What is logistics & supply chain of Fitbit

Logistics and Supply Chain Analysis

Lectured by
Dr. Pairach Phiboonrungroj

Reported by
Tanaporn Janapiraganit 595 1209 005
Saowalak Tankam 595 1209 010
Muhammad Syukur 595 1209 260

MBA PROGRAM IN LOGISTICS AND SUPPLY CHAIN MANAGEMENT

SCHOOL OF MANAGEMENT
MAE FAH LUANG UNIVERSITY
CHIANG RAI, THAILAND
2016

1
 TABLE OF CONTENT

COVER ………………………………………………………………………………… 1

TABLE OF CONTENT ………………………………………………………………. 2

PREFACE ……………………………………………………………………………… 3

Fitbit Profile …………………………………………………………………………….. 4

Why-How-What ………………………………………………………………………... 5

Business Model Canvas ……………………………………………………………… 6

Customer Segment …………………………………………………….…… 9

Value Propositions ………………………………………………………….. 9

Channels ……………………………………………………………………… 9

Customer Relationship ………………………………………………………. 10

Revenue Stream ………………………………………………………………. 10

Key Partners …………………………………………………………………... 10

Key Activities …………………………………………………………………. 10

Key Resources ………………………………………………………………… 11

Cost Structure …………………………………………………………………. 11

Value Matrix ………………………………………………….........……………………. 11

Market Qualifier ……………………………………………………............... 11

Quality ………………………………………………………………………… 11

Service ………………………………………………………………………… 12

Cost ……………………………………………………………………………. 12

Lead Time …………………………………………………………………….. 12

Order Winner ………………………………………………………………….. 12

Value Stream Mapping …....................................................................................... 14

Bibliography ……………………………………………………………………………... 16

2
 PREFACE

Fitbit is an American company making activity trackers. There are many models of
activity trackers of making by this company – around ten models. In this report, our group
analysed from the beginning of Fitbit company using three questions, why how what and
we also thought about the firm’s structure in business model canvas. We chose Fitbit
Charge HR to analyse the value matrix, market qualifiers, and order winner – what is made
Fitbit Charge HR win the activity tracker market. To see the whole picture of logistics and
supply chain, we made a Value Stream Mapping and estimated time of production based
on one of our member working experience. Thank you our lecturer, Dr.Pairach
Phiboonrungroj for giving the knowledge and recommending us useful advice.

3
Fitbit Profile

In 2007, Fitbit founders, James Park and Eric Friedman, saw the amazing detectors
then they adapt this amazing option to life by choosing fitness to be the main target to
produce something advantage for healthy people. The mission of Fitbit is to empower and
inspire to live happy, strong and healthy.
Headquarter is located in San Fransisco, California. Fitbit is growing fast. In eight
years after its establishment, it announced for IPO and officially traded its shares with the
symbol “FIT” on June 18, 2015. Its beginning trading in NYSE list was filled with US$358
million.

1 2 1 James Park
2 Eric Friedman
3 Fitbit’s office in San Francisco
4 Reception and lobby in San Francisco Office
5 Fitbit activity tracker products

3 4

4
WHY-HOW-WHAT

WHY, WHAT, and HOW questions are what successful companies use to define the
brand position. Our group firstly knew these questions when we watched a TEDx video
talking by Simon Sinek in our Logistics and Supply Chain System class.
In Picture 1, WHY is in the centre of the circle. Next to WHY is HOW and WHAT
respectively. So, if we start with the first question, WHY means that we have to think inside
of WHY to WHAT. To what extends, the first question is why the company exists. The
second question is how to make the product or service unique and desirable. So, the result
of WHY and HOW become the last question - WHAT - what should a company do?
Our group uses these three questions to explain Fitbit Company which made activity
trackers and sold them worldwide. In this case, we look up founders’ vision (James Park
and Eric Friedman) when they first run the business. We founded that the founders saw the
potential for using sensors and wireless technology and wanted to apply them with
exercising in small, wearable devices. As for HOW, we think that the founders desired to
make the devices easy to use and not strike the eyes for daily wear. As a result, Park and
Friedman launched a company named Fitbit activity trackers which make people can trace
their activity all time from wake up until sleep (see Picture 1).

Picture 1 WHY, HOW, WHAT framework

In our opinion, it is because nowadays more and more people want to be healthy
and know their effective workout, so how can people know they maximise performance
when exercise. That’s why people want an activity tracker to track and measure their
activity they do in everyday life such as the distance they walked or run, calories burned, in-
zone heart rate etc. The value of activity tracker market goes higher in this period as there
are many brands compete in the market.

