Introduction to study
Background or Rationale
Supply chain management (SCM) is essential for businesses navigating globalization and intense global competition Its strategic importance has grown as companies recognize SCM as a key operational tool to enhance organizational performance.
A supply chain (SC) is a network of facilities and activities involved in product development, procurement, manufacturing, distribution, and after-market support (Mabert & Venkataramanan, 1998) Supply Chain Management (SCM) focuses on managing interconnected businesses to deliver product and service packages to end customers (Harland, 1996) It is a crucial strategic factor for enhancing organizational effectiveness, competitiveness, customer care, and profitability (Gunasekaran et al., 2001) The primary objectives of SCM include minimizing non-value-added activities and costs, increasing customer responsiveness and flexibility, and improving overall performance and cost competitiveness (Stewart, 1995) A study by Petrovic-Lazarevic and Sohal (2002) highlights the significance of effective supply chain management in achieving and maintaining a competitive advantage, particularly in the Australian textiles, clothing, and footwear industry.
Supply chain performance (SCP) is influenced by external factors such as demand fluctuations and lead time variability, as well as decisions related to supply chain management (SCM), planning, and overall supply chain design.
2008) More recent work has identified such emerging themes as value networks (e.g., Ehret, 2004), learning within these networks (e.g., Hồkansson, Havila, & Pedersen,
1999), and conceptualizing industrial marketing networks as a series of resources, activities, and actors (Gadde, Huemer, & Hồkansson, 2003)
Many firms are increasingly focused on supply chains, yet some view existing literature as merely descriptive and anecdotal There is significant potential to enhance efficiency by addressing issues such as supplier performance, unpredictable customer demands, and an uncertain business environment An integrated supply chain offers a competitive advantage to individual companies, leading to a shift from enterprise-to-enterprise competition to chain-to-chain competition, particularly in less developed economies.
In today's volatile business landscape, companies are actively seeking tools to enhance performance and effectively manage their operations The primary goals of performance measurement are to boost the efficiency and effectiveness of supply chains, as highlighted by Beamon (1999) and Gunasekaran et al (2001).
Performance measurement in logistics aims to lower operating costs and enhance customer service while driving revenue growth and increasing shareholder value Organizations have recognized that improving internal efficiencies alone is insufficient; their entire supply chain must be competitive As highlighted by Power et al (2001) and Moberg et al (2002), a comprehensive understanding and implementation of supply chain management (SCM) is crucial for maintaining competitiveness in the global market and achieving profitable growth.
The sportswear industry is a global market primarily driven by production in Asian countries, with leading brands like Nike and Reebok from the US, alongside Adidas from Europe, dominating global sales Additionally, the influence of sports superstars, television sports programs, and various sporting events significantly impacts consumer trends and market dynamics.
The sportswear market shares key characteristics with the fashion industry, including strong seasonality, a short product life cycle, volatile demand, and high impulse buying tendencies Seasonal variations are influenced not only by weather patterns but also by the sporting calendar For major companies like Sport Obermeyer, the costs associated with stockouts and markdowns can exceed 10% of sales Therefore, effective supply chain management (SCM) in the sportswear sector is essential to prevent outdated stock and minimize markdowns, ultimately protecting retail profits.
Asia's supply chain (SC) is characterized by a high number of small independent retailers and the dominance of large international suppliers This region accounts for a significant portion of global sourcing due to several factors, including lower labor costs compared to other areas Additionally, Asia presents advantages such as reduced political, economic, and financial risks, improved infrastructure, and a skilled workforce The growing domestic demand within countries like China, India, and Japan further enhances the attractiveness of this market.
Research problem
Numerous empirical studies have explored the factors influencing Supply Chain Performance (SCP) Specific research has concentrated on various elements of internal supply chains, including total quality management practices (Tan et al., 2002) and internal integration (Pagell, 2004; Braganza).
Research in manufacturing strategies has explored various methodologies such as agile and lean manufacturing (Womack and Jones, 1996; Naylor et al., 1999; McIvor, 2001) and postponement strategies (Beamon, 1998; Naylor et al., 1999; Van Hoek, 1998; Van Hoek et al., 1999) Additionally, studies have examined the supplier side, focusing on aspects like supplier selection, involvement, and overall manufacturing performance (Choi and Hartley, 1996; Vonderembse and Tracey, 1999) Key areas of interest include the impact of supplier alliances on organizational success (Stuart, 1997), critical success factors in strategic supplier partnerships (Monczka et al., 1998; Narasimhan and Jayaram, 1998; Stuart, 1997), and the relationship between supplier management orientation and buyer-supplier performance (Shin et al., 2000).
