Assignment Addidas Supply Chain

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Nov 24, 2024

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Assignment: Supply Chain Management and Digital Transformation

Executive Summary This comprehensive report explores the multifaceted challenges and transformations within Adidas’s supply chain, triggered by external factors such as the COVID-19 pandemic, the Russia- Ukraine conflict, and the technological shifts associated with Industry 4.0 and 5.0. Each of these factors has compelled Adidas to reassess and adapt its supply chain strategy. The pandemic emphasized the need for agility and resilience in supply chain management due to production delays, shifts in consumer behavior, and inventory management challenges. The Russia-Ukraine conflict introduced additional complexities, impacting Product prices and leading to ethical dilemmas in continuing operations in the region. The advancements in Industry 4.0 and 5.0 have necessitated the integration of cutting-edge technologies such as AI, ML, IoT, blockchain, robotics, AR, VR, and 3D printing. These technologies are pivotal for enhancing operational efficiency, transparency, traceability, and customer satisfaction. The report concludes with an assessment of strategies that Adidas can implement to ensure its supply chain is ready for these challenges, focusing on advanced manufacturing technologies, sustainable practices, data analytics, workforce training, and supply chain diversification

Table of Contents 1.0 Introduction of Adidas ........................................................................................................................... 4 2.0 Appraise the impact of recent difficulties in the supply chain of Adidas ............................................... 4 2.1 Impact of the COVID-19 Pandemic ........................................................................................ 4 2.2 Impact of the Russia-Ukraine Conflict ................................................................................... 5 2.3 Impact of Industry 4.0 ........................................................................................................... 6 2.4 Impact of Industry 5.0 Rise ................................................................................................... 7 3.0 Assess and propose ways that cutting-edge technologies can be employed to overcome the supply chain obstacles in Adidas and gain competitive edge .................................................................................. 8 4.0 How will transformation to Industry 5.0 impact Adidas’s supply chain and what strategies can be implemented to ensure their supply chain is ready for these changes? .................................................... 12 4.1 Impact on Addidas’s Supply Chain ...................................................................................... 12 4.2 Strategies for Supply Chain Readiness ................................................................................ 13 5.0 Conclusion ........................................................................................................................................... 15 References ................................................................................................................................................. 15

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1.0 Introduction of Adidas Adi Dassler established Adidas, a well-known brand in the sporting goods industry, on August 18, 1949, in Herzogenaurach, Germany, with a small staff of just 47 people. Originally focused on producing top-tier footwear for sports, the company swiftly garnered acclaim with its unique three-stripe pattern. Significantly, in 1954, Adidas provided screw-in stud footwear to the German national football team, contributing to their triumph in the World Cup final. Presently, the organisation, with its main office in Herzogenaurach, has a workforce of more than 62,000 people around the globe. It continues to uphold its original mission of using sports as a means to motivate and change lives. Both professional athletes and ardent fans continue to wear Adidas, which remains a global symbol of exceptional athletic performance[ CITATION Adi23 \l 1033 ]. 2.0 Appraise the impact of recent difficulties in the supply chain of Adidas 2.1 Impact of the COVID-19 Pandemic Adidas, a world-renowned sportswear brand, was among those affected by the worldwide supply chain disruption caused by the COVID-19 epidemic. Disrupting the company's operations and finances, this crisis affected numerous critical sectors. Firstly, there were serious problems with manufacturing delays. Lockdowns and safety precautions had a significant impact on Adidas' main Asian manufacturing centres, which caused production to slow down. Factory closures caused major delays in Adidas's footwear manufacturing in Vietnam, which is a vital site (Addidas, 2021). Secondly, there was a sea change in buying habits because of the epidemic. Online shopping saw a significant surge, compelling Adidas to swiftly transformation to a business strategy focused mostly on e-commerce. The logistical problems this sudden transformation caused altered the company's supply chain dynamics[ CITATION Add21 \l 1033 ]. Thirdly, Adidas had trouble with stock control. The corporation had the challenge of dealing with an excess of unsold goods due to physical shops being closed during lockdowns. This led to higher storage expenses and the possibility of the product becoming outdated. During the

