{"id":24188,"date":"2017-11-15T16:54:05","date_gmt":"2017-11-15T21:54:05","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/the-future-of-adidas\/"},"modified":"2017-11-15T16:54:59","modified_gmt":"2017-11-15T21:54:59","slug":"the-future-of-adidas","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/the-future-of-adidas\/","title":{"rendered":"The Future of adidas"},"content":{"rendered":"

The New Sneaker World<\/strong><\/p>\n

In a world where speed to market determines the winner and limited-edition runs drive sales, the old way of sneaker making no longer applies. adidas no longer just competes with Nike and Under Armour, but also with Supreme and for the attention of a mobile-trained generation. Customers want innovation and fresh designs \u2013 fast [1]. \u201cBuy now, wear now\u201d has become the norm in an industry used to lead times of 18 months or more. [2]<\/p>\n

In addition, customization at the individual level is the new name of the game. Take Nike ID for example, Nike\u2019s co-creation platform, which in 2009 generated $100M, and is indicative of the growing Gen Y mentality where consumers demand something tailored to their wants and needs. [3]<\/p>\n

Digital seems the obvious path forward. However, while digitization in retail has been used in a limited capacity to predict consumer demand, provide in-store customer service, and inventory tracking [4], retailers have seen far less digitization on the manufacturing side. This is primarily due to technical challenges in existing robotics [5] \u2013 soft fabrics are more pliable, and thus their variable reactions make it hard for existing robots to work with \u2013 but also a prevailing idea that design can only come from human creativity. This has born out in the numbers \u2013 global sales of industrial robots reached almost 230,000 units in 2014, but shipments in the textiles, leather, and apparel sectors a mere 289. [6]<\/p>\n

adidas’ Solution: Robots<\/strong><\/p>\n

Enter: adidas\u2019 Speedfactory, the first shoe manufacturing plant controlled mainly by robots. Described by the company as \u201cdesign driven by athlete data, radical accelerated footwear production, hyper-flexible and localized manufacturing\u201d [7], adidas has brought manufacturing back to Ansbach, Germany.<\/p>\n

In the short run, adidas is leveraging this as a way to prototype rapidly. Their existing factories in Asia takes between 60 to 90 days to produce a shoe, but the Speedfactory allows adidas to turn raw materials into shoes in a single day. The Speedfactory, equipped with technology like the robotic knitting method Primeknit and artificially produced fibers that can be easily manipulated to spec, also enables small runs to be completed cost-efficiently. These collective systems, called \u201cadditive manufacturing\u201d can create 20,000 shoes at once \u2013 all different. [8]<\/p>\n

This has also enabled adidas to integrate data better into their designs. At the end of October 2017, adidas launched six different sneakers customized to the needs of runners in six cities. Through sensors and motion capture, adidas was able to monitor runners\u2019 strides and conduct gait analysis to craft a shoe unique to each city. [9]<\/p>\n

The next step is a second factory opening in Atlanta, Georgia, later in 2017. From the 500 units they started with at the Ansbach factory in 2016, adidas expects to scale production to one million shoes in three years through these two Speedfactories. [10] By 2023, Morgan Stanley anticipates that adidas could have nearly 20% of their production done through more automation [11], a view echoed by McKinsey, which predicts that sewing, a key component of the shoe making process, consists 100% of potentially fully automatable activities. [12]<\/p>\n

The Road Ahead<\/strong><\/p>\n

Looking forward, adidas should consider how to integrate other types of technology into their Speedfactories. Currently 3D printing is being developed separately, with a goal to produce 100,000 pairs of 3D-printed midsoles by 2018. [13] It seems counter-intuitive to separate the technologies that are optimizing different parts of the production process and adidas should consider embedding 3D printing into the Speedfactory technology.<\/p>\n

In addition, adidas could go much further in integrating data collecting technology in their products, which begun in 2011\u2019s chip-embedded soccer shoe that allows players to measure performance [14], but has only been developed as embedded NFC chips for shoes in the Speedfactory to track them through the production process. This data could be run through artificial intelligence technology to sift through trends and more accurately predict what customers want. [15]<\/p>\n

In the longer-term, scale becomes a much bigger issue. One million shoes in the next three years is a drop in the bucket for a company producing 720 million shoes a year. It is unclear if the existing Speedfactories are able to ramp up production to more significant levels, or if adidas has plans to build more Speedfactories around the world in the next 5-10 years. This is also an extremely costly investment, and adidas needs to decide if they are getting the return on investment they are looking for and if this scale of innovative manufacturing is required to compete.<\/p>\n

