CASE STUDY Trek: Building Better Bikes through Organizational Buying
“Let me tell you a little bit about the history of Trek,”
says Mark Joslyn, vice president of human resources at
Trek Bicycle Corporation. “It’s
a fantastic story,” he continues
Trek Video Case proudly. “It’s a story about a
kerin.tv/cr7e/v5-3 business that started in re-
sponse to a market opportu-
nity.” That opportunity was to build bicycles with the
highest-quality frames. In fact, Trek’s mission was
simple: “Build the best bikes in the world.” To do this
Trek needed to find the best raw materials from the best
vendors. Michael Leighton, a Trek product manager,
explains, “Our relationship with our vendors is incred-
ibly important, and one of our recipes for success!”
THE COMPANY
Trek Bicycle was founded in 1976 by Richard Burke
and Bevill Hogg. With just five employees they began
manufacturing bicycles in a Wisconsin barn. From the
beginning they targeted the high-quality, prestige
segment of the bicycle market, using only the best ma-
terials and components for their bicycles. The first year
they manufactured 900 custom-made bicycles, which
sold quickly. Soon, Trek exceeded its manufacturing
capacity. It built a new 26,000-square-foot factory and
corporate headquarters to help meet growing demand.
Trek’s focus on quality meant that it was very sensi-
tive to the materials used to manufacture the bicycles.
The first models, for example, used hand-brazed steel
for the frames. Then, borrowing ideas from the aero-
space industry, Trek soon began making frames out of
bonded aluminum. Following on the success of its alu-
minum bicycles, Trek began manufacturing bicycles
out of carbon fiber. The idea was to be “at the front of
technology,” explains Joslyn.
The company also expanded its product line. Its first
bikes were designed to compete directly with Japanese
and Italian bicycles and included road racing models. In
1983 Trek manufactured its first mountain bike. In 1990
Trek developed a new category of bicycle—called a
multitrack—that combined the speed of road bikes with
the ruggedness of mountain bikes. The company also
began manufacturing children’s bikes, tandem bikes,
BMX bikes, and models used by police departments
and the U.S. Secret Service. In addition, it added a line
of cycling apparel called Trek Wear and cycling acces-
sories such as helmets. Recently, Trek also undertook an
Eco Design initiative to build bicycles and parts that are
“green” in terms of the environmental impact of manu-
facturing them, how long they last, and how they can be
recycled. To accommodate these production demands,
Trek expanded its facilities two more times.
As Trek’s popularity increased, it began to expand
outside of the United States. For example, the com-
pany acquired a Swiss bicycle company called Villiger
and the oldest bicycle company in Germany, Diamant.
It also expanded into China, opening two stores and
signing deals with 20 Chinese distributors.
Today, Trek is one of the leading manufacturers of
bicycles and cycling products, with more than $800 mil-
lion in sales and 2,000 employees. Trek’s products are
now marketed through 1,700 dealers in North America
and wholly owned subsidiaries in seven countries and
through distributors in 90 other countries. Its brands in-
clude Trek, Gary Fisher, and Bontrager. As a global
company, Trek’s mission has evolved also, and today the
mission is to “help the world use the bicycle as a simple
solution to complex problems.” Trek employees believe
that the bicycle is the most efficient form of human
transportation and that it can combat climate change,
ease urban congestion, and build human fitness. Their
motto: “We believe in bikes.” Mark Joslyn explains:
In the world today we are faced with a number of chal-
lenges. We are faced with congestion, issues with mobility,
© Jean Christophe Bott/Keystone/AP Images
issues with the environment, and quite frankly, issues with
health. We believe that the bicycle is a simple solution to
all of those things. We are clearly an alternative to other
forms of transportation and that’s evident in the way that
people are embracing cycling not just for recreation but
also for transportation. And more and more, particularly in
the United States, we are seeing people move to the bike as
a way to get around and get to the places they need to ulti-
mately get their life done.
ORGANIZATIONAL BUYING AT TREK
Trek’s success at accomplishing its mission is the re-
sult of many important business practices, including
its organizational buying process. The process begins
when managers specify types of materials such as car-
bon fiber, component parts such as wheels and shift-
ers, and finishing materials such as paint and decals
needed to produce a Trek product. In addition, they
specify quality requirements, sizing standards, and
likely delivery schedules. According to Leighton,
once the requirements are known, the next step is to
“go to our buying center and say ‘can you help us find
this piece?’”
The buying center is the group of individuals who
are responsible for finding the best suppliers and ven-
dors for the organization’s purchases. At Trek the buy-
ing center consists of a purchasing manager, buyers
who identify domestic and international sources of ma-
terials and components, and representatives from re-
search and development, production, and quality
control. The communication between the product man-
agers and the buying center is important. “I work very
closely with our buying centers to ensure that we’re
partnering with vendors who can supply reliable qual-
ity, and they are actually the ones who, with our quality
control team, go in and say ‘yes this vendor is building
product to the quality that meets Trek’s standards,’ and
they also negotiate the pricing. Our buying center do-
mestically is a relatively small team of people and they
are focused on specific components.”