Recent studies, including those by Clark and Lee (2000) and Alvarado and Kotzab (2001), emphasize the downstream connections between manufacturers and retailers However, a shift has occurred with newer research examining both upstream and downstream aspects of supply chains For instance, Tan et al (1998) investigate the interplay between supplier management, customer relations, and organizational performance, while Frohlich and Westbrook (2001) analyze how supplier-customer integration impacts performance Additionally, Tan et al (2002) delve into supply chain management and supplier evaluation practices, further contributing to the understanding of supply chain dynamics as highlighted by Min and Mentzer (2004).
In 2004, Cigolini et al developed an instrument to measure supply chain orientation and supply chain management (SCM) at a conceptual level, along with techniques and tools for examining SCM strategies Li et al (2005) further conceptualized and validated six dimensions of SCM practices, including strategic supplier partnerships, customer relationships, information sharing, information quality, internal lean practices, and postponement, addressing the upstream, internal, and downstream aspects of supply chains This body of research highlights various facets of SCM practices; however, Li et al noted that the effectiveness of these practices can be influenced by contextual factors such as firm size, supply chain position, supply chain length, and channel structure Larger organizations, for instance, may exhibit higher levels of SCM practices due to their more complex supply chain networks, which require more effective management Therefore, further research is essential to explore SCM practices across different industries and supply chain models.
Adidas, a leading German producer of sportswear and equipment, operates through four primary brands: Adidas, Taylor Made-Adidas Golf, Maxfli, and Reebok Headquartered in Herzogenaurach, Germany, the Adidas group oversees over 150 subsidiaries and employs approximately 26,376 individuals With a diverse product line featuring more than 20,000 items and numerous variations, Adidas adapts its offerings biannually or more frequently in response to market demand and technological advancements The company reported revenues of €10.799 billion in 2008, up from €10.299 billion in 2007, equivalent to around $15.6 billion.
The company operates a lengthy and intricate supply chain, utilizing approximately 1,120 independent factories across 68 countries A significant portion of these factories is located in six key countries: China, India, Indonesia, Thailand, Turkey, and Vietnam In Asia, suppliers are active in 18 different nations, highlighting the company's extensive global supply chain network, which is fully outsourced.
Adidas strategically leverages global manufacturing resources as a key component of its supply chain management (SCM) strategies The company targets countries with low labor costs, minimal import taxes, efficient manufacturing management, and political stability, making Vietnam, China, India, and Indonesia prime candidates for production This approach allows adidas the flexibility to relocate production based on cost concerns or political and trade issues Recently, adidas has been shifting its manufacturing focus from Indonesia and China to Vietnam due to Indonesia's political instability and rising labor costs in China However, the company also encounters challenges related to its outsourcing strategy in these regions.
Adidas faces challenges in its strategic supplier partnerships, primarily due to reliance on material suppliers from developed countries like Japan, Korea, Taiwan, and China, which leads to long material lead times To improve its supply chain performance (SCP), adidas is focusing on building strategic partnerships based on trust and commitment with both contract factories and key suppliers.
Research questions and research objectives
Product creation is crucial in supply chain management, prompting major sports brands to relocate their product development and production centers to Asia This strategic move aims to streamline processes and minimize costs from the initial creation stage to mass production However, this transition presents a significant challenge, as it marks the first time these companies are undertaking such an experiment.
This study leverages the theoretical model by Li et al (2005) alongside the FY10 operational strategies of adidas Sourcing Limited, focusing on nine key drivers of Supply Chain Performance (SCP): Strategic Demand/Design, Product Creation, Demand Planning, Purchasing/Supply Planning, Sourcing Production, Inbound Customs, Order Fulfillment/Warehouse, and Outbound/Point of Sale It aims to identify the factors influencing adidas's SCP while addressing current supply chain challenges Additionally, the research will develop a theoretical model and measurement scale suitable for real-world application in adidas's supply chain management practices.