uncertain pandemic phase, it was critical to manage this surplus inventory in order to minimise financial losses (Dhaul, 2020). Finally, the pandemic demonstrated the need for a diverse and resilient supply chain. One major danger was that Adidas relied on a small number of suppliers in a few different countries for manufacturing. They rethought their supply chain strategy in light of this, making diversity a priority to lessen the impact of such interruptions in the future[ CITATION Suh20 \l 1033 ] . Figure 1: Addidas Profits in Covid-19 2.2 Impact of the Russia-Ukraine Conflict Market uncertainty and the need to strike a compromise between ethical concerns and commercial interests have been major impacts of the Russia-Ukraine crisis on global corporations, including Adidas. Product prices rose due to the war, which likely increased Adidas' manufacturing costs. Product prices particularly rose for metals like aluminium, nickel, and copper, which are vital for apparel and equipment. Adidas may have had to pay more for energy and logistics as a result of the spike in oil and gasoline prices, which hit Europe especially hard because of its reliance on Russian supplies. As a result of these price hikes, Adidas's worldwide supply chain is feeling the pinch. In addition to market uncertainty, geopolitical tensions forced Adidas to make crucial choices about the continuation of activities in the area. This required figuring out how it would affect its worldwide reputation and how people saw its brand, particularly in relation to its Russian sales and production (Nguyen Minh Ngoc, 2022). In

addition, the dispute forced Adidas to reorganise its supply chain, which might lead to extra expenses and inefficiencies as the business sought new materials and redirected operations. Given the heightened polarisation of public opinion during times of war, Adidas also had to take customer mood into account throughout this era. Careful consideration of possible backlash or support across different markets is necessary before the corporation takes any actions pertaining to the problem area that might have a major influence on customer loyalty and the worldwide impression of the brand[ CITATION LUC22 \l 1033 ] . Figure 2 2.3 Impact of Industry 4.0 Interfacing cutting-edge systems like robots, artificial intelligence (AI), and the Internet of Things (IoT) may be a nightmare. The proper administration of these technologies, however advantageous, requires a large investment in new infrastructure and trained workers. This is a large outlay of capital, and the difficulty for Adidas will be incorporating these technologies into their current infrastructure without interfering with their supply chain processes. Cyber security and data management can pose serious challenges. Data breaches and cyberattacks are becoming more common due to the growing dependence on data-driven procedures. Given the

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sheer volume of data involved, Adidas has a crucial and complicated challenge in mitigating these risks—the implementation of strong cybersecurity safeguards to safeguard sensitive supply chain information. The implementation of Industry 4.0 solutions also draws attention to a lack of personnel with the necessary capabilities. Data analysts, machine learning experts, and digital systems administrators are in high demand. Because there is a severe lack of qualified candidates in the labour market, Adidas must choose between expanding its talent pool or enhancing the capabilities of its current staff. Even though the goal of Industry 4.0 is to simplify processes, the reality is that it may make supply chain management more complicated. Adidas may face operational issues due to the need to continuously monitor, optimise, and modify linked systems. As a result, the company must evaluate and alter its strategy on an ongoing basis[ CITATION Raj22 \l 1033 ]. Figure 3: Addidas From Industry 1.0 to Industry 4.0 (Source: [ CITATION MFX17 \l 1033 ]) 2.4 Impact of Industry 5.0 Rise The introduction of Industry 5.0 has a profound impact on Adidas' supply chain and brings with it new possibilities and threats. In keeping with the principles of Industry 5.0, which prioritise customer-centric production, Adidas has launched programmes like the "miadidas" customisation service that enable consumers to personalise their Adidas products. Sustainability is fundamental to Adidas's strategy and is a critical component of Industry 5.0. Using recycled

