The three stripes in Asia

(This interview was published in our Sept/Oct 2011 Supply Chain Asia Magazine issue)

Glenn Bennett, member of the executive board of the Adidas group responsible for global operations, talks to Turloch Mooney about the supply chain operations of the global sports brand and how they are supporting ambitious business expansion plans in Asia and beyond.

Would you provide an overview of the current operations of the Adidas group in Asia, in terms of sourcing, distribution and retail operations for your major brands. Would you also quantify the volume of business that you do in Asia in terms of sales and volume of product sourced and distributed in the region.

Asia is a very important region for the Adidas group, both in terms of sourcing from the region as well as sales achieved in the region. In 2010, Adidas group sales reached €12bn ($17.2bn) worldwide with €2.972bn coming from Asia. Greater China alone is our second-biggest market worldwide with sales of €1bn in 2010.

In terms of sourcing, Asia is by far the most important sourcing region for the Adidas group. While China is our most important sourcing country, other key sourcing countries in the region include Indonesia, Vietnam and Thailand. Seventy-five percent of our suppliers are located in Asia. In terms of sourcing by category, 97 percent of all footwear, 82 percent of all apparel and 98 percent of all accessories are sourced from Asia.

How much of the product that you source in Asia is actually sold in the region and how much is exported to other markets? How much of your packing materials are sourced in Asia?

We are sourcing the vast majority of our products from Asia. While Asia is an important market for us, a big amount of the products we source in Asia are exported to other parts of the world. Unfortunately I can’t give you exact figures here but you can do the maths yourself: many Adidas, Reebok, TaylorMade- Adidas Golf and Rockport products made in Asia are sold to consumers all over the world.

What kind of growth is the group expecting in Asia over the coming five years?


Asia will be one of our major regions for growth over the next couple of years. Greater China is expected to contribute 50 percent to our growth until 2015 together with the US and Russia/CIS.

How does the Adidas group leverage the scale of its supply chain for improved operations, including better flexibility and risk mitigation?

Overall, the scale of our business enables us to move around the development and production of product  in order to balance the demand coming in from our many subsidiaries around the world. By doing so, we can ensure a balance of product availability and cost impact for our business.

In certain situations, our team will commit to early production before our subsidiaries do so in order to ensure on-time availability and full utilisation of available factory capacity. At the same time, the Adidas group has various business models across our sales channels (wholesale, own retail, eCommerce), which adds complexity to our supply chain. We operate a short lead time production capability, which allows us to drive a mixture of replenishment models and read-and-react type approaches across our business.

How do Asia supply chain operations help to support growth yet limit risk in markets with high levels of change, risk and growth?

From our point of view, working hand-in-hand with our suppliers and other partners is the key to success. Our team shares long term volume plans with our suppliers to ensure that capacity and capability requirements are clear to everyone and appropriate plans are developed in time. We have established a very close working relationship with our suppliers which is extremely helpful when it comes to managing challenges together.

What is your approach to outsourcing supply chain operations?

The vast majority of our products are manufactured by external suppliers, most of them in Asia. We also outsource operations in other fields of our supply chain, i.e. freight movements. While we have outsourced these operations, we still operate under a globally negotiated agreement. Again, working closely with our partners ensures that we are in a position to give our subsidiaries the visibility they need when it comes to delivery dates and status updates.

What information systems do you employ to support your supply chain operations globally and in Asia. in what ways has the Adidas group been leveraging it to improve supply chain efficiency and capability?

Together with our IT team, we have established a single back-bone system for the entire Adidas group’s purchasing requirements which is based on SAP. The system brings all steps along the supply chain – from factories to subsidiaries – together. This ensures full transparency across the entire supply chain. Rolling out this system globally has definitely helped us become faster and, as a result, closer to our consumer which is what our team here is ultimately striving for every day.

Can you please describe to our readers what is ‘route 2015’? How will your supply chain operations help you to meet the targets of route 2015 and how will it affect the structure of your supply chain operations in Asia?

Route 2015 is the name of the Adidas group’s strategic business plan. It was presented last November: our goal is to grow the business of the entire Adidas group to €17bn in 2015; to target a compounded annual earnings growth rate of 15 percent, and to reach an operating margin of 11 percent sustainably by 2015 at the latest. These goals are all based on the group’s strong brands, premium products, extensive global presence and its commitment to innovation and the consumer.

Our global operations organisation plays an important role in achieving the group's Route 2015 goals. After all, our team is responsible for ensuring that quality products are created, tested, commercialised, mass produced and shipped to over 110 countries around the world. Global operations’ vision is to be closest to every consumer and 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.

The Route 2015 strategic business plan will require changes in how global operations operates

within the group – not only in Asia but globally. We have therefore formulated our strategic plan in close alignment with the needs of our brands and sales functions. Throughout the next five years, global operations will focus on five strategic priorities for the group:

  • Ensuring cost competitiveness
  • Providing industry-leading availability
  • Enabling late ordering
  • Supporting the group’s growth projects
  • Modernising the group’s infrastructure

By delivering on these initiatives, we will not only enable the group to achieve its Route 2015 goals, but will also ensure that our supply chain remains a competitive advantage in making us the partner of choice for both consumers and customers.

Adidas has some ambitious environmental goals, including use of 100 percent ‘better Cotton’ by 2018. How will the supply chain operations assist in meeting these goals and how will meeting these goals affect the structure of your supply chain operations in Asia?

In March 2011, we presented our environmental strategy, a five-year plan to reengineer the company’s approach to environmental management by focusing on significant improvements along the entire value chain. As part of the strategy, which was published together with the group’s 2010 Sustainability Report, the Adidas group is committed to using 100 percent 'Better Cotton' by 2018.

The strategy is based on extending existing programmes to deliver process efficiencies at every stage of the value chain: from product design, development and sourcing to logistics, own sites and IT systems. As a result, the improved value chain enables the company to offer more sustainable products to consumers, thus improving the group’s environmental footprint.

As part of developing our environmental strategy, we established an Environmental Sourcing Strategy (ESS) to align the sustainability efforts and activities in our supply chain with those of the overall Adidas group environmental strategy 2015. The ESS aims to give our suppliers a clear sense of direction in tackling their environmental impacts. We will review progress each year and adjust the Strategy accordingly as we approach 2015.