1.3 Research question and research objectives:
Research questions involve the research translation of “problem” into the need for inquiry The research problems which are defined as above will lead to the following research question:
What are the relationships between SCM practices- Strategic supplier partnership, Product creation, Purchasing/Supply planning, Sourcing Production (manufacturing), Internal lean practices (Fast and Lean) – and adidas SCP?
A research objective serves as the researcher’s interpretation of a business problem, articulating the purpose of the research in measurable terms and establishing criteria for its success (Zikmund 1997, p 89) This paper aims to identify the key factors of supply chain management (SCM) practices that influence adidas's supply chain performance (SCP) in Asia and to measure the relationship between these SCM practices and adidas's SCP.
This research aims to assist adidas supply chain managers in assessing the supply chain using pertinent data and providing recommendations to enhance the supply chain performance (SCP) of adidas in Asia.
Scope and Limitation of research
This research investigates the determinants of the Supply Chain Performance (SCP) of Adidas specifically within the Asian market Due to certain limitations, the study concentrates solely on Adidas's manufacturing and operational activities in Asian countries, while SCP analysis from other regions will be addressed in future research endeavors.
This research will specifically focus on adidas Footwear's "tier 1" and "tier 2" contract factories, while raw material suppliers and distribution centers will be addressed in future studies.
Collecting survey data from individual respondents at various locations can lead to inaccurate measurements, even when the respondent is a top manager or executive Additionally, the respondents' perceptions and feelings may skew their assessments of performance discrepancies between their company and competitors.
This research focused on SCM practices of manufacturing firms Therefore, the construct of internal lean practice may not be appropriate for distributors or retailers
The Postponement factor is not suitable for the characteristics of adidas‟s supply chain; therefore, it was not included in this research
This research deems delivery dependability as measurements for SCP
Due to the confidential nature of certain metrics, such as inventory costs and cash-to-cash cycle time, obtaining accurate data for this research proves to be challenging.
Research method
This research study aims to identify the key factors of supply chain management (SCM) practices that influence the supply chain performance (SCP) of Adidas in Asia By employing an exploratory research approach, the study seeks to measure the relationship between SCM practices and the SCP of Adidas.
This research employs surveys as the primary method to identify key factors of supply chain management (SCM) practices that impact supply chain performance (SCP) of Adidas in Asia The study also aims to measure the relationship between SCM practices and the SCP of Adidas.
Questionnaires are utilized to gather data on supply chain management (SCM) practices by directly asking interviewees The rationale for selecting surveys lies in two key aspects: they offer a fast, efficient, and precise method for evaluating information about the target population, and they are particularly useful when secondary data is scarce.
Finally, SPSS Version 16 software program are used to analyze data.
Structure of research
This research includes six chapters:
The introduction chapter outlines the rationale and background of the research, highlighting relevant previous studies that aid in identifying the research gap From this gap, specific research questions and objectives are formulated Additionally, the chapter discusses the scope of the study, the research methodology employed, its limitations, and the overall structure of the research.
Chapter 2 (Introduction to adidas Limited Sourcing group) briefs the general information about adidas, its strategy, its majors location, partnerships in the world as well as its business performance in FY09 and its action plan in FY10
Chapter 3 (Literature review) summarizes theories and previous study, which is helpful to build up the hypothesis and conceptual framework
Chapter 4 (Research methodology) explains research process and the method of data analyzing in each stage
Chapter 5 (Empirical results of the research) analyzes collected data from each survey stage in more detail
Chapter 6 (Conclusion and suggestions) details the conclusion and recommendation of the research
Figure 1.2 Structure of the study
Chapter 2 Introduction to adidas Limited Sourcing Company
Chapter 5 Empirical results of the research
Introduction to adidas Limited Sourcing Company
Introduction about adidas group
Adidas is synonymous with excellence in the global sports industry, embodying the vision of its founder, Adolf Dassler His corporate philosophy continues to guide successive generations, reinforcing the brand's commitment to quality and innovation in all areas of sport.
Adi Dassler's vision was to equip every athlete with top-quality gear, a concept that was both simple and innovative This journey started in 1920, when he crafted his first shoes from limited materials available in the aftermath of World War I.
Today, the adidas product range extends from shoes, apparel and accessories for basketball, soccer, fitness and training to adventure, trail and golf
The adidas brand originated in 1948, named after Adi Dassler, who combined the first two syllables of his first and last name In 1949, he trademarked the iconic Three Stripes logo After nearly 70 years of family involvement, the Dassler Family exited the company in 1989, leading to its transformation into a corporation known as "Aktiengesellschaft."