materials and striving for a carbon-neutral supply chain show the company's dedication to sustainability, which attracts eco-conscious customers and strengthens their loyalty to the brand. With projects like SPEEDFACTORY, which use cutting-edge robots and AI to expedite shoe manufacture, Adidas takes advantage of Industry 5.0 innovations in technology. Reduced supply chain interruptions and steady production are the results of this innovation's improved efficiency and flexibility. For better manufacturing and inventory management, Adidas also uses sophisticated data analytics. Improved resource management and less overproduction are outcomes of this technology's ability to accurately forecast demand and regulate inventory levels. Similarly, Adidas has embraced Industry 5.0's focus on human-machine collaboration. In order to encourage creativity and improve product quality, the corporation spends money on training its employees. This strategy is in line with Adidas's aim to revamp its supply chain and production processes by using Industry 5.0 concepts[ CITATION Yvo23 \l 1033 ]. 3.0 Assess and propose ways that cutting-edge technologies can be employed to overcome the supply chain obstacles in Adidas and gain competitive edge The integration of cutting-edge technologies offers a pivotal opportunity for Adidas to overcome current supply chain obstacles and gain a competitive edge. We will explore various ways that cutting-edge technologies can be employed to overcome the supply chain obstacles in Adidas and gain competitive edge. 3.1 Implementation of Artificial Intelligence (AI) and Machine Learning (ML) Artificial intelligence (AI) and machine learning (ML) provide innovative solutions for addressing the supply chain difficulties faced by Adidas. These technologies provide the examination of extensive information to optimise inventory control, improve demand prediction, and speed production scheduling. Through the analysis of previous sales data, seasonal patterns, and consumer behaviours, AI systems can make precise predictions about future demand, resulting in improved inventory management methods. Adidas relies heavily on predictive skills to ensure that they maintain the most efficient stock levels, minimise surplus inventory, and prevent stockouts. AI-driven demand forecasting technologies may analyse

customer buying trends and preferences, enabling Adidas to customise its inventory to match real market needs. This strategy not only boosts consumer happiness by guaranteeing the availability of products but also improves Adidas's operational efficiency by minimising waste and storage expenses. Notably, organisations that use AI for inventory management have reported a noteworthy decrease of up to 50% in the expenses associated with maintaining goods. This underscores the considerable economic advantages of this technology (Ghobakhloo, 2020). The decrease in inventory levels may be credited to the superior capability of AI in accurately aligning supply and demand, resulting in a reduced occurrence of excessive or insufficient stock[ CITATION Mor20 \l 1033 ]. 3.2 Utilization of the Internet of Things (IoT) The Internet of Things (IoT) offers a great means to improve the efficiency and transparency of Adidas's supply chain. Through the integration of Internet of Things (IoT) devices across the supply chain, Adidas may have the capability to monitor resources and goods in real-time. This monitoring system guarantees enhanced transparency and visibility, which is crucial in effectively managing the intricate logistics of worldwide supply chains. Internet of Things (IoT) sensors affixed to products and shipping containers have the capability to transmit vital information on their whereabouts, temperature, and how they are being handled, all in real-time. This information is very important for Adidas in mitigating risks associated with product damage and loss during transportation. Temperature-sensitive products may undergo continuous monitoring to guarantee that they are kept and transported under ideal circumstances, therefore maintaining their quality. Furthermore, the use of IoT technology in supply chain management might result in a substantial decrease in operating expenses. Research has shown that organisations that use IoT technology might potentially achieve a reduction of up to 30% in their operating costs (Raja Santhi, 2022). The decrease in costs may be attributed mainly to the implementation of more efficient asset monitoring, better inventory management, and the avoidance of losses caused by damaged products. 3.3 Advancing with Blockchain Technology

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Adidas benefits from blockchain technology, which provides a secure and transparent record that improves the capacity to track and verify the authenticity of products along the whole supply chain. This decentralised digital ledger maintains a record of transactions in a manner that is very resistant to manipulation, therefore guaranteeing the integrity of product information along the whole supply chain, from production to final customers. Implementing blockchain technology in Adidas's supply chain may be very efficient in tackling the proliferation of counterfeit products. Blockchain technology may ensure the genuineness of products by creating an unalterable record of their entire journey. This, in turn, safeguards the reputation of brands and fosters trust among consumers. Consumers have the ability to track the source and path of the products they have bought, which strengthens the reliability of Adidas's supply chain. Empirical data demonstrates that the integration of blockchain technology in supply chain management has the potential to significantly enhance overall operational effectiveness. According to Raja Santhi (2022), enterprises that use blockchain technology may enhance supply chain efficiency by as much as 40%. The increase in efficiency is credited to the improved visibility, decreased occurrences of fraudulent activities, and simplified procedures facilitated by blockchain technology. 3.4 Adoption of Robotics and Automation By incorporating robots and automation into their production processes, Adidas can greatly improve operational efficiency and minimise human error. The use of robotics, particularly in jobs that involve repetition and require a significant amount of physical labour, has the potential to completely transform production processes. This transformation may result in higher levels of productivity and consistency. Adidas can use autonomous robotic arms for several operations, including material handling and assembly. This automation not only accelerates the manufacturing process but also reduces the probability of mistakes that might arise in human procedures. Robots' accuracy and velocity in performing jobs may lead to a more efficient production process, enhancing productivity and effectiveness. The use of robots in industrial processes has the potential to significantly enhance production capacity. According to a paper by Ghobakhloo (2020), the use of robots has the potential to increase production capacity by as much as 25% while also lowering labour expenses. Adidas may gain a substantial