Some outstanding issues are: is there potential government or community push back? Moving manufacturing back to Germany is a great newspaper headline, but the Ansbasch Speedfactory is run with only 150 relatively highly skilled workers. Furthermore, how can they integrate this innovation into their flagship products, like Stan Smith sneakers, or other products outside of footwear?<\/p>\n

(799 words)<\/p>\n

[1] \u201cFoot Locker Gets Caught in Downdraft as Athletic Sector Sags,\u201d August 18, 2017, via eMarketer, accessed November 2017<\/p>\n

[2] Kristen Henning, \u201cSneakers & Fashion Athletic Trends Continue to Drive Consumer Interest\u201d, Footwear News<\/em>, February 21, 2017, http:\/\/footwearnews.com\/2017\/business\/retail\/sneaker-sales-fashion-athletic-trends-npd-group-research-fn-platform-las-vegas-2017-315553\/<\/a>, accessed November 2017<\/p>\n

[3] Danny Wong, \u201cNikeID Makes $100M+: Co-Creation Isn\u2019t Just a Trend,\u201d Huffington Post<\/em>, July 20, 2010, https:\/\/www.huffingtonpost.com\/danny-wong\/nikeid-makes-100m-co-crea_b_652214.html<\/a>, accessed November 2017<\/p>\n

[4] Roland Berger, \u201cRobots and Retail: What Does the Future Hold for People and Robots in the Stores of Tomorrow?,\u201d December 10, 2016<\/p>\n

[5] Kate Abnett, \u201cThe Robot Opportunity,\u201d Business of Fashion<\/em>, May 19, 2016,\u00a0 https:\/\/www.businessoffashion.com\/articles\/fashion-tech\/the-robotics-opportunity-manufacturing-efficiencies<\/a>, accessed November 2017<\/p>\n

[6] International Federation of Robotics, \u201cWorld Robotics 2014 Industrial Robots\u201d<\/p>\n

[7] Adidas, \u201cSpeedfactory,\u201d https:\/\/www.adidas.com\/us\/speedfactory<\/a>, accessed November 2017<\/p>\n

[8] Rowland Manthorpe, \u201cTo make a new kind of shoe, adidas had to change everything,\u201d Wired Magazine, <\/em>http:\/\/www.wired.co.uk\/article\/adidas-speedfactory-made-for-london-trainers<\/a>, accessed November 2017<\/p>\n

[9] Jake Woolf, \u201cAdidas Is Changing the Way It Makes Sneakers\u2014Again,\u201d GQ<\/em>, October 5, 2017, https:\/\/www.gq.com\/story\/adidas-made-for-london-speedfactory<\/a>, accessed November 2017<\/p>\n

[10] April Glaser, \u201cThis is the first Adidas shoe made almost entirely by robots,\u201d Recode<\/em>, September 27, 2016, https:\/\/www.recode.net\/2016\/9\/27\/13065822\/adidas-shoe-robots-manufacturing-factory-jobs<\/a>, accessed November 2017<\/p>\n

[11] Marc Bain, \u201cA revolution is coming in the way your sneakers are designed and manufactured,\u201d Quartz<\/em>, June 8, 2017, https:\/\/qz.com\/1000737\/a-revolution-is-coming-in-the-way-your-sneakers-are-designed-and-manufactured\/<\/a>, accessed November 2017<\/p>\n

[12] McKinsey & Company, \u201cA Future That Works: Automation, Employment, and Productivity,\u201d January 2017<\/p>\n

[13] Fitz Tepper, \u201cAdidas\u2019 latest 3D-printed shoe puts mass production within sight,\u201d TechCrunch<\/em>, April 7, 2017, https:\/\/techcrunch.com\/2017\/04\/07\/adidas-latest-3d-printed-shoe-puts-mass-production-within-sight\/<\/a>, accessed November 2017<\/p>\n

[14] Julie Cruz, \u201cAdidas Bets on a Soccer-Shoe-with-a-Chip,\u201d Bloomberg Businessweek<\/em>, November 23, 2011, https:\/\/www.bloomberg.com\/news\/articles\/2011-11-23\/adidas-bets-on-a-soccer-shoe-with-a-chip<\/a>, accessed November 2017<\/p>\n

[15] Kate Abnett, \u201cFashion\u2019s Fourth Industrial Revolution,\u201d Business of Fashion<\/em>, August 16, 2016, https:\/\/www.businessoffashion.com\/community\/voices\/discussions\/what-does-the-fourth-industrial-revolution-mean-for-fashion\/fashions-fourth-industrial-revolution-2<\/a>, accessed November 2017<\/p>\n","protected":false},"excerpt":{"rendered":"

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