Robert Louis-Dreyfus, a French national, served as Chairman of the Executive Board of adidas from April 1993 until March 2001, during which he initiated the company's stock market flotation in November 1995 Following his tenure, Herbert Hainer took over leadership in 2001 In 1997, adidas expanded by acquiring the Salomon Group, leading to a rebranding of the company as adidas-Salomon AG, which also encompassed the TaylorMade golf brand.
In October 2005, the Salomon business segment, along with its subsidiaries and brands such as Salomon, Mavic, Bonfire, Arc'Teryx, and Cliché, was acquired by the Finnish company Amer Sports Corporation Following shareholder approval at the Annual General Meeting in May 2006, the company will officially change its legal name to "adidas AG."
On January 31, 2006, adidas-Salomon AG acquired Reebok International Ltd The closing of the Reebok transaction marks a new chapter in the history of the adidas
The newly formed Group unites two of the most esteemed brands in the global sporting goods sector, enhancing its competitive edge on an international scale With distinct and complementary brand identities, the Group offers an expanded product range and a more robust presence across teams, athletes, events, and leagues.
The adidas Group employs over 25,000 individuals globally, with over 2,000 based at its headquarters in Herzogenaurach A dedicated team of designers, product developers, and specialists in biomechanics and material technology conducts research at the company’s facilities in Portland and at its second technology center in Scheinfeld, near Nuremberg.
In Scheinfeld models, adidas produces and tests both prototypes and custom performance products, housing the only remaining sports shoe production facility in Germany.
Adidas boasts over 80 subsidiaries that ensure a global marketplace presence for its products, with sales and distribution organized into four key regions: Europe/Emerging Markets, North America, Asia/Pacific, and Latin America Currently, adidas stands as Europe's largest supplier of athletic footwear and sports apparel.
For more than 80 years, the adidas Group has been a key player in the sports industry, providing innovative footwear, apparel, and accessories As a global leader in sporting goods, adidas offers a diverse range of products available in nearly every country The company's straightforward strategy focuses on enhancing brand strength and product quality to boost its competitive edge and overall performance.
Golf Equipment: metal woods, irons putters, golf balls, footwear, apparel and accessories
Dress, casual and outdoor footwear, apparel and accessories
The adidas Group, headquartered in Herzogenaurach, Germany, oversees its operations and more than 170 subsidiaries, including the Reebok headquarters in Canton, Massachusetts, and Taylor Made-adidas Golf in California The company also maintains creation centers and development departments globally, aligned with its business activities Additionally, adidas Sourcing Ltd., a wholly-owned subsidiary based in Hong Kong, serves as the global sourcing agent for the adidas Group.
31, 2009, the adidas Group employed 39,596 people
The adidas Group strives to be the global leader in the sporting goods industry with sports brands built on a passion for sports and a sporting lifestyle
Our organization prioritizes consumer satisfaction by consistently enhancing the quality, aesthetics, and overall image of our products and structures This commitment ensures that we not only meet but exceed consumer expectations, delivering the highest value possible.
It is innovation and design leaders who seek to help athletes of all skill levels achieve peak performance with every product it brings to market
It is a global organization that is socially and environmentally responsible, creative and financially rewarding for our employees and shareholders
It is committed to continuously strengthening its brands and products to improve its competitive position
It is dedicated to consistently delivering outstanding financial results.
Adidas‟s Strategy
Adidas aims to be a leader in the sporting goods industry by creating brands that embody a passion for sports and an active lifestyle Drawing inspiration from its rich heritage, the company recognizes that a deep understanding of consumer and customer needs is crucial for reaching this objective.
To foster a culture of innovation, the organization actively seeks to anticipate and address the evolving needs of its stakeholders, challenging conventional norms and embracing change By leveraging this innovative mindset, it enhances its products, services, and processes, thereby boosting competitiveness and optimizing both operational and financial performance Ultimately, this commitment to innovation aims to drive sustainable long-term value creation for its shareholders.
