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Long recognized by its signature three stripes, Adidas is considered a gold standard around the globe for athleticwear, athleisure, and fashionable casual apparel. Founded in Germany in 1949, the company now has seven regional headquarters throughout the Northern hemisphere and works with suppliers in more than 50 countries worldwide.
Its future-forward approach to a vast and complex supply chain has helped set the sportswear giant apart. Below, we dive into a few of the key features of the Adidas supply chain.
Environmental and Social Responsibility
While Adidas outsources the majority of its production, it is committed to working with industry partners in an effort to mitigate the toll of the manufacturing process.
As the company noted in its 2016 sustainability report, “Our approach follows a three-pillar model built on humanitarian aid, close collaboration with public authorities, external partners and volunteers as well as employee integration. This approach is [complemented] by support in the countries … we source from.”
Adidas takes a direct and systematic approach to managing relationships with its vast network of suppliers. To ensure compliance, consistency, and quality while meeting key performance objectives, Adidas has established a set of “Workplace Standards,” an internal set of social and environmental protocols for all suppliers in the chain.
In 2019, Adidas scored a high ranking from the anti-human-slavery charity, Know The Chain. These rankings aim to provide the public with valuable information on popular fashion businesses, analyzing their practices based on seven key metrics: commitment and governance, purchasing practices, listening to workers’ viewpoints, recruitment practices, traceability and risk assessment, supply chain monitoring, and corrective policies for violations of human rights laws.
Adidas was one of two brands able to provide proof that employees below the first tier of its supply chain had used their grievance systems in 2018.
This year, Adidas — along with H&M and Ikea — led 77 businesses recognized for their efforts in sustainable cotton sourcing. The Sustainable Cotton Ranking specifically aims its attention on businesses working with more than 10,000 metrics tons of cotton lint a year, as they have the greatest control over cotton supply chains worldwide.
Optimizing the Supply Chain
Manufacturing sportswear is a complex process that for years necessitated the intersection and logistical oversight of numerous players across disparate regions. In recent years, though, Adidas has made moves to automate its processes under one roof. Two key initiatives are in place to implement this plan:
1. Tapping into Technology and Digitization
By manufacturing on an on-demand basis, Adidas can deliver what consumers want, when they want it. This is accomplished through:
Speedfactory
All Adidas suppliers ship components directly to Speedfactory, where products are assembled using primarily 3D printing and robotics, increasing efficiency as they move closer to mass-customization goals. Originally built in Germany, satellite Speedfactory facilities moved to Asia in 2019, where the infrastructure to support the volume of production was already in place.
As consumers increasingly demand personalized products and services to meet their specific needs, achieving mass customization at scale could be a great boon for Adidas.
Click and Collect
Responding to expectations for a lightning-fast consumer experience and purchasing journey, Adidas has implemented a multidimensional purchasing program. This enables consumers to choose the way they prefer to shop for whichever product they desire, wherever it is stored, and however it’s delivered.
This reduces excesses and waste in production and inventory, as well as decreases storage and shipping costs — all while increasing revenue.
2. Optimizing the Customer Experience
A three-pronged set of parameters works to ensure customer satisfaction and inspire brand loyalty:
- Speedy delivery — The company aims to provide customers with the newest, highest-quality products, exactly when they want them.
- Location desirability — Adidas is focused on being present in urban markets, where many values and trends are shaped.
- Collaboration and innovation — Also called “open sourcing,” Adidas welcomes creative input and participation of all members in its global community, including athletes, consumers, and partners.
Learning from the Adidas Supply Chain Model
The efficiency brought about by Speedfactory may very well inspire competitors to take a page from the Adidas book. By speeding up production time, Adidas can respond to consumer demand faster than ever.
“Through shortened development and production lead times, we’ve provided select customers with hyper-relevant product for moments that matter,” said Martin Shankland, a member of Adidas’ executive board.
“We are now able to couple these learnings with other advancements made with our suppliers, leveraging the totality of these technologies to be more flexible and economic while simultaneously expanding the range of products available.”
Shifting to this more automated model has revolutionized the relationship between supply and demand; the ability to customize production reduces storage, transportation, and delivery costs, shrinking the company’s carbon footprint.
Adidas and Nike
Adidas has a strong corporate culture centering on innovation and collaboration. It maintains a strategic focus on a simplified manufacturing process, working with long-term suppliers.
Nike maintains a lean supply chain, relying almost exclusively on independent contractors to source its raw materials in 14 countries around the world. By manufacturing products in the countries where they’re sourced, the company minimizes the need to negotiate with multiple vendors or oversee production.
Fully committed to meeting the “buy now, wear now” preferences of today’s consumers, both companies are predicted to have 20% production taking place in automated factories by 2023.
It’s also expected that most of these facilities will be proprietary, meaning the two athleticwear giants will be less reliant on outside manufacturing.
Weathering the COVID-19 Storm
As with just about every other industry, the COVID-19 pandemic disrupted Adidas’ supply chain, with suppliers and retailers alike being forced to pause operations around the world. The company’s main priority, in addition to remaining financially viable and protecting its employees’ health, has been to ensure the supply chain will survive lockdowns and other containment measures.
“Many of our partners have been around for more than ten years, actually, 85% of our partners,” CEO Kasper Rorsted said. “We have a deep responsibility for the extended supply chain to ensure that they will be around when the crisis goes away.”
In recent weeks, Adidas closed offices, moving some 40,000 employees to remote work. As for the suppliers, the company has made changes to manage inventory issues ahead of time.
“We also placed orders that we have actually postponed to later quarters or later months, and we actually canceled some orders proactively as well,” Rorsted said. “And all the cancellations have been in close alignment with our suppliers.”
Image Credit: Adidas / www.adidas.com
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