltimoreReturn to top