{"id":22641,"date":"2017-11-15T12:38:08","date_gmt":"2017-11-15T17:38:08","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/how-supply-chain-improvements-are-enabling-growth-at-adidas\/"},"modified":"2017-11-15T12:38:08","modified_gmt":"2017-11-15T17:38:08","slug":"how-supply-chain-improvements-are-enabling-growth-at-adidas","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/how-supply-chain-improvements-are-enabling-growth-at-adidas\/","title":{"rendered":"How Supply Chain Improvements are Enabling Growth At Adidas"},"content":{"rendered":"

Some of my fondest memories from my childhood are going shoe shopping with my dad. \u00a0My biggest decision was which shoe I liked best in the store that day. \u00a0It is no longer this simple. \u00a0For example, \u201crecent online trends have led to growing service expectations combined with much more detailed orders. Also, a definite trend toward further individualization and customization is driving strong growth of and constant changes in the SKU portfolio.\u201d[1]<\/span> Companies like Adidas need to adjust to these changing consumer expectations. \u00a0Currently, \u201c<\/span>from the first sketch of a completely new pair of trainers to making and testing prototypes, ordering materials, sending samples back and forth, retooling a factory, working up production and eventually shipping the finished goods to the shops can take the industry as long as 18 months.\u201d[2]<\/span> \u00a0<\/span>After 18 months, the product may no longer be relevant, leaving Adidas with excess inventory and a stale brand image. <\/span><\/p>\n

In order \u201cto build on these trends, cope with changed requirements, and enable a wide range of new technologies, supply chains need to become much faster and much more precise.\u201d[3]<\/span> Adidas has recognized this and has aligned their 2020 growth strategy around speed and digitalization. \u00a0They endeavor to \u201cbecome the first true fast sports company: Fast in satisfying consumer needs, fast in internal decision-making.\u201d[4]<\/span> They have done this through investing in German speedfactories and experimenting with enabling omnichannel purchasing. \u00a0<\/span><\/p>\n

Adidas piloted the first speed factory in Germany in 2016. \u00a0\u201c<\/span>Altogether, in 2016, around 15% of total sales were generated with products manufactured on Speed programmes. It is the company\u2019s ambition to increase the share of \u2018speed-enabled\u2019 products to at least 50% of net sales by 2020.\u201d[5]<\/span> \u00a0In addition to producing products quicker with reduced labor costs, these speedfactories also have the potential to increase revenue because \u201cthe share of full-price sales with these \u2018speed-enabled\u2019 products is targeted to be 20% higher compared to the regular range.\u201d[6]<\/span> \u00a0Additionally, \u201cleaving behind manual production methods will allow Adidas to come up with novel shapes and finishes\u201d and to create more customized shoes based on the specifications of customers, \u201cperhaps even with bespoke trainers fashioned from a computer scan of how a person walks or runs.\u201d[7]<\/span> These first steps towards automating their supply chain show how embracing <\/span>digitalization could lead to reduction in production times, increases in revenue, and a better aligned buying experience for customers. <\/span><\/p>\n

Another way in which Adidas is working to increase speed in their supply chain is through enabling omnichannel purchases. Adidas recognized that \u201dconsumers expect brands and retailers to offer a seamless shopping and buying experience in-store, online, and on mobile devices.\u201d[8]<\/span> \u00a0To test an omnichannel supply chain hypothesis, \u201cAdidas implemented a trial of click and collect in Moscow expecting that just a few consumers would choose this option \u2013 to buy on-line and collect the product at a store. They expected around 10 to 20 orders per week, but consumers embraced the idea and orders reached 1,000 per week.\u201d[9]<\/span> Adidas also showed that \u201cdelivery costs fell and sales increased substantially.\u201d[10]<\/span> Improving the speed by which consumers receive their products, Adidas has leveraged their supply chain to meet consumer preferences and increase their profits.<\/span><\/p>\n