Reorganization of Group provides solid platform for growth
In 2009, the adidas Group transitioned from a vertically integrated brand structure to a functional multi-brand structure for adidas and Reebok, establishing a Global Sales function for commercial activities and a Global Brands function for marketing The Global Sales organization was further divided into Wholesale and Retail to better address the unique requirements of each business model This new structure aims to enhance brand alignment and management for sustainable growth while ensuring coordinated execution and best practices in the marketplace.
In 2009, the Group implemented key measures to transition to a new structure, including the establishment of joint operating models for the adidas and Reebok brands across most global markets This involved eliminating regional headquarters to foster direct interaction between local markets and global functions Additionally, the responsibilities on the Board level were divided between Global Brands and Global Sales management, with Herbert Hainer, CEO of the adidas Group, taking on direct oversight of Global Sales, while Erich Stamminger, a member of the Executive Board, assumed responsibility for Global Brands.
The new organizational structure is designed to enhance the management team's strengths and provide top-notch service to consumers and customers However, the distinct business models of Taylor Made-adidas Golf, Rockport, and Reebok-CCM Hockey mean that these operating segments will not be included in the new matrix framework.
Consumers seek variety, whether they are athletes in pursuit of top-notch equipment or casual shoppers after the latest fashion trends Inspired by this demand, the adidas Group focuses on creating engaging experiences that foster long-lasting relationships with its brands By adopting a multi-brand strategy, adidas can explore opportunities from diverse angles, serving both mass and niche markets with relevant products tailored to a wide range of consumers This strategy enables each brand to maintain its unique identity and core strengths, while also enhancing adidas Group's overall product offering and competitive advantage in the marketplace.
Investments focused on highest potential markets and channels
The adidas Group aims to secure top market positions globally, focusing its investments on regions with the greatest potential for medium- to long-term growth and profitability With nearly 180 subsidiaries worldwide, the company is particularly emphasizing expansion in emerging markets, especially in China and Russia, to enhance its competitive edge.
Adidas understands that consumer buying behavior and the retail environment vary across markets To maximize market opportunities, the brand customizes its distribution strategy, ensuring that its products are presented to consumers in the most effective manner This is accomplished through a unique channel approach tailored to each specific market.
The company is dedicated to delivering exceptional service to ensure optimal shelf placement for its brands, while also focusing on enhancing its strategic capabilities in retail and e-commerce, as outlined in Global Sales.
To stay ahead of the competition, speed and agility are essential The Adidas Group is dedicated to fulfilling diverse customer needs by ensuring product availability in the right sizes and colors, introducing groundbreaking technical innovations, and offering the latest high-quality fashion products.
To enhance efficiency and reduce lead times in creation and production, the company continuously improves its infrastructure, processes, and systems By facilitating information flow between point of sale and sourcing, it aims to better integrate its supply chain and swiftly respond to evolving consumer trends The focus is on maximizing flexibility while utilizing shared infrastructure and processes, allowing the Group to offer customized solutions across various business models, including wholesale, retail, performance-oriented, and style-oriented sectors.
At adidas, every team member plays a vital role in fostering innovation by challenging the status quo and embracing change The company encourages a culture where each department is expected to deliver at least one significant innovative improvement annually.
The Group is committed to achieving sustainable leadership in its industry through technological innovation and advanced design in its products, as highlighted in its Research and Development (R&D) efforts Additionally, it focuses on improving customer services and optimizing internal processes to foster continuous innovation across the organization.
Develop a team grounded in our heritage
The Group's culture is consistently influenced by its history, current practices, and future aspirations, reflecting the founder's dedication to athletes and consumers alike It embodies a pride in its work, a commitment to quality, and a passion for sports Success is achieved collectively through open communication, collaboration, and shared values rooted in the spirit of sport.
The Group prioritizes best-practice social and environmental standards, promoting responsible behavior that fosters long-term value creation By focusing on these principles, the Group aims to enhance shareholder value sustainably.
Business performance in FY09 and its action plans in FY10
As of December 31, 2009, the adidas Group operates in nearly every country globally, with its headquarters situated in Herzogenaurach, Germany, and a network of 177 subsidiaries The Group boasts an extensive portfolio of promotional partnerships, collaborating with sports associations, events, teams, and individual athletes Key locations and upcoming sporting events are prominently featured on the world map, showcasing adidas's global presence and commitment to sports.