competitive edge from this expansion in capacity and decrease in expenses. This advantage will enable them to respond more swiftly to market needs and perhaps reduce product prices. 3.5 Integrating Augmented Reality (AR) and Virtual Reality (VR) Adidas may use the combination of augmented reality (AR) and virtual reality (VR) technology to transform its product development processes. The use of AR and VR technology has the potential to greatly revolutionise Adidas' approach to design and development, as well as improve training and maintenance operations at its production plants. AR may be used to generate intricate virtual prototypes of footwear, enabling designers to visualise and alter designs in a virtual environment without the need for actual examples. This strategy not only expedites the design process but also reduces the material waste linked to physical prototypes. Virtual reality (VR), however, may be used in training situations, offering immersive and engaging experiences that improve the skill development of Adidas's employees. Empirical evidence suggests that the integration of augmented reality (AR) and virtual reality (VR) technologies in the process of product development has shown a significant reduction in the time required to bring new goods to the market, with a potential decrease of up to 30% (Ghobakhloo, 2020). The decrease in size is credited to the more efficient design process and improved cooperation facilitated by these technologies. 3.6 Implementing 3D Printing Adidas can use 3D printing technology to drive innovation in manufacturing by enabling fast creation of prototypes, personalised manufacture, and production based on immediate demand. Utilising 3D printing technology may greatly decrease the amount of time it takes to produce and distribute things, especially when it comes to creating personalised or exclusive products. Adidas has the capability to use 3D printing technology in order to produce personalised sneakers that are specifically designed to meet the unique requirements of each individual consumer. This technology enables extensive customisation in both design and fit, providing consumers with a distinctive value proposition. In addition, 3D printing expedites the creation of first models, allowing Adidas to swiftly generate and evaluate novel shoe concepts without the protracted procedures often linked to shoe production. Empirically, the use of 3D

printing in the footwear sector has shown a reduction in manufacturing lead times of up to 70% (Xiao, 2022). The significant decrease in production is a result of removing conventional manufacturing processes and the capability to directly manufacture components from digital models. 4.0 How will transformation to Industry 5.0 impact Adidas’s supply chain and what strategies can be implemented to ensure their supply chain is ready for these changes? The transformation to Industry 5.0 represents a significant shift in manufacturing and supply chain management, with a focus on customization, sustainability, and the integration of advanced technologies. For Adidas, this transformation will have profound implications on its supply chain operations. To ensure readiness for these changes, Adidas needs to implement strategic initiatives aligned with Industry 5.0 principles. 4.1 Impact on Addidas’s Supply Chain The transformation to Industry 5.0 is poised to significantly restructure Adidas' supply chain, bringing in new facets of operations and strategic planning. Adidas is adapting to suit the changing needs of the market and taking advantage of technical progress, which will enable it to better address future problems and opportunities. Central to this transformation is the emphasis on customisation and personalisation. Adidas will embrace more flexible and adaptable supply chain processes as a result of Industry 5.0's focus on catering to specific customer preferences. The incorporation of technology such as 3D printing and artificial intelligence is essential in this context. The "miadidas" service of Adidas, which provides customised products, is a commendable step towards this trend. These services need substantial modifications in manufacturing processes and logistics, requiring a transformation from mass production to more flexible, demand-driven models. Adidas will probably need to reorganise its production and distribution networks in order to meet the specific requirements of personalised goods. Adidas must include sustainability and eco-friendly practices as a fundamental component of Industry 5.0 in its operations. The firm has made significant progress in this

