Adidas Company Supply Chain Management

Adidas is a company that operates in the textile and footwear industries. In addition, Adidas outsources most of its production. In total, adidas works with more than 400 independent factories from around the world that manufacture adidas products in around 45 countries. The adidas supply chain is global and multi-layered, with different types of business partners, some of which are directly contracted factories, while others are not.

The Adidas Company uses 4 types of outsourcing :

1. Personal Employment Outsourcing (PEO): Adidas uses PEOs to manage some of its HR functions, such as recruitment, training, and salary administration. This allows Adidas to focus on its core business and reduce HR costs.

2. Business Process Outsourcing (BPO): Adidas Company uses BPO to outsource some business processes, such as accounting, logistics, and customer service.

3. Information Technology Outsourcing (ITO): Adidas uses ITO to outsource some IT functions, such as application development and maintenance, IT infrastructure, and cybersecurity.

4. Knowledge Process Outsourcing (KPO): The use of KPO in adidas companies can outsource some functions that require specialized expertise, such as market research, data analysis, and product design.

Adidas Supply Chain Flow

adidas suppliers fall into five broad categories:

- Manufacturing partners have a direct contractual relationship with adidas to provide products for both export and domestic market consumption.

- Subcontractors are factories that have been subcontracted by our suppliers to perform manufacturing operations that our key suppliers are not capable of performing in their own facilities.

- Other material and service providers may not have a direct business relationship with Adidas, but supply goods and services to our key suppliers.

- Licensees are independent companies that manage the design, production and distribution of certain products, under license from Adidas.

- Agent An independent company that acts as an intermediary to source the production of products, manage the production process, and sell finished products to Adidas.

- Strategic suppliers are manufacturing partners and material suppliers. They are suppliers selected for specific social and environmental initiatives that go beyond monitoring general fulfillment. They are viewed as long-term strategic partners that provide world-class facilities, have a meaningful share of business with Adidas as a Tier 1 manufacturer or, if a Tier 2 supplier, are a key source of materials for our Tier 1 manufacturers, strong management in development and manufacturing, economies of scale, and chain-level capabilities. We are seen as a long-term strategic partner that provides world-class facilities, economies of scale, and further supply tier chain capabilities.

Raw materials come from suppliers whose procurement of raw materials is in accordance with Adidas' raw material orders. Furthermore, the raw materials are received by the manufacturer, checked for quantity and quality, then processed into semi-finished goods, and the semi-finished goods are then processed into finished goods. 

After the manufacturer finishes producing the finished goods, the goods are then sent to the retail store, which will display the materials in the showcase. The finished goods on display will be seen by consumers, and if they like them, they will buy them. Finally, the finished goods in the form of shoes, or other products are received by consumers directly from Adidas retail stores. For some online purchases, products are delivered through shipping or direct distribution (Adidas - Supplier Lists, 2022).

Distribution Adidas has invested heavily in its distribution network to ensure its products are delivered quickly and accurately to customers. The company uses various transportation methods, such as air, land, and sea, to ensure its products are delivered on time.

Information is received by retail stores through consumer purchasing patterns, and some suggestions and criticisms given by consumers through Adidas retail stores, then retail stores provide information to manufacturers by telling them what products they should focus on producing according to current consumer demand, then manufacturers will provide information to suppliers in the form of the amount and type of raw materials that must be purchased for Adidas (Adidas, 2021).

Finance, There are two types of financial flows within Adidas. The first is inward flow, where funds are transferred from customers to the company, and the second is outward flow, where funds are transferred from the company to the manufacturing department. The main source of Adidas' inflow is consumer purchases, both offline and online (Adidas Global Sales, 2021). Meanwhile, the main source of outflow is Adidas' production needs.

Adidas Supply Performance Drivers

Adidas facilities conduct their production through 500 independent factories. 68% percent of its factories are located in Asia. These factories in Asia mostly use human labor and machinery to help process raw materials into intermediate products that are used to assemble shoe parts. The rest of the factories are located in Europe (Polk, 2022). In Bavaria, Adidas has a 'speed factory' that produces shoes at high speed using robotic machines. The speed factory captures data from athletes to create custom shoes that Adidas customers are interested in. Adidas also has a factory located in Herzogenaurach in Germany, although this serves more as the headquarters. Mass production of shoes (push production process) is done in Asia, while custom shoe production is done in Europe, using personalized 3D printing machines (Solereview, 2017).

Adidas inventory is usually located within its retail stores, and some inventory, mainly work-in-progress inventory, is placed in the factory. Some finished goods may also be located in the factory. The remaining finished goods that are not placed in factories or retail stores are placed in warehouses, such as Adidas' new warehouse in Pensylvania USA that opened in 2019, which makes the distribution of finished goods faster into the hands of consumers located in the United States (Kish, 2019). 

According to Adidas' annual report, there are 64 distribution centers globally. To maintain the operational flexibility and agility required to provide the best service to customers and consumers, only 29 of the 64 distribution facility network worldwide are owned and operated by Adidas, and 35 are owned and operated by logistics partners. These distribution centers, are divided into the following regions: Twelve distribution facilities are located in Europe, 22 in Asia-Pacific, eight in Latin America, two in Russia/CIS, and ten in emerging markets (Adidas, 2021).

Location To make it easier for customers to purchase Adidas products, the company has more than 2,500 retail stores around the world located on important highways with easy access (Adidas, 2021). Adidas consults and cooperates with its local partners when opening new stores in new areas as these partners are the most knowledgeable about key locations.

Adidas Transportation transports goods directly from 64 distribution centers spread around the world, to 2,500 retail stores, using trucks that can move multiple inventories at once. Distribution centers in Europe, for example, are used to supply inventory at Adidas retail stores in Europe. This contiguous distribution is designed to keep distribution costs low, and distribution times efficient. Adidas can also respond quickly to changes in consumer demand, for example if a consumer wants to buy a product that is not currently available in a retail store, by picking up the requested item from the nearest distribution center to the retail store.

Citation:

https://dfreight.org/blog/an-insight-into-adidas-supply-chain-strategy/

https://www.researchgate.net/publication/370593535_How_Effective_Supply_Chain_Management_of_Adidas

https://www.adidas-group.com/en/sustainability/social-impacts/supply-chain/#/sourcing-relationships/

https://report.adidas-group.com/2023/en/group-management-report-our-company/sustainability/supply-chain.html