5
Business Model Canvas

Business Model Canvas is a basic business model suited for start-up business
which can draw a business plan in one page of paper. This model has nine important boxes
compose of Customer Segments, Value Propositions, Channels, Customer Relationships,
Key Activities, Key Resources, Key Partners, Cost Structure, and Revenue Streams which is
useful for business owner to see the overall picture (seeing Picture 2).

Source: http://www.businessmodelgeneration.com/downloads/business_model_canvas_poster.pdf

Picture 2 the Business Model Canvas

To understand more, nine boxes or questions the business owner should answer
have details below.
1. Customer Segments – What type of market of target customer
2. Value Proposition – The way to deliver value to target customers
3. Channels – Channel that business reach the customers
4. Customer Relationships – The relationship between business and customers
5. Revenue Streams – Ways of incoming of company come from
6. Key Resources – The management of resources to support all business activities
7. Key Activities – The action that make business success
8. Key Partners – People that company work with
9. Cost Structure – cost to manage business

6
 In our Logistics and Supply Chain System class, all students brainstormed and used
sticky note to stick into a duplicative canvas model of Fitbit Company in two parts -
Customer Segments and Value Proposition (see Picture 3). Next class we finished all parts
of the model (see Picture 4). After class our group discussed about the model – what were
proper answers for each box – and added or changed some details (see Picture 5)

Picture 3 Customer Segments and Value Proposition

7
 Picture 4 Details of the Model

Picture 5 After some amendments of the details.

8
 Our group categorises details of each section as below.

Customer segment
Before starting a business, an entrepreneur has to know who the customer target
and what is the type of them to know what to do next. Customer segment has 5 important
groups, which are:

• Mass Market : General customer group

• Niche Market : Small group of customer which has the unique interest.
• Segmented : Group of customer that have specific interest but wider than
Niche market.
• Diversified : Market that need variety of products
• Multi-sided Markets : Market that have 2 or more groups of customer with
different purposes in the same product
Customer segment of Fitbit is the Niche market because their target is a group of
people who love healthy life and exercise.

Value propositions
After knowing the customer segment, the entrepreneur has to make the value
proposition of product to touch customer heart and to make customer feel and ready to get
the product. Value proposition has different kinds, so entrepreneur has to choose which one
suits the company customer segment and solve what product or service that company has
to produce.

• Newness • Performance • Customisation

• Getting job done • Design • Brand/status
• Price • Cost reduction • Risk reduction
• Accessibility • Convenience/usability

Values of Fitbit are design and convenience because Fitbit won design and health &
wellness awards. It has lower price than other brands of health activity detector.

Channels
After knowing what to sell and how to make products or services to touch
customer’s hearts, an entrepreneur has to find ways to access customers such as
transportation, service, evaluation, awareness and purchase. Fitbit accesses its customers
by online marketing [2] because the customer segment is Niche market which mean market
is not big as general mass market and customers sparse around the world. The main media
advertisement may not access the real customer target group.

9
 Customer relationship
Customer relationship is how business relates to customers. Generally, the
relationship leads to Customer acquisition, customer retention and boosting sales.
Business can relate with customer by many ways such as
• Personal assistance • Dedicated personal assistance
• Self-service • Automated services
• Communities • Co-creation

Fitbit related with customer as the personal assistance and communities because
it’s the personal use product and Fitbit has website to support customer’s community to
share ideas to use and makes user enjoy using more because healthy life has to have
motivation to eat clean and exercise.

Revenue stream
Revenue stream is the income stream which entrepreneur has to manage and know
where income comes from it by understanding pricing mechanisms and analysing. Revenue
stream can be separated into 2 ways

1. Transaction Revenues – one-time customer payment

2. Recurring Revenues – on going payment or post-purchase payment

Incomes come from many ways such as asset sale, fee (usage, subscription,
license, and brokerage) and advertisement. Fitbit is the big organisation the revenue
stream comes from both transaction and recurring revenue.

Key partners
There are many key partners of Fitbit in our opinion. As in production line, the
suppliers such as electronic manufactures from Thailand, rubber band factory from China or
even the assembling factory, which are outsource parties located in China, are considered
as key partners of production. Our group think that shipping companies or 3PL (third
logistics provider) also play roles in key resources in transportation sector too. Because
without 3PL, finished activity trackers cannot be shipped from the assembling factory in
China to 8 head-distributing cities around the world - Shanghai, Hong Kong, Seoul, Tokyo,
New Dehli, Minsk, and Boston.