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regard by using recycled materials in its products and striving for a supply chain that is carbon- neutral. The subsequent action is to integrate sustainability extensively across all facets of the supply chain, including the procurement of environmentally friendly resources, the implementation of eco-conscious production methods, and the optimisation of logistics to minimise carbon emissions. This dedication to sustainability is not just a moral position but also a reaction to the increasing customer need for ecologically conscious products. Adidas's use of cutting-edge technologies like AI, IoT, and robots is an essential element of Industry 5.0, which will profoundly transform their production and logistical processes. For example, the use of AI in predictive analytics may greatly improve inventory management, enabling Adidas to forecast market trends and adapt production appropriately. The use of automated warehouses and robots in production has the potential to enhance efficiency, lower expenses, and provide fast expansion of operations in order to adapt to fluctuating market requirements. The SPEEDFACTORY effort of Adidas, which employs automated technologies for shoe manufacturing, serves as a prime example of this method. Moreover, a pivotal aspect of this metamorphosis is the increased cooperation between people and robots. Adidas must prioritise the enhancement of its workforce's skills, allowing them to collaborate proficiently with innovative technology. This entails not just providing technical instruction but also cultivating a corporate environment that promotes creativity and flexibility. Through the integration of technology assistance, Adidas may attain elevated levels of creativity and quality in its goods by augmenting human knowledge. Finally, the ability of the supply chain to withstand and recover from challenges in a complex and ever-changing market environment is crucial. Adidas has to establish a supply chain that is robust and flexible, able to effectively handle unexpected events and adjustments in the worldwide market. To address this, it is necessary to broaden the range of suppliers, investigate the possibility of establishing manufacturing facilities closer to the target market or inside the same country, and create thorough contingency plans to mitigate the impact of probable interruptions.

4.2 Strategies for Supply Chain Readiness To navigate the transformation to Industry 5.0 successfully, Adidas must implement strategic measures to ensure its supply chain is not only ready but also at the forefront of innovation and efficiency. The following strategies are crucial in this endeavor: i. Investment in Advanced Manufacturing Technologies : Adidas's investments towards technologies such as 3D printing and AI is crucial for improving their ability to personalise products. The SPEEDFACTORY programme exemplifies the ability of automated, localised manufacturing facilities to swiftly adapt to market developments and consumer preferences. This method enables the creation of customised products as needed, resulting in decreased lead times and inventory expenses. Adopting these technologies has the potential to completely transform Adidas's production process, enhancing its flexibility and ability to quickly meet customer demands. Illustrations showcasing the decrease in manufacturing time and the expansion of customisation choices resulting from SPEEDFACTORY might effectively showcase the effectiveness of these expenditures. ii. Sustainable Supply Chain Practices : Adidas's operating concept is firmly grounded on sustainability. It is crucial to promote sustainability efforts, such as enhancing the utilisation of recyclable materials and striving for a supply chain that has no net carbon emissions. Adidas has the option to establish and openly disclose explicit sustainability objectives, monitoring advancements in the reduction of carbon emissions and waste. One way to demonstrate this is by using a table that displays the annual progress in sustainability indicators, which strengthens the company's dedication to environmentally friendly initiatives. iii. Data Analytics and AI Implementation : Utilising modern data analytics and AI is crucial for optimising the supply chain. Through the analysis of customer data, Adidas can enhance its ability to predict trends, effectively control inventory, and reduce waste to a greater extent. For instance, the use of AI-powered analytics might accurately forecast sudden increases in demand in certain regions, enabling Adidas to proactively adapt their production and distribution strategies. An AI analytics implementation may be effectively shown by a graph

