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Global Operations

The adidas Group’s Global Operations function manages the development, production planning, sourcing and distribution of the majority of our products. The function continually strives to both increase efficiency throughout the Group’s supply chain and to ensure the highest standards in product quality and delivery performance for our customers at competitive costs.
Enforced vision: closest to every consumer The vision of the Global Operations function is to be closest to every consumer. By delivering on each of its five strategic pillars see 02, Global Operations strives to provide the right product to consumers – in the right size, colour and style, in the right place, at the right time, across the entire range of the Group’s channels and brands. Global Operations has a strong track record for establishing state-of-the-art infrastructure, processes and systems. Over the last four years, the function has successfully consolidated and improved legacy structures, reducing complexity and operating cost for the Group. By taking strong ownership for quality, cost and availability, we have proven that we are able to respond to the fast-changing requirements of both our consumers and customers. The Route 2015 strategic business plan will require changes in how Global Operations operates within the Group. Global Operations has therefore formulated its strategic plan in close alignment with the needs of our Global Brands and Global Sales functions and in consideration of several external factors impacting the business today. These include anticipated increases in commodity prices, labour and transportation costs, social and regulatory requirements and demand growth as well as increasing demand volatility.
Throughout the next five years, Global Operations will focus on five strategic priorities supported by 15 initiatives for the Group: – Ensuring cost competitiveness – Providing industry-leading availability – Enabling later ordering – Supporting the Group’s growth projects – Modernising the Group’s infrastructure. By delivering on these initiatives, the function will not only enable the Group to achieve its Route 2015 goals, but will also ensure our supply chain remains a competitive advantage in making us the partner of choice for both consumers and customers. The first two priorities in Global Operations’ 2015 strategic plan ensure the function continues to deliver upon the Group’s basic requirements. The remaining three priorities are aimed at positioning Global Operations ahead of industry competition.
Global Operations in go-to-market process

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GLOBAL OPERATIONS

Marketing
Briefing

Design
Concept

Product Development
Product creation

Sourcing
Manufacturing

Supply Chain Management
Distribution

Sales Subsidiaries
Sales

Business Solutions
Processes and infrastructure of the future

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Group Management Report – Our Group

Global Operations

Global Operations will focus on further optimising product creation through a more efficient material and colour selection process. Enabling later ordering: Enabling later ordering is a cross-functional priority in Global Operations focused on allowing our customers to order our products closer to the time of sale. Preparations are also underway to bring apparel lead times down to 60 days or less over time. the function will continue delivering its existing long-term improvement programmes such as Fast and Lean Creation for apparel. Since the majority of adidas footwear is already on 60 days. with the adidas NEO label. which will enable us to manufacture closer to our key markets to deliver and replenish products faster. p. Global Operations will focus on evolving existing customisation models in support of business expansion. shorten lead times and improve overall quality. particularly within our eCommerce channel. This will support our Route 2015 goal of reducing the lead times across the Group’s product portfolio to 60 days or less. This includes monitoring macroeconomic trends. Enhance the flexibility and responsiveness of both the Global Operations Sourcing and Supply Chain Management organisations to satisfy fast-changing market needs. Global Operations strategic pillars Replenishment 02 Provide high product availability and timely and fast deliveries to Wholesale and Retail customers while minimising finished goods inventory. An example of this is the opening of our new Spartanburg distribution campus designed to support growth in the USA. The development of risk-oriented planning and production models for selected product ranges as well as the shift from buying to inventory planning at our distribution centres both form key requirements for the successful delivery of this initiative. the roll-out of the Global Procurement Solution platform and the expansion of virtualisation to new product categories and the design teams. Modernising the Group’s infrastructure: Global Operations will continue to focus on building the required infrastructure. Also under this priority. For example. Retail and eCommerce as well as other key brand programmes such as customisation see Global Brands Strategy. The Profitability Management department within Global Operations assumes a central role in realising cost competitiveness by driving our strategic costing efforts and optimising our buying strategies. coupled with increased automation in manufacturing. These improvements are expected to enhance profitability for the Group and ensure we provide our consumers with the best value proposition in the industry. Global Operations will support this business with fast fashion creation. consolidation of legacy systems and distribution structures. such as the adidas NEO label. 82. the initiative will focus on immediately reducing production lead times on the majority of Reebok footwear from 90 days to 60 days. The above improvements involve establishing a greater regional source base for apparel. the change will allow us to align sales processes across the brands and improve efficiencies. End-to-End Profitability Adaptive Supply Network End-to-End Planning Accelerated Creation to Shelf Group Management Report – Our Group Global Operations 107 . This will include further process simplification. processes and systems to support the Group’s growth plans. Global Operations will further shorten our order-to-delivery lead times. Build capabilities. p. smarter and more efficient product creation to enhance the Group’s topline and bottom-line growth. Specifically. 84. sourcing and supply chain management capabilities. processes and technologies that drive faster. will enhance productivity. Supporting the Group’s growth projects: Global Operations will support the growth projects outlined in the Group’s Route 2015 plan. Optimise the Group’s demand and supply planning system landscape to improve efficiency. Global Operations will continue to build the processes and systems backbone with the ultimate goal being a demand-driven supply chain that leverages existing short lead time production models to improve availability without excessive inventory see Retail Strategy. facilitating buying decisions that are based on better market knowledge. 87 and Global Sales Strategy. This. to identify the future impact on product costs as well as the ongoing financial assessment of the adidas Group’s supply base. Providing industry-leading availability: Building on the solid platform that has been established to ensure product availability. Finally. key market programmes. For Retail. This will be accomplished by establishing and offering a set of tailored and sophisticated replenishment models to our customers via improvements in our planning systems and processes. to support the Group’s controlled space initiatives. p.Ensuring cost competitiveness: As part of this priority. Identify key cost and profitability drivers and their interrelationships to optimise decision-making to mitigate financial risks and ensure the longterm profitability of the Group and its supply base. transparency and cross-functionality of processes across the Wholesale and Retail segments as well as Other Businesses. as well as the creation of state-of-the-art systems required to support new business demands.