The details of major locations and partnerships are presented on appendix 2
Number of suppliers and its own factories
As of December 31, 2009, adidas collaborated with over 1,120 independent factories across 68 countries to produce its products A significant majority, 69%, of these factories are situated in Asia, while 15% are located in the Americas and 16% in the Europe, Middle East, and Africa (EMEA) regions Notably, 27% of all adidas factories are based in China.
The total numbers of supplier factories is higher than the number reported in 2008 for this are:
1 The supply chain disclosure by business entities increased
2 The number of business entities within the Group contracted and expanded, resulting in a moving supplier and factory count
There was a notable movement of factories as shown on appendix 3
2.4 Business Performance and its action plan in FY10:
In 2009, the adidas Group faced challenges due to a significant slowdown in consumer spending and increased promotional activities amid a tough macroeconomic environment Currency-neutral sales fell by 6%, particularly in the Wholesale and Other Businesses segments, leading to a 4% decrease in revenues to €10.381 billion from €10.799 billion in 2008 The gross margin also suffered, declining by 3.3 percentage points to 45.4%, primarily due to rising input costs, currency devaluation, and heightened clearance sales As a result, the Group's gross profit decreased by 10%.
In 2009, the Group reported revenues of € 4.712 billion, a decline from € 5.256 billion in 2008 The operating margin fell by 5.0 percentage points to 4.9%, down from 9.9% the previous year, primarily due to a lower gross margin and increased operating expenses relative to sales Consequently, the operating profit plummeted by 53% to € 508 million, compared to € 1.070 billion in 2008 Additionally, net income attributable to shareholders dropped 62% to € 245 million, down from € 642 million in 2008, while diluted earnings per share decreased by 60% to € 1.22 in 2009, compared to € 3.07 in 2008.
2.4.2 Its Action Plan in FY10
The adidas Group's Global Operations function oversees the development, production planning, sourcing, and distribution of most products This function aims to enhance efficiency across the supply chain while maintaining top-notch product quality and delivery performance for customers at competitive prices.
Figure 2.1 Global Operations in Go-to-Market Process
Sources: http://www.adidas-group.com/en/ourgroup/OurGroup_AreaStart.aspx Enforced vision: closest to every consumer
The vision of the Global Operations function is to be closest to every consumer, driving adidas Group's growth by aligning product quality, size, color, style, and material with consumer demand in both wholesale and retail channels To achieve this, Global Operations focuses on five strategic initiatives: ensuring high product availability and timely delivery while minimizing finished goods inventory; optimizing decision-making through the identification of key cost and profitability drivers; enhancing the flexibility of the supply network to respond to market changes; improving the efficiency and transparency of demand and supply planning across all business segments; and building capabilities that accelerate product creation processes.
Processes and systems tailored for expansion of Retail segment
The Replenishment initiative is crucial for the growth of the Retail segment and Group-controlled retail space In 2009, a dedicated retail transformation team was established within Global Operations to support the retail sales team by implementing tailored processes and systems Throughout the year, Global Operations focused on enhancing its fulfillment models, enabling sales subsidiaries to purchase products closer to the market and replenish stores more strategically and frequently Improved capacity and material planning processes facilitated the production and delivery of over 1,300 articles with lead times of just 22 to 30 days.
Further advancements in costing transparency and predictability
In 2009, amidst a decline in global economic output, the establishment of a dedicated Profitability Management department became crucial for monitoring macroeconomic trends and forecasting product and supplier costs This initiative focused on enhancing supply chain profitability through engineering cost-effective products and increasing transparency with suppliers By closely tracking raw material costs and consolidating volumes, adidas improved its negotiation power to counteract cost increases Additionally, the Sourcing teams optimized product allocation to utilize supplier capabilities effectively, considering total supply chain costs Furthermore, the Transport and Customs team leveraged consolidated volumes to negotiate reduced transportation costs and optimize shipment routes, contributing to overall profitability.
In 2009, as part of its Adaptive Supply Network initiative, Adidas optimized its supply chain infrastructure by consolidating distribution centers and upgrading facilities across the UK, Spain, the Netherlands, Greece, and South Africa A significant achievement was the completion of the adidas Group's second multi-brand distribution center in Spartanburg, South Carolina, designed to accommodate future brand growth and retail channel demands Additionally, the planning for a new distribution center in Russia was finalized, although its execution has been postponed until market conditions warrant a restart to support local business models.