illustrating the enhancements in forecast accuracy or inventory turnover, hence showcasing the advantages of this technique. iv. Workforce Upskilling and Training : Another crucial approach is to equip the workers for Industry 5.0. Adidas should provide training to its staff on emerging technologies and cultivate a culture that promotes ongoing innovation. Facilitating skill development may be achieved by establishing training programmes and forming relationships with technology suppliers. For example, conducting seminars on artificial intelligence and machine learning, or engaging in partnerships with technology companies for practical training, may provide staff with the essential competencies to excel in a technologically sophisticated setting. v. Supply Chain Diversification and Flexibility : It is essential to improve the resilience of the supply chain. Adidas need to broaden its range of suppliers and investigate the possibilities of near-shoring or on-shoring manufacturing. This approach decreases reliance on individual suppliers and geographical areas, therefore minimising the risks linked to interruptions in the global supply chain. An illustrative map showcasing Adidas's diverse supplier network or a comparative table highlighting lead times and prices before and after broadening the supply chain might emphasise the efficacy of this strategy. 5.0 Conclusion Adidas's supply chain transformation requires a deliberate and comprehensive strategy. Embracing technological progress, promoting sustainability, and improving labour skills are essential for adapting to Industry 5.0. By doing this, Adidas will enhance operational efficiency, efficiently meet market needs, and sustain its competitive advantage in the ever-changing global market. Implementing these tactics effectively will guarantee that Adidas's supply chain is resilient, flexible, and well-prepared for future obstacles and possibilities.

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References Addidas, 2021. WORKING CONDITIONS IN OUR SUPPLY CHAIN. [Online] Available at: https://report.adidas-group.com/2021/en/group-management-report-our- company/sustainability/supply-chain.html Adidas, 2023. About. [Online] Available at: https://www.adidas-group.com/en/about/ Badulescu, Y., 2023. Implementing Industry 5.0 and its impact on Supply Chain. [Online] Available at: https://www.linkedin.com/pulse/implementing-industry-50-its-impacts-supply-chain- badulescu-ph-d#:~:text=This%20will%20require%20the%20integration,3%5D%20into%20supply %20chain%20planning.&text=Additionally%2C%20Industry%205.0%20will%20require,social%20resp Dhaul, S., 2020. COVID-19 has changed the way footwear brands make and sell footwear. [Online] Available at: https://www.dmodot.com/blogs/shblog/covid-19-has-changed-the-way-footwear-brands- make-and-sell-footwear Ghobakhloo, M., 2020. Industry 4.0, digitization, and opportunities for sustainability. Journal of Cleaner Production, Volume 252. Lu, D., 2011. Fundamentals of Supply Chain Management . s.l.:bookboon.com. MAGUIRE, L., 2022. Adidas predicts €250 million sales hit from Russia-Ukraine war. [Online] Available at: https://www.voguebusiness.com/companies/adidas-predicts-euro250-million-sales-hit- from-russia-ukraine-war#:~:text=Adidas%20is%20aiming%20for%20sales,amid%20the%20war%20in %20Ukraine. MFXR, 2017. Adidas: Front-running digitalization in sports retailing. [Online] Available at: https://d3.harvard.edu/platform-rctom/submission/adidas-front-running-digitalization-in- sports-retailing/

Nguyen Minh Ngoc, D. T. V. N. H. T. P. M. H. N. T. A. L. D. H. A. N. T. T. N. S. T. A. L. Q. T. V. T. P. D. a. L. T. H. T., 2022. Russia-Ukraine war and risks to global supply chains. International Journal of Mechanical Engineering, 7(6). Raja Santhi, A. a. P. M., 2022. Pandemic, War, Natural Calamities, and Sustainability: Industry 4.0 Technologies to Overcome Traditional and Contemporary Supply Chain Challenges. Logistics, 6(4), p. 81. Stephens, S., 2001. Supply Chain Operations Reference Model Version 5.0: A New Tool to Improve Supply Chain Efficiency and Achieve Best Practice. Information Systems Frontiers, Volume 3, p. 471–476. Villar, A. P. S. &. B. O., 2023. Towards Supply Chain 5.0: Redesigning Supply Chains as Resilient, Sustainable, and Human-Centric Systems in a Post-pandemic World. Operations Research Forum, 4(60). Witjaksono, G. C., 2023. How Effective Supply Chain Management of Adidas. Xiao, Y.-Q. a. C.-W. K., 2022. Review on Development and Application of 3D-Printing Technology in Textile and Fashion Design. Coatings, 12(2).

Assignment Addidas Supply Chain

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