apparel and accessories. Our Global Operations function manages product development. In addition. we are now servicing our wholesale customers as well as our own-retail and e-commerce activities in the USA across the brands adidas. but exclude local sourcing partners. In order to quickly seize short-term opportunities in their local market or react to trade regulations. Another major achievement in 2010 was the official implementation of the Fast and Lean Creation process for footwear. it increased in footwear and hardware. Local purchases. with the approval of our Social and Environmental team. In total. FlexPLM. We also successfully completed several important system simplification projects. While we provide them with detailed specifications for production and delivery. With this state-of-the-art facility. we promote adherence to social and environmental standards throughout our supply chain see Sustainability.g. Cambodia). Sweden (1). but instead utilise their own purchasing organisation. Due to the specific sourcing requirements in their respective fields of business. The increase in footwear was the result of the significant growth in volumes and expansion into new sourcing countries (e. In May. these suppliers possess excellent expertise in cost-efficient. the GPS 2. USA. we enforce strict control and inspection procedures at our suppliers and in our own factories. Reebok and adidas Golf. 75% were located in Asia. reporting and communication platform. TaylorMadeadidas Golf and Rockport – with 80% of our customers receiving their orders in three days or less. commercialisation and distribution. In order to ensure the high quality consumers expect from our products. Reebok and Ashworth purchase orders are now procured through one common platform covering the entire flow from market demand. Product creation teams are now developing around 75% of all footwear directly with factories. Reebok and adidas Golf. we saw the formal opening of the Group’s Spartanburg distribution facility in South Carolina. 16% were located in the Americas and 9% in Europe see 03. Fast and Lean Creation for apparel also reached a major milestone with the launch of a new product lifecycle management system. Global Operations teams contributed to both the Group’s Virtualisation programme by creating over 18. adidas. Also in 2010. subcontractors.adidas-Group. Global Operations worked with 270 independent manufacturing partners. Finland (1). and also supervises sourcing for our Wholesale and Retail segments as well as for adidas Golf see 01. Footwear production 1) in million pairs 05 201 221 171 219 2007 2008 2009 2010 1) Figures include adidas. The latest list of our supplier factories can be found on our website www. Reebok and adidas Golf. We also reduced the total number of supply planning systems across the adidas Group from three to one. com/en/sustainability/suppliers_and_workers. factory planning through to supplier invoice procurement and subsidiary billing. Overall number of manufacturing partners stable In 2010. Of our independent manufacturing partners. Global Operations made significant progress on key projects.000 articles as 3D files.Several major programmes reach important milestones in 2010 Throughout 2010. 32% of all suppliers were located in China. the USA (4). 108 Group Management Report – Our Group Global Operations . Rockport. and to the “Fit & Size” programme which involved the adjustment of over 500 base patterns to current consumers’ body shapes for an improved overall fit of garments. establishing a common planning. 120. however. second-tier suppliers and licensee factories.0 release replaced five major IT applications. Reebok-CCM Hockey and the Sports Licensed Division are not serviced through Global Operations. Footwear production by region 1) 04 97% Asia 2% Europe 1% Americas 1) Figures include adidas. within just eight months of the project launch. also source from selected local suppliers outside the realm of Global Operations. p. TaylorMade. high-volume production of footwear. The adidas Group also operates a limited amount of own production and assembly sites in Germany (1). primarily located in Asia. Majority of production through independent suppliers To minimise production costs. sourcing agents. Reebok. Canada (4). While the number of suppliers in apparel decreased as a result of further rationalisation of the supply base. Group subsidiaries may. we outsource over 95% of production to independent third-party suppliers. China (1) and Japan (1). Suppliers by region 1) 03 75% Asia 16% Americas 9% Europe 1) Figures include adidas. account only for a minor portion of the Group’s total sourcing volume. The Reebok and Ashworth brands were integrated into the long-term roll-out of the adidas Group’s Global Procurement Solution (GPS). laying the foundation for the introduction of creation calendars of 12 months or less.

