This is Part 2 of a talk with Geraint John, Research Vice President at Gartner, and Kevin Purser, Head of Global Supply Chain, Sourcing, and Procurement at Fitbit, on the topic of digital procurement and how Fitbit implemented LevaData's digital procurement platform. The discussion takes place at Gartner's Supply Chain Executive Conference 2018 in Phoenix. You can find Part 1 here.
Fitbit's supply chain is not unusual, according to Kevin. It's a multi-source strategy with 5 manufacturing partners and 200+ suppliers. They've got over 200+ SKUs, a number that's increasing as the company grows. They currently sell in 65 countries and they take an omnichannel approach to sales, dealing with corporate wellness at the enterprise level, with health care and insurance providers in the health and wellness space, and through eCommerce and over 55,000 retail stores. Like a lot of organizations, they face the challenge of managing costs and maintaining continuity of supply in a volatile commodity market.
Kevin provided a brief introduction to Fitbit, a health and fitness company that helps people use data to empower and inspire people to live healthier lives. They manufacture products that gather the data that people across all age groups need to make the decisions necessary to leading better lives.
Getting a Handle
Kevin arrived at Fitbit in the beginning of 2015, while the company was experiencing tremendous growth. There was an IPO on the horizon and the company was adding new, increasingly sophisticated products quickly. There was a tremendous amount of churn in the supply chain.
When Kevin joined Fitbit he took the time to asses where the company stood:
"I placed us in level two back in 2015, kind of the 2015 to 2016. We were focused on cost, and as I say, continuity of supply. We had some sources of insight, but it was really just supplier data, it was limited market data, and it was really our own enterprise data. The tools were the normal tools that most people have at their disposal, including the most powerful one in the world, Excel. Then our supplier engagement. We were doing one to three sourcing events and we were addressing, I think, greater than 60% of the spend in those events."
He began to chart a course forward. Kevin wanted to be able to maintain his current multi-source supply strategy while responding to the pressures imposed by a competitive market place. He needed leverage that would enable him to generate savings with scarce resources.
Kevin had worked with LevaData in his previous organization and recognized the value of bringing in and analyzing a wider range of data quickly. Data, not only from current sources, but also data from the community, peer performance, trends, and a wider range of market intelligence.
"The whole intent here is for us to make better decisions faster, and we do that with information, not data. We're actually taking the data, turning it into information so our money managers and our sourcing professionals can actually take action, while also considering what our commodity strategies are, what are our trade-off analysis… multisource as I talked about that earlier. It’s a big strategy for us to make sure we ensure continuity of supply. Then delivering things such as digital playbooks, which really definitely help in your negotiating process and negotiating leverage as well."
Another reason that Kevin chose LevaData was that he knew from experience that the platform would begin showing results quickly.
"I had an engagement with LevaData at a previous company, understood the speed to action that is available with LevaData. We were able to get up and running fast. We could manage our cost process initially and expanding that on to sourcing and a very rigorous RFQ process. It's really become a big, big infrastructure for us and how we move forward with digital sourcing."
Kevin also described how transformation to a digital procurement process would begin to improve other elements. He described how, often people get stuck, concerned that the quality of the data they're bring in would result in garbage in, garbage out. He explained how that's not the case. As Leva began to import Fitbit's data, they were able to spot problem areas and the data quality began to improve.
"You just need to get started and that's what we did. You can imagine. I showed you where we were in 2015. You can only imagine what our data looked like. This actually facilitated us, cleansing the data and organizing the data as we went along so that it was actually useful and not just trying to clean the data normally or just as you normally would, but actually for a purpose."
The shift allowed Fitbit to evolve its procurement capacity in other ways too. Kevin describes how the platform allowed for a retooling of the talent across his procurement teams. The shift from data collection and analysis to decision making means that more time is spent understanding and learning about a supply chain as part of a system, rather than having to understand the technical details of how to clean, gather and manage data in Excel.
"It gave me an opportunity to [...] bring on talent not only from the subject matter expertise area, but people with an engineering background, kind of a younger generation, more interested, more driven towards the technology as it comes. When we talk about the digital sourcing professional, this is really about augmenting our human intelligence. It's about making better decisions and making those decisions faster."
The transparency and access to procurement Leva afforded other functions in the organization generated returns.
"We have finance operating on the platform. They actually help manage the whole process and very intimately involved in new product introductions, driving value creation in the product lifecycle by ensuring that we're delivering products at the right gross margin at launch. That takes place 12 to 18 months before. So, we're using the platform, we're using the capabilities to be able to help manage that process as well and having it show up at product launch going forward."
We'll finish up in Part 3, where Kevin talks about what Fitbit has accomplished so far, his vision for the future, and what digital procurement can mean for you.
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