Key activities
We divided Fitbit’s key activities into three main activities: assembling,
transportation, and marketing. As production process, the main process that Fitbit does is
to assembly all components like detectors, monitors, and rubber band (elastomer material).
Transportation is also one of key activities distributing finished goods to dealers by 3PL.
These activities are activities which done by the outsource factories or the third logistics
providers. In our opinion, Fitbit did without so much as doing production. The only one
thing that Fitbit do by itself is marketing. It hired volleyball superstar, cyclist, marathon
champion, fitness trainer, actress, dancer, and etc. in age range of teenagers to midlife, to
be brand ambassadors. This might affect and motivates customers’ behaviour to purchase
activity trackers because they saw this ambassadors existing in real life.

10
 Key resources
There are three key resources that involve with Fitbit company: electronic monitors,
wristband (elastomer material), and human and intellectual. As for production line,
electronic monitors and rubber bands are important resources of products. The basic
electronic monitors include optical heart rate monitor, 3-axis accelerometer, altimeter, and
vibration motor. The wristbands of Fitbit are made of an elastomer material which not
consists of latex and similar to many sports watches. The Fitbit Force clasps are made with
a surgical-grade stainless steel, which is commonly used in watches, jewellery and other
products in contact with the skin (source: http://venturebeat.com/2014/01/14/fitbit-force-
irritation/). One of the most important resources of Fitbit is human and intellectual. Fitbit has
a good team of planning, designing, and marketing as Fitbit was recognised as the most
innovative company in 2014 and 2016, the fastest growing private company in America,
and won many awards such as design and engineering, product design, and editor’s
choice. All of this awards and recognitions are from the founders and crews’ intellectual.

Cost structure
In our opinion, there are three cost structures of Fitbit. Certainly, there are usual cost
of operating a business such as salaries, office rent to run a business, and hiring outsource
assembly factories. Moreover, the innovative products having short-life cycle have to be
developed all the time, so spending R&D on new products is also important. As there are
many players in activity trackers market, promotional sales have to be used, like hiring
brand ambassadors to create brand appearance and motivate customers’ purchasing.

Value matrix
Doing order winner, we have to know who is the target customer and plan for how to
get this target costumer by making market qualifier and order winner’s and concern about
Quality of product, service, cost of product, lead time.

Market qualifier
Market qualifier is the minimum spec requirement of product which mean what is
the standard of product that you want customer to get. For Fitbit it is the health activities
detector that contact with user’s skin. So, it should has these options
- Precise tracking
- Warranty 1 year (innovative product)
- Everyday use (comfortable to use)
- Not striking the eyes

Quality
Quality of product is the important part that encourage customer to buy products.
Fitbit qualities are precise tracking, durable body, and good material comparing to its price.

11
 Service
Service is what making customers satisfied. Fitbit has 1-2 years’ warranty (up to the
area customers purchase), and Fitbit community website for user to share ideas of healthy
life and work out. Moreover, Fitbit website also teach user how to use, clean, and sync the
product with smart phone as the after sell service.

Cost
Cost of product is something the customers have to pay for product which is
covering all cost of product supply chain. Fitbit cost comes from Warranty, transportation,
taxes, transaction cost and production. So cost is different in different countries by shipping
and taxes.

Lead time
Period of time from start to end that has to have the reference time point. Such as
final customer is the reference point lead time should start from the second the customer
knows product and end at the time that customer pay for it. If consider by full chain of
supply chain, reference point would start from the day that customer orders product to time
that customer get product but this customer can be final customers or retailers.
There are two ways to buy Fitbit:

1. Buy directly at general IT store which customer can get Fitbit in 1-30
minutes
2. Buy from Online shop which customers have to for shipping 1-15 days
after order depends on distance.

Total lead time of Fitbit Supply chain is around 47 days from customer’s order to
customer’s hands.

Order winner
Fitbit won best design innovative and health & wellness category awards which
guarantee that Fitbit design is suited for activities you do to calculate heart rate, calories,
number of step walk, distance and show you the result by press only one button which is
very easy to use during self-moving. Picture 6 shows the display comparison of Fitbit and
other popular health activity detector brands which have nearly the same property as Fitbit
Charge HR such as Garmin Vivosmart HR+, Polar A360 Fitness Tracker, and MIO Alpha2
Heart Rate Sport Watch. Our group has compared these four activity tracker brands as in
Table 1.