Adidas has taken the first couple steps to increase the speed in their supply chain but they still have a long way to go. They should continue with their current strategy and further expand speedfactory production and enable omnichannel purchasing and delivery in more locations. \u00a0To get to the next level of speed in a digitalized world, Adidas should go a step further and incorporate <\/span>machine learning and big data. Adidas can leverage big data across their entire product development cycle to cut down on the 18 month lead times. \u00a0They can combine the online marketing data they collect with the supply chain data to get a holistic picture of their demand and customer preferences as early as possible. They can even predict where products will need to be delivered and when in order to reduce delivery times. A data driven, interconnected system would allow them to disrupt the \u201ctraditional boundaries between the different planning steps\u201d and would transform \u201cplanning into a flexible, continuous process.\u201d<\/span> With quicker turnaround times to get highly customized and relevant products in the hands of the customer Adidas can become the leader in retail.<\/span><\/p>\n

The path to a digitalized world looks achievable, but along the way Adidas will have to answer important questions. \u00a0For example, is there still a place for creative directors and brand teams to drive a creative vision or will Adidas move towards a world where they build shoes automatically based on customer preferences? \u00a0How does Adidas ensure that they don\u2019t lose their brand as they move towards high speed and customization?<\/span><\/p>\n

(798)<\/span><\/p>\n

[1] Alicke, Knut, et al. \u201cSupply Chain 4.0 In Consumer Goods.\u201d <\/span>McKinsey & Company<\/span><\/i>, Apr. 2017, pp. 1\u20132.<\/span><\/p>\n

[2] \u201cAdidas high-Tech factory brings production back to Germany.\u201d <\/span>The Economist<\/span><\/i>, 14 Jan. 2017, www.economist.com\/news\/business\/21714394-making-trainers-robots-and-3d-printers-adidass-high-tech-factory-brings-production-back.<\/span><\/p>\n

[3]\u00a0Alicke, Knut, et al. \u201cSupply Chain 4.0 In Consumer Goods.\u201d <\/span>McKinsey & Company<\/span><\/i>, Apr. 2017, pp. 2<\/span><\/p>\n

[4]\u00a0 \u201cStrategy Overview.\u201d <\/span>www.adidas-Group.com<\/span><\/i>, www.adidas-group.com\/en\/group\/strategy-overview\/.<\/span><\/p>\n

[5] \u201cAdidas Increases Sales and Earnings Guidance Until 2020.\u201d <\/span>www.adidas-Group.com<\/span><\/i>, 8 Mar. 2017.<\/span><\/p>\n

[6]\u00a0\u201cAdidas Increases Sales and Earnings Guidance Until 2020.\u201d <\/span>www.adidas-Group.com<\/span><\/i>, 8 Mar. 2017, www.adidas-group.com\/en\/media\/news-archive\/press-releases\/2017\/adidas-increases-sales-and-earnings-guidance-until-2020\/.<\/span><\/p>\n

[7]\u201cAdidas high-Tech factory brings production back to Germany.\u201d <\/span>The Economist<\/span><\/i>, 14 Jan. 2017, www.economist.com\/news\/business\/21714394-making-trainers-robots-and-3d-printers-adidass-high-tech-factory-brings-production-back.<\/span><\/p>\n

[8]\u00a0Benton, Dale. \u201cSupply Chain 4.0: Adidas and Amazon re-Write the rules of supply chain management.\u201d Supply Chain Digital, 10 Feb. 2017, www.supplychaindigital.com\/scm\/supply-chain-40-adidas-and-amazon-re-write-rules-supply-chain-management.<\/span><\/p>\n

[9]\u00a0Benton, Dale. \u201cSupply Chain 4.0: Adidas and Amazon re-Write the rules of supply chain management.\u201d <\/span>Supply Chain Digital<\/span><\/i>, 10 Feb. 2017, www.supplychaindigital.com\/scm\/supply-chain-40-adidas-and-amazon-re-write-rules-supply-chain-management.<\/span><\/p>\n

[10]Benton, Dale. \u201cSupply Chain 4.0: Adidas and Amazon re-Write the rules of supply chain management.\u201d <\/span>Supply Chain Digital<\/span><\/i>, 10 Feb. 2017, www.supplychaindigital.com\/scm\/supply-chain-40-adidas-and-amazon-re-write-rules-supply-chain-management.<\/span><\/p>\n

[11]\u00a0Alicke, Knut, et al. \u201cSupply Chain 4.0 In Consumer Goods.\u201d <\/span>McKinsey & Company<\/span><\/i>, Apr. 2017, pp. 8.<\/span><\/p>\n

 <\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

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