In 2009, Adidas focused on improving its process and systems infrastructure to enhance supply chain flexibility and responsiveness Significant upgrades were made to its SAP-based Global Procurement System (GPS) based on user feedback, which streamlined the ordering process and allowed for quicker adaptation to market changes Additionally, preparations were initiated for the rollout of GPS to the Reebok brand in 2010.
The adidas Group is executing its largest SAP implementation to date, set to replace ten legacy systems across the organization Additionally, preparations are underway to expand its trading platform from Amsterdam to the USA and Japan This initiative will enhance visibility, control, and risk management across all supply chain functions, benefiting all brands within the Group.
Standardization and automation of planning processes
As part of its End-to-End planning initiative, adidas has been implementing an optimized demand planning process across over 20 European countries, standardizing and partially automating planning functions to enhance forecast accuracy Following initial implementations in 2008, the rollout continued throughout 2009, with the final launch expected by the end of Q2 2010, enabling both adidas and Reebok to operate on a shared platform in Europe Looking ahead, adidas plans to extend this initiative to other key markets, including Japan.
The demand planning program is enhanced by a supply planning initiative designed to unify various legacy systems and processes into a single International Logistics Planning System (ILS) for all brands and product categories, including Footwear, Apparel, and Accessories Following the successful launch of ILS for the adidas brand in 2009, the system is set to be implemented for Reebok in 2010.
Product creation process streamlined and simplified
In 2009, the Accelerated Creation to Shelf initiative gained significant momentum with the launch of the "Fast and Lean Creation" program for adidas and Reebok This initiative focuses on enhancing the product creation process by streamlining operations, improving communication between development teams and suppliers, and minimizing administrative tasks Additionally, it aims to harmonize processes and systems across the adidas and Reebok brands, resulting in a faster, smarter, and more efficient creation process.
The program aims to enhance the development of creation calendars, reducing them to 12 months or less for a broader range of products, with a planned rollout extending until 2011 In 2009, adidas expanded the use of virtual technologies at its global creation centers to lower the costs associated with product prototypes and sales samples.
Majority of production through independent suppliers
Literature Review
Literature review
Strategic supplier partnerships refer to the long-term relationships established between organizations and their suppliers This concept is a key focus in the fields of relationship marketing, purchasing, and business-to-business marketing, emphasizing the importance of effective buyer-supplier interactions in the purchasing process.
Buyer-supplier relationships are crucial for supply chain integration and play a vital role in business success Effectively establishing and managing these relationships at every level of the supply chain enhances the strategic and operational capabilities of all participating organizations, leading to significant ongoing benefits.
A strategic partnership fosters a long-term relationship that emphasizes mutual planning and problem-solving, promoting shared benefits among the involved parties (Gunasekaran et al., 2001; Yoshino and Rangan, 1995) By collaborating closely with key suppliers, organizations can enhance product success through shared responsibilities Early involvement of suppliers in the product design process leads to more cost-effective design choices and optimal component selection (Monczka et al., 1993) This alignment allows organizations to work efficiently together, reducing wasteful efforts and streamlining operations (Balsmeier and Voisin).
1996) An effective supplier partnership can be a critical component of a leading edge supply chain (Noble, 1997)
Empirical studies in China demonstrate that strong buyer-supplier relationships significantly enhance a firm's financial performance (Liu and Wang, 2000; Luo, 1997; Yeung and Tung, 1996) Additionally, the dynamics of manufacturer-distributor relationships and guanxi play a crucial role in the success of export ventures in the Chinese market (Ambler et al., 1999).
Firms engaged in long-term relationship with their customers achieve higher profitability than firms using a transactional approach (Kalwani and Narayandas 1995)
Maloni and Benton (2000) found that strong buyer-supplier relationships have a significant positive effect on manufacturer performance, supplier performance, and performance of the entire supply chain
In the context of supply chain management, strategic supplier partnerships refer to the extent of collaboration between manufacturers and their supply chain partners This collaboration focuses on the joint management of both intra- and inter-organizational processes, aiming to optimize the flow of products, services, information, finances, and decision-making The ultimate objective is to deliver maximum value to customers while minimizing costs and enhancing speed.
Strategic collaboration is crucial for fostering ongoing partnerships aimed at achieving mutually beneficial goals It builds mutual trust, extends contract durations, and promotes effective conflict resolution, as well as the sharing of information, rewards, and risks.
