Adidas - Sports and Logistics

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Table of Contents

1. Introduction……………………………………………………………….…...2

2. Supply Chain Structure………..………………………………………………2

3. Supply Chain Approach………….…………………………………................5

4. Logistics Overview……………………………………………………………8

1. Introduction

Adidas is a German multinational corporation that designs and produces sports apparel, shoes and accessories based in Herzogenaurach, Bavaria, Germany. Adidas is the biggest sports clothing manufacturer in Germany and Europe and the second largest in the world following Nike.

In fact, the official name of the concern is adidas AG (adidas Group), which includes also the Reebok sportswear company, TaylorMade-Adidas golf company, FC Bayern Munich and Runtastic, an Austrian fitness company (Wikipedia, 2016).

The product range that the company provides is not only limited to the sport shoes, but also it produces shoes, shirts, watches, sunglasses, bags and other sports-related goods.

The initial founder of Adidas Adolf Dassler established the company in 1948. Later on, his elder brother Rudolf Dassler joined him and the company became “Dassler Brother Shoe Factory” (Gebrüder Dassler Schuhfabrik). However, after some time, brothers decided to be separated: Rudolf Dassler based his own company Puma, registered in 1949 in the same city in Germany. Meanwhile, Adolf Dassler officially changed the name of the company to adidas AG.

The headquarters of the Adidas are located in Germany, but it also has its global affiliates in Portland OR, Hong Kong, Toronto, Taiwan, England, Japan, Australia, and Spain, which constitute the comprehensive distribution network. The company’s revenues amounted to €14.88 billion in 2012 (The Business of Fashion, 2016).  

1. Supply Chain Structure

As the company has to manage its vast amount of subsidiaries all around the world, it has global and multi-layered supply chain with many different types of business associates (both directly and indirectly contracted). The adidas AG has taking the advantage of outsourcing some production activities abroad, which enables the company to reduce the costs and concentrate more on its core competencies (adidas Group, 2008).

According to the latest Sustainability Progress Report, the company worked with 1133 independent plants worldwide, which produce the Adidas products in 61 countries (Sustainability Progress Report, 2014).

                                                           Figure 1. The distribution of the suppliers by continents.             [pic 4]

In 2014, the top five countries per region by number of supplier places were:

• The Americas: United States, Brazil, Canada, Argentina and Mexico
• Asia: China, Korea, Vietnam, Indonesia and Japan
• EMEA: United Kingdom, Germany,                            Source: Adidas Group, 2014.

Turkey, Italy and Spain (adidas Group, 2014).                                                                              As you can see from the pie chart above, Adidas AG production is located in five different continents: America, Middle East, Europe, Asia Pacific and Africa, which obviously indicates and proves how global the company is. The main strengths attributable to the company’ partnerships is the impact that it has as regards to social and environmental abidance. The main direction of Adidas Group’s fortification is contracting fewer with larger factories for higher order levels (adidas Group, 2008).

Different sourcing relationships

Direct sourcing model.
The adidas Group keeps direct contractual relationships with its core suppliers, who are focally managed by Global Operations. Global Operations is a Group function, which supervises product development, commercialisation, distribution and supervision of the production of clothes, footwear and accessories for the adidas, Reebok and TaylorMade-adidas Golf segments. Mainly this type of suppliers manufacture the prevalent percentage from the total supply volume of the adidas Group (adidas Group, 2008).
Indirect sourcing model.
Another portion of the company’s sourcing volume is provided by agents or is manufactured under licence, constituting only a tiny share. In this case, agents place orders with their favored suppliers. Licensees may make orders either directly with their supplier factories or use agents as intermediaries. The role of indirect sourcing is that it supplements the direct supply chain by meeting specific requirements, which cannot be maintained by Global Operations (adidas Group, 2014).                                                                            

Local market production.
In some cases, adidas Group affiliates can also receive sources from local factories in specific countries in order to capture fast the short-term possibilities of their local markets, to satisfy a niche market requirements, or sometimes to respond to specific trade regulations. These suppliers require authorisation from the Social and Environmental Affairs team in order to produce the sportswear (adidas Group, 2014).                                                                              

Types of suppliers

1. Main suppliers. They have a direct contractual relationship with the adidas Group for the supply of products, whether for export or domestic market consumption.
2. Subcontractors. These are factories that have been subcontracted by the suppliers to carry out manufacturing operations the main suppliers are not able to perform in their own facility.
3. Material and other service providers. These suppliers may not have a direct business relationship with the adidas Group, but they can supply goods and services to the main suppliers.
4. Licensees. Independent companies which manage the design, production and distribution of specific products, under licence to the adidas Group. In 2014, the adidas Group operated with 67 licensees, whose suppliers sourced products from 448 factories in 49 countries.
5. Agents. Independent companies that act as intermediaries to supply product manufacturing, supervise the manufacturing processes, and sell finished products to the Group (adidas Group, 2014).                                                                              

Figure 2. Supplier Relationship Overview.[pic 5]

Source: adidas Group, 2014.                                                                            

1. Supply Chain Approach

Working with suppliers

The key strengths of the adidas AG Company are strong management team and good corporate strategy in North American and overseas markets. The most important fact is that the company does not only care about its internal employees, but also it takes into consideration the workers in suppliers’ factories, who are the central issue in the company’s sustainability programme. The company possess its own supply chain of conduct (“Workplace Standards”), which also covers workers’ health and safety and provisions to ensure environmentally sound factory operations. Moreover, to enforce compliance with the Standards the Group has a multi-level monitoring and enforcement process in place, comprising the use of an innovative rating system for the evaluation of its suppliers (adidas Group, 2014).