{"id":22418,"date":"2017-11-14T18:01:22","date_gmt":"2017-11-14T23:01:22","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/changing-the-sole-of-adidas-an-old-school-company-steps-into-the-future\/"},"modified":"2017-11-14T18:01:22","modified_gmt":"2017-11-14T23:01:22","slug":"changing-the-sole-of-adidas-stepping-into-the-future-with-a-digital-supply-chain","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/changing-the-sole-of-adidas-stepping-into-the-future-with-a-digital-supply-chain\/","title":{"rendered":"Changing the Sole of Adidas: Stepping into the Future with a Digital Supply Chain"},"content":{"rendered":"

Move over, Zara and H&M, there\u2019s a new name in fast-fashion: Adidas.<\/p>\n

Through bold moves including 3D printed shoes produced in the US and the EU, as well as aggressive changes to its supply chain, Adidas is aiming to become the world\u2019s first \u201cfast sports\u201d company [1], vowing that 50% of its sales will be \u201cspeed-enabled\u201d by 2020 [2].<\/p>\n

Historically, shoe production takes 18 months from concept to shelf [3]. To capture the fast sports market Adidas has been rapidly reshaping its supply chain to improve its speed to market.<\/p>\n

Impetus for Digitization<\/b><\/h2>\n

Adidas has been focused on improving speed to market through a digitized supply chain since at least 2015 when the company included it as one of three strategic pillars [4]. Three market trends make the digitized supply chain a strategic imperative:<\/p>\n

(1) Inability to Respond to Consumer Trends Quickly<\/b>. Adidas\u2019s historical long lead time from concept to shelf makes it difficult to capture in-season trends and leads to product waste and discounting resulting from long lead time production decisions. The trend towards fast fashion further favors companies with rapid supply chains.<\/p>\n

(2) Customization<\/b>. Consumer trends favor unique, custom products, delivered quickly. A more flexible supply chain increases service by delivering customers a custom or small batch product quickly. [5]<\/p>\n

(2) Cost Trends<\/b>. The costs of labor across Asia are rising, making Asian production less attractive [6]. What\u2019s more, the Asian production model is conditioned on high batch sizes \u2013 typically 50,000 to 100,000 or more which makes this model incompatible with the trends towards customization [7].<\/p>\n

The long-term vision for Adidas is a flexible supply chain delivering a bespoke product. CIO Michael Voegele says, \u201cThe capabilities we\u2019re building and trying to build are geared toward lot size one.\u201d [8]<\/p>\n

The Speedfactory<\/b><\/h2>\n

Adidas\u2019s most ambitious bet involves moving production back to the western world. The company recently opened two highly automated \u201cSpeedfactories\u201d in Germany and Atlanta. These factories produce shoes with just 160 workers using 3D printed soles and other high-tech manufacturing processes. [9]<\/p>\n

http:\/\/www.youtube.com\/watch?v=FVpfVdXxcCA<\/a><\/p>\n

These Speedfactories hold the promise of lowering inventory and warehouse costs while bringing products to market faster and with lower batch sizes [10]. While the Speedfactories produce just one million shoes per year today (.5% of total production [11]) they are key to the company\u2019s long-term strategy.<\/p>\n

Other Digital Supply Chain Initiatives<\/b><\/h2>\n

In concert with its Speedfactory initiative, Adidas has taken steps to digitize its entire supply chain. For example, Adidas has reduced its time to market by implementing rapid prototyping enabled by 3D printing. A process that used to take four to six weeks and require a dozen technicians can now be done in just a day or two by employing 3D printing technology and computer simulations. [12]<\/p>\n

The company made another notable effort in Russia where it tracks inventory through in-shoe RFID chips. This inventory system allows customers to purchase online and pick up in store, or have shoes shipped directly from local stores. The move has proved popular and 70% of Adidas\u2019 sales in Russia are now through \u201cclick-and-collect\u201d sales. [13]<\/p>\n

Capturing Supply Chain Value: The Need for Consumer Engagement<\/b><\/h2>\n

The long-term promise of Adidas\u2019s supply chain \u2013 localization and personalization \u2013 will be dramatically more valuable with an engaged user base anxious to personalize their shoes. While Adidas has succeeded in releasing on-trend products recently, it needs to improve mobile and online customer engagement to capture the value of its supply chain in the longer term. If the value of its supply chain is in customization, Adidas may not be as successful pushing its products through existing channels.<\/p>\n

Perhaps recognizing this, Adidas released its first ever dedicated mobile shopping app in the US and the UK in early November [14]. To continue to gain ground on Nike, Adidas will need to create more ways for consumers to take advantage of its digitized, bespoke supply chain through new ordering systems and improved delivery capabilities.<\/p>\n

Creating a Sustainable Competitive Advantage<\/h2>\n

If Adidas has its way, one day soon running pros, sneakerheads and athleisure aficionados will be able to order a custom 3D printed shoe and have the sneakers delivered within a day or two. It\u2019s an impressive customer promise facilitated by a digitized, nimble supply chain.<\/p>\n

And yet, the very technologies Adidas is producing may threaten many of the market advantages Adidas possesses. If shoes can be produced in small batches economically, how will Adidas fend off a new wave of footwear entrepreneurs? Will the Warby Parker\u2019s of the world make inroads into athletic shoes? How can Adidas use its digitized supply chain as a competitive edge against established players like Nike or likely entrants like Amazon?<\/p>\n

(773 words)<\/p>\n","protected":false},"excerpt":{"rendered":"

Move over, Zara and H&M, there\u2019s a new name in fast-fashion: Adidas. Through bold moves including 3D printed shoes produced in the US and the EU, as well as aggressive changes to its supply chain, Adidas is aiming to become […]<\/p>\n","protected":false},"author":10129,"featured_media":22600,"comment_status":"open","ping_status":"closed","template":"","categories":[1740,3235,597,16,17],"class_list":["post-22418","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-adidas","category-digital-supply-chain","category-fast-fashion-uncategorized","category-retail","category-supply-chain","hck-taxonomy-organization-adidas","hck-taxonomy-industry-consumer-products","hck-taxonomy-country-united-states"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/rc-tom-challenge-2017\/","yoast_head":"\nChanging the Sole of Adidas: Stepping into the Future with a Digital Supply Chain - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/changing-the-sole-of-adidas-stepping-into-the-future-with-a-digital-supply-chain\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Changing the Sole of Adidas: Stepping into the Future with a Digital Supply Chain - Technology and Operations Management\" \/>\n<meta property=\"og:description\" content=\"Move over, Zara and H&M, there\u2019s a new name in fast-fashion: Adidas. 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