It’s not surprising when an exercise enthusiast describes a class, a trainer, or a piece of equipment as providing a “punishing workout.” Whether he or she uses a treadmill, resistance machinery, or a wearable electronic tracker, the punishment likely extends to those things as well. And faltering, low-quality equipment in the health-club industry is very quickly discovered—which is what drives John Fogerty, director of global sourcing and supply chain management for Precor Incorporated. The company’s bankable reputation is built on the quality of its fitness equipment and service. If products don’t work well or if orders take too long to fill, the brand will take a beating.
Precor’s sales growth over recent years suggests the brand’s promise is met: 2013 saw an 8 percent hike in sales over 2012, in part due to several new product introductions or updates that capture territory in the club and home markets. These include a line of cardio equipment with touchscreen console technology and network capability (the Experience Series); Preva networked fitness that integrates tracked, personalized workouts with Internet content; and several variations on treadmills and elliptical cross-trainers.
Such new products can bring category excitement that is welcomed by the trade and user-consumers. But long before that happens, myriad metals, plastics, and electronic components from the supply chain have to arrive at the right time and place—and meet quality specifications. Supply chain management ensures that they do, all while strict attention is given to the net costs of handling those pieces.
As the fitness industry is in a mature phase, innovation ranks up there with quality and service. “New products raise the user experience, including that of the club operators,” Fogerty says. “Our new products come with enhancements, plus better engineering and better manufacturing methods.”
Fogerty says that Precor makes a better quality product in their US manufacturing facilities than is feasibly made in China. In fact, they actually sell their American-made exercise equipment to discerning Chinese customers. “Our strategy is quality,” he says. “And that begins by partnering with high-quality suppliers. We might source some materials and components overseas, but they are rigorously audited on engineering and human rights matters. We are also a lean organization,” adds Fogerty, referring to a management method, lean kanban, that is highly regarded in manufacturing. (See sidebar on page 72.) “This includes frequent meetings and factory visits with our suppliers to keep track of how they are doing on their score cards.”
Hiccups in raw material supplies can easily derail this and any manufacturing approach. But Fogerty points out how close communications with suppliers can sometimes make up for that. An example he provides was during a global aluminum supply shortfall in the first half of 2014; to counter it, some manufacturing equipment in a vendor’s operation was adapted to create greater efficiencies. “You have to go three to four levels deep into the supply chain to understand how to root out waste.”
Precor’s base in Woodinville, Washington, near Seattle, serves as one of two major manufacturing sites for the company’s products, the second being in Greensboro, North Carolina. The decision to manufacture in the United States is driven by a number of factors, mostly based in sound financials.
“We do a make-or-buy analysis for all finished goods,” says Fogerty regarding outsourcing versus insourcing. He details how that includes looking at the economics of manufacturing overseas or at home, as well as in-house or through suppliers. There are a number of dynamics—labor costs, raw supply availability, input prices, shipping—but social values are considered as well. “We plan to achieve zero waste in manufacturing by the end of 2016,” Fogerty adds. “It’s hard to see how we’d have that kind of control in China. The environment has to be a part of the equation.”
With a staff of twenty, overseeing a $220 million expenditure operation on two coasts, and a supply chain from across the globe, how does Fogerty lead this process? “I trust people to be adults, to be professionals, and we expect compliance with all plans,” he says. But it boils down to frequent visits, frequent communications, and perhaps some degree of “giving back.” Fogerty mentors supply chain management students as well as a woman-owned business, and is a guest lecturer at the University of Washington business school. In some respects, the supply chain includes people, too.