12
 Fitbit Garmin Mio Alpha2 Polar A360
Charge HR Vivosmart Heart Rate Fitness
HR+ Sport Tracker
Watch

Picture 6 Products

Table 1 Comparing four activity tracker brands

Fitbit Charge HR MIO Alpha 2 Garmin Polar A360

Heart Rate Sport Vivosmart HR+ Fitness Tracker
Watch

Heart Rate
detector

Heart Rate range

24 hrs. Tracking

Sleep Quality

Number of step
walk

Stairs step

Distance

Calories

Speed measure

GPS

Time

Call Alert

Email Alert

Social Media
Alert

Wireless Sync
with application ,
computer

Touch screen

13
 Fitbit Charge HR MIO Alpha 2 Garmin Polar A360
Heart Rate Sport Vivosmart HR+ Fitness Tracker
Watch

Water resistant (just sweat, 30 m 5 ATM WR30

splash)

Language Show only Show only

symbols & symbols & Thai English
number number

Battery (day) 5 1 5 14

Weight (grams) 7

Warranty (year) 1 1 2

Price (baht) 6,250 5,890 8,590 8,990

Value stream mapping

Value stream mapping is the flow chart that uses for see all processes of supply
chain to lean by manage inventory and minimise wastes. For Fitbit, it is an innovative
mass production product so, life time is short because it’s always new version come up
after 1-6 months. So the manufacturing has to be fast and high volume of production.
So the evaluation of Fitbit is around 1 month and mass production is 2-4 months and
after that demand will suddenly drop. 1 batch of production is around 5000 pcs which
takes 7 days to finish. During manufactured, it always causes some waste by human
error or machines. So, they have to rework and reject works which cause cost. About
the production sites of Fitbit, Thailand is the big electronic device and polymer
(synthesis and non-synthesis) manufacturer so Fitbit raw material parts are from
Thailand and assembled in China. Fitbit markets are in 8 main cities around the world;
Hong Kong, Shanghai, Seoul, Tokyo, New Delhi, Minsk, Dublin and Boston. About the
communication, nowadays business world is using E-mail to communicate with
partners, suppliers, customers, between internal processes even in line production. As
you can see the VSM that can show the number of defect, rework, shipping lead time,
communication lead time and how inventory flows which we can use the information to
forecast and improve inventory and time to send products to customers.

14
The estimate Value Stream Mapping (VSM) of Fitbit

15
 Bibliography

About Fitbit. (2016). [Online]. Available https://www.fitbit.com/th/about

Avarin: Fitbit Charge HR. (2016). [Online]. Available

http://www.avarinshop.com/product/fitbit-charge-hr/

Avarin: MIO Alpha 2 Heart Rate Sport Watch. (2016). [Online]. Available
http://www.avarinshop.com/product/mio-alpha-2-heart-rate-sport-watch/

Avarin: Garmin Vivosmart HR+. (2016). [Online]. Available

http://www.avarinshop.com/product/garmin-vivosmart-hr-2/

Avarin: Polar A360 Fitness Tracker. (2016). [Online]. Available

http://www.avarinshop.com/product/polar-a360-fitness-tracker/

Buzz keeping you up to date on the most recent happenings. (2016). [Online]. Available
https://www.fitbit.com/buzz

Fitbit Charge. (2016). [Online]. Available https://www.fitbit.com/th/charge

Fitbit Charge HR: Every beat counts. (2016). [Online]. Available

https://www.fitbit.com/th/chargehr

Fitbit Communities: Charge HR Looking for answer?. (2016). [Online]. Available

https://community.fitbit.com/t5/Charge-HR/bd-p/chargeHR

Fitbit health & fitness trackers. (2016). [Online]. Available http://www.pcworld.co.uk/gbuk/

fitbit-279-commercial.html

Go inside Fitbit's bright San Francisco offices. (2016). [Online]. Available http://
www.businessinsider.com/fitbit-new-san-francisco-offices-2015-3

How Fitbit make money (2016). [Online]. Available http://revenuesandprofits.com/how-fitbit-

makes-money/

The story of Fitbit: How a wooden box became a $4 billion company. (2016). [Online].
Available http://www.wareable.com/fitbit/youre-fitbit-and-you-know-it-how-a-
wooden-box-became-a-dollar-4-billion-company

16