When potential suppliers are identified, they are
evaluated on four criteria—quality, delivery capabili-
ties, price, and environmental impact of their produc-
tion process. This allows Trek to compare alternative
suppliers and to select the best match for Trek and its
customers. Once a business is selected as a Trek sup-
plier, it is continuously evaluated on elements of the
four criteria. For example, current suppliers might re-
ceive scores on the number of defects in a large quan-
tity of supplies, whether just-in-time orders made
their deadlines, if target prices were maintained, and
if recycled packaging was used. At Trek the tool that
is used to record information about potential and ex-
isting suppliers is called a “white paper.” Michael
Leighton describes how this works: “Our buying cen-
ter is tasked with developing what we call white pa-
pers. It’s a sheet that managers can look at that shows
issues and benefits related to working with these peo-
ple.” Every effort is made to develop long-term rela-
tionships with suppliers so that they become partners
with Trek. These partnerships mean that Trek’s suc-
cess also contributes to the partner’s success.
Trek’s product managers and the buying center are
involved in three types of organizational purchases.
First, new buys are purchases that are made for the
first time. Second, modified rebuys involve changing
some aspect of a previously ordered product. Finally,
straight rebuys are reorders of existing products from
the list of acceptable suppliers. Leighton offers ex-
amples of each type of purchase at Trek:
So, [for] a new buy, we work with our buying centers to
find new products, something we’ve never done before
whether it’s a new saddle with a new material or a new
technology that goes into the frame that damps vibration
or gives a better ride. Another case might be electric
bikes—maybe we are putting a motor in a bike, that’s a
new thing, so our buying center will help us go find
those vendors. A modified rebuy is basically a saddle
with a little bit different material but we are sharing
some components of it, so the existing components of
the saddle [are the same] but the cover is new, so it’s a
little bit different, but it’s just the evolution of the prod-
uct. A straight rebuy is looking at our strategic vision for
the component further on down the line where we are
just buying the same component and the volume goes
up. We look at how can we make this a better business;
can we save some money or can we make it more worth
our while to keep buying the same product rather than
buying something new.
While each of the types of purchases may occur fre-
quently at Trek, the criteria that are used to select or
evaluate a vendor may vary by the type of purchase
and the type of product, making the buying process a
dynamic challenge for managers.
ECO BUYING AND THE FUTURE
AT TREK
One of Trek’s criteria for evaluating existing and po-
tential vendors is their environmental impact. Joslyn
says it well: “We evaluate our vendors on many crite-
ria including, increasingly, the elements that we
would consider to be the ‘green’ part” of their offer-
ing. For example, Trek recently selected a supplier
that (1) owned a quarry for extracting material,
(2) used its own manufacturing facilities, and (3) used
natural gas instead of coal in its production process.
This was appealing to Trek because it suggested that
the supplier had a “thorough understanding” of the
impact of the product on the environment from start
to finish.
Trek’s organizational buying reflects the growing
importance of its “Eco” perspective. Its bikes are be-
coming “smarter” as it adds electric-assist compo-
nents to help them become a practical transportation
alternative. Its bikes are also becoming “greener” as
more low-impact materials and components are used
and as packaging size and weight are reduced. Trek is
also addressing the issue of recycling by building the
bikes to last longer, using its dealers to help recycle
tires and tubes, and funding a nonprofit organization
called Dream Bikes to teach youth to fix and repair
donated bikes.
In addition to changing bikes and the way it makes
them, Trek faces several other challenges as it strives
to improve its organizational buying process. For ex-
ample, the growing number of suppliers and vendors
necessitates constant, coordinated, and real-time com-
munication to ensure that all components are avail-
able when they are needed. In addition, changes in
consumer interests and economic conditions mean
that Trek must anticipate fluctuations in demand and
make appropriate changes in order sizes and delivery
dates. As Mark Joslyn explains, “Everything we do all
the time can and should be improved. So the search
for ideas inside of our business and outside of our
business, always looking for ways that we can im-
prove and bring new technology and new solutions to
the marketplace, is just a core of who we are.”23
Questions
1 What is the role of the buying center at Trek? Who
is likely to comprise the buying center in the deci-
sion to select a new supplier at Trek?
2 What selection criteria does Trek utilize when it se-
lects a new supplier or evaluates an existing supplier?
3 How has Trek’s interest in the environmental im-
pact of its business influenced its organizational
buying process?
4 Provide an example of each of the three buying
situations—straight rebuy, modified rebuy, and
new buy—at Trek.