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Supply Chain Management of Adidas

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Supply Chain Management of Adidas - December 29th, 2010

Supply Chain Management of Adidas : Adidas AG FWB: ADS, ADR:Pink Sheets: ADDYY) is a German sports apparel manufacturer and parent company of the Adidas Group, which consists of the Reebok sportswear company, golf company (including Ashworth), and Rockport. Besides sports footwear, the company also produces other products such as bags, shirts, watches, eyewear and other sports and clothing-related goods. The company is the largest sportswear manufacturer in Europe and the second biggest sportswear manufacturer in the world, after its American rival Nike.[3]

Adidas was founded in 1948 by Adolf "Adi" Dassler, following the split of Gebrüder Dassler Schuhfabrik between him and his older brother, Rudolf. Rudolf later established Puma, which was the early rival of Adidas. Registered in 1949, Adidas is currently based in Herzogenaurach, Germany, along with Puma.

The company's clothing and shoe designs typically feature three parallel bars, and the same motif is incorporated into Adidas's current official logo. The "Three Stripes" were bought from the Finnish sport company Karhu Sports in the 1951.[4][5] The company revenue for 2009 was listed at €10.38 billion and the 2008 figure at €10.80 billion.

Situation
The adidas sporting goods brand is famous across the world and, like any household name, it could potentially become the target of protests and media pressure if its parent company's policies and practices fail to win public approval.

Using an external supply-chain has allowed adidas-Salomon to keep its costs down and remain competitive. However, the company's supply chain is long and complex, relying on about 570 factories around the world. In Asia alone, its suppliers operate in 18 different countries. Moreover, its cost-saving use of external suppliers is not without risks: in particular, the company has less control over workplace conditions at its suppliers' factories than it would have at company-owned sites.

Outsourcing therefore raises a broad range of issues and concerns for the company. Employment standards have to be evaluated throughout the supply-chain to ensure fairness and legal compliance on such matters as wages and benefits, working hours, freedom of association and disciplinary practices as well as on the even more serious issues such as forced labor, child labor and discrimination. Furthermore, health and safety issues, environmental requirements and community involvement also need to be considered.

Targets
Outsourcing supply should not mean outsourcing moral responsibility. Recognizing this, and having regard to the risks and responsibilities associated with managing a global supply-chain, adidas-Salomon has designed and implemented a comprehensive supply-chain management strategy.

That strategy is to source the company's supplies from the cheapest acceptable sources rather than from the cheapest possible. The company has its own so-called "standards of engagement" (SOE) and the level of acceptability is based on the values of the company itself. Contractors, sub-contractors, suppliers and others are therefore expected to conduct themselves in line with adidas-Salomon's SOE.

The strategy is based on a long-term vision of self-governance for suppliers - adidas does not wish to be forever in the position of looking over the shoulders of its suppliers.

Actions
The company has a 30-strong SOE team, most of whom are based in the countries where suppliers are located (Asia, Europe and the USA). They know the labor laws and safety regulations in their countries and are often able to interview workers in their own language.

Before a relationship is formed with any new supplier, an internal audit is carried out to ensure working conditions in that supplier meet adidas-Salomon's SOE criteria. All business partners sign an agreement committing them to comply with the SOE and to take responsibility for their subcontractors' performance on workplace conditions. The monitoring process is continuous as suppliers are audited at least once a year, and more often if serious problems are detected.

Training forms an even more important part of the process than monitoring because it goes beyond the policing role to one that will have a long-term impact. As of October 2001, some 200 SOE training sessions had been held for business partners during the course of the year, a significant increase on the 150 courses held the year before.

Results
About 800 audits were conducted at different levels in the supply-chain during 2000. This involved interviewing managers and workers, reviewing the documentation and inspecting facilities. Since then, the audit process has continued.

Using the information gained from these audits, presentations are made to the management of the supplier, outlining any problems found and the consequential action points. Clearly defined responsibilities and timelines are then agreed with the site managers. Where serious problems are detected, a follow-up visit may be conducted within one to three months. If the supplier is unwilling to make the necessary improvements, adidas-Salomon may withdraw its business. This course of action is a last resort; the company prefers to stay in partnership and to work from the inside to help encourage improvements.

In 2000, adidas-Salomon adopted a system of scoring and reporting on its suppliers' performance. This gave an overview of the supply-chain and highlighted the main issues and problem areas on a country-by-country basis, but an improved and extended system is now being developed. This will allow the company to publish even more detailed reports about the progress that it, as a company which manages large and complex supply-chains, has been able to make in the important areas of social and environmental performance.
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Business Education
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Re: Supply Chain Management of Adidas - July 1st, 2015

“Nike has always been more than just a company -- it has been my life’s passion,” Mr. Knight, who is 77 years old, said in the release. “For myself, I intend to continue to work with Nike and look forward to contributing to its future well after my chairmanship ends.”Well he was the man who utilizes the supply chain management efficiently.
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