Rockport purchased approximately 8 million pairs of footwear in 2010. and was subsequently finished in our own screen-printing facilities in the USA. the bulk (i. respectively (2009: 92% and 78%). TaylorMade and Reebok-CCM Hockey sourced 98% and 72% of their hardware volumes from Asia. The largest factory accounted for 37% of the total sourcing volume of the Rockport brand. At the same time.e. Production in Europe and the Americas combined accounted for 3% of the sourcing volume (2009: 3%) see 04. the footwear volumes sourced from Cambodia almost tripled in 2010 from a low comparison base. China and Japan. Group Management Report – Our Group Global Operations 109 . The total 2010 hardware sourcing volume was approximately 48 million units (2009: approximately 34 million units). 67% of adidas and Reebok branded hardware produced in China In 2010. Reebok and adidas Golf. Indonesia (5%) and India (3%). representing 12% of the volume (2009: 11%). The remaining 2% was sourced via European countries see 08. Reebok and adidas Golf. Reebok and adidas Golf. followed by Thailand with 13% and Indonesia with 13%. Products were primarily sourced from factories in China (67%). China was the largest source country. The largest apparel factory produced approximately 9% of this apparel volume in 2010 (2009: 11%). Reebok and adidas Golf was produced in Asia (2009: 97%). our footwear suppliers produced approximately 219 million pairs of shoes (2009: approx. China represents our largest sourcing country with approximately 39% of the total volume. representing 36% of the produced volume. followed by Vietnam with 20% and Pakistan with 11%. At TaylorMade. accounting for 67% of the sourced volume. Vietnam (25%). the majority of golf club components were manufactured by suppliers in China and assembled by TaylorMade in the USA. The Sports Licensed Division sourced approximately 23 million units of apparel and 15 million units of headwear (2009: 20 million and 14 million. Apparel production by region 1) 06 82% Asia 12% Europe 6% Americas 1) Figures include adidas. The Americas accounted for 6% of the volume (2009: 6%) see 06. the overall representation of China in our sourcing mix declined 2 percentage points. such as balls and bags. we sourced 82% of the total apparel volume for adidas. 239 million units) see 07. Reebok and adidas Golf from Asia (2009: 83%). with the largest factory accounting for 21% of production see 09. Apparel production 1) in million units 07 252 284 239 301 2007 2008 2009 2010 1) Figures include adidas. As part of our strategy to increase the regional diversity of our supplier base to meet the ongoing needs of our business. Europe remained the second-largest apparel sourcing region. In 2010. Reebok and adidas Golf. The majority of purchased apparel products was sourced as unfinished goods from Latin America (85%) and Asia (15%). In total. The year-over-year increase was driven by the strong sales growth in 2010 and a low comparison base in 2009 due to inventory clean-up activities. The majority of headwear sourced was finished products manufactured predominately in Asia (97%) and the USA (3%). while small portions were sourced from the Americas (particularly Canada) and Europe. China remained our largest source country. both brands sourced a portion of hardware products in the Americas. which represents an increase of 27% versus the prior year. followed by Vietnam with 31% and Indonesia with 22%. Our largest footwear factory produced approximately 9% of the footwear sourcing volume (2009: 11%). Hardware production by region 1) 08 98% Asia 2% Europe 1) Figures include adidas. respectively). Volume of apparel production increases In 2010. The majority of this volume was also produced in Asia. 98%) of adidas and Reebok branded hardware products. Hardware production 1) in million units 09 39 42 34 48 2007 2008 2009 2010 1) Figures include adidas. Reebok-CCM Hockey sourced around 2 million units of apparel in 2010 (2009: approx. In addition. our suppliers produced approximately 301 million units of apparel in 2010 (2009: approx. 2 million units). 171 million pairs) see 05.China’s share of footwear production decreases 97% of our total 2010 footwear volume for adidas. was also produced in Asia (2009: 98%). In addition.