Strategic supplier partnerships offer both operational and strategic benefits, unlike operational coordination, which is limited to operational gains (Heide and John, 1990; Poirier and Reiter, 1996; Sanders, 2008) These partnerships involve comprehensive intra- and inter-organizational processes, focusing on various activities related to materials, transportation, and administrative tasks (Bowersox and Morash, 1989; Hillebrand and Biemans, 2003) Ultimately, the primary goal of strategic supplier partnerships is to maximize value for the customer.
Creation means bringing something into existence Here, product creation means bringing physical products into existence through their design and production
The Product Creation Process described how an organization gets from a product idea to a tested system and all product documentation that is required for the Customer Oriented Process
In the past two decades, economists have significantly advanced our understanding of how product innovation affects macroeconomic performance Research has highlighted the impact of product creation and destruction on business cycle fluctuations, with notable contributions from scholars like Shleifer, Caballero, Hammour, and Ghironi Additionally, the importance of new and improved products for long-term economic growth has been examined by influential economists such as Romer, Grossman, Helpman, Aghion, Howitt, Klette, and Kortum.
The growth in research and product development presents a unique opportunity for companies to enhance operational effectiveness through optimized supply chain processes However, many organizations overlook the importance of these systems during the establishment of new facilities or processes By strategically designing supply chain processes, companies can achieve significant resource and cost savings, which ultimately influences both the supply chain structure and the internal processes associated with new product development.
In examining supply chain operations for new product development, it is essential to focus on the collaborative integration of the operating supply chain during the product creation phase Typically, companies engage their suppliers to request component parts, while simultaneously conceptualizing and developing the new product Subsequently, they may provide demand schedules for the required components weeks or even months prior to the product launch.
Is this enough though? How would a full supply chain understanding improve the performance and profitability for the product when it does reach the market?
The integration of supply chain processes into the new product development phase can significantly enhance collaboration among companies Key strategies include the early involvement of contributors to foster innovative ideas, the establishment of a clear design to streamline communication, the implementation of multiple stages of quality testing to ensure product integrity, and a comprehensive understanding of each contributor's role in the process By focusing on these areas, businesses can create more efficient and effective development models.
As we prepare to develop a new product that addresses a clear market opportunity with high consumer demand, it is crucial to consider not only the costs and timing of the launch but also the intricacies of the supply chain Key questions include understanding lead time costs, determining optimal inventory levels across various locations such as warehouses, retail outlets, manufacturing facilities, and during transportation, as well as deciding where inventory will be stored and the associated costs Addressing these supply chain considerations is essential for a successful product launch.
To enhance supply chain development, it is essential to initiate the process during the new product creation phase By integrating marketing's demand forecasts with product engineering and involving key stakeholders, such as purchasing teams and suppliers, companies can gain valuable insights into both the product and the evolving supply chain Additionally, incorporating potential customers in the retail sector is crucial for optimizing stocking and shipping strategies.
At adidas, we follow this below models for production creation phase:
Further decomposition of the Product Creation Process
The Product Creation Process can be decomposed in 3 processes:
Marketing: Defining how to obtain a sellable profitable product, starting with listening to customers, followed by managing the customer expectations, introducing the product at the customer and obtaining customer feedback
Project Management: Realizing the product in the agreed triangle of o Specification o Resources o Amount of time
Design Control is a critical component of the Product Creation Process, closely aligned with traditional R&D activities It focuses on the specification and design of the system, serving as the content-rich segment of the overall Product Creation Process.
The operational or project leader oversees operational management, while the architect is in charge of design control Additionally, the marketing or product manager handles the commercial aspects of the project.
Figure 3.1 adidas Product Creation Process
Sources: http://www.adidas-group.com
At adidas the most frequently conceptualized is that “New products offer the lifeblood of any dynamic business organization” With that reason the Product creation process is streamlined and simplified
Conceptual framework and Hypotheses
Basing on literatures review above, the hypotheses are built as below:
Hypothesis 1 : Strategic supplier partnership is positively related to SCP
Hypothesis 2 : Product creation is positively related to SCP
Hypothesis 3 : Purchasing/Supply planning is positively related to SCP
Hypothesis 4 : Sourcing production is positively related to SCP
Hypothesis 5 : Internal Lean practice is positively related to SCP