Peloton’s outsourcing praise comes with a warning

Peloton announced in July its intention to exit all in-house manufacturing. Instead, the company wants to expand its relationship with Rexon Industrial, a Taiwanese manufacturer.

READ MORE: Peloton will close Tonic Fitness upon exit from manufacturing

Fictiv CEO and co-founder Dave Evans said Peloton’s move would achieve three key goals: reduce costs, increase flexibility and simplify its overall supply chain through its contractor, Rexon Industrial.

“Companies like Peloton are realizing the risks and burdens of building, operating and maintaining their manufacturing infrastructure, which puts go-to-market goals at stake,” Evans said.

According to Evans, the decision will allow Peloton to focus on designing and developing new products to meet the needs of its customers.

However, Evans said he is aware of the disruptions and is combating them with dual and triple sourcing strategies, such as acquiring trusted manufacturing partners in geographies other than Taiwan. This would create a shorter supply chain that would not be as vulnerable to the logistical safeguards seen in overseas manufacturing.

Evans also emphasized digitization.

“They need to ensure they have visibility into production status and stock levels for all components at all times,” Evans said. “This is often a challenge with traditional contractors who operate fragmented networks of Tier 2 and Tier 3 providers on legacy systems, or no systems at all.”

While Evans praised Peloton’s decision to outsource manufacturing, he cautioned against losing control. In-house manufacturing offers maximum control, but involves high operating costs and minimal flexibility.

“At Fictiv, we recommend our clients own their most critical manufacturing operations and outsource the rest,” Evans said. “This way you get the best of both worlds to reduce risk, lower costs and increase speed to market.”

Fitiv is a digital manufacturing ecosystem that delivers parts. Based in 2013, Fictiv manufactured over 19 million parts for start-ups and large corporations.

David Evansfictional

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