Merits and Limitations of Adidas LIFO, FIFO, EOQ, JIT, and BPR in Business Operations

This report discusses the merits and limitations of Adidas LIFO, FIFO, EOQ, JIT, and BPR in improving business operations. It explores their impact on supply chain management and quality improvement. The report also provides recommendations for Adidas to enhance its operations.

Business Operations

Table of Contents
INTRODUCTION......................................................................................................................3
MAIN BODY.............................................................................................................................3
The merits and limitations of Adidas LIFO, FIFO and EOQ in supply chain management..3
The merits and limitations of Adidas JIT and BPR is improving business operations..........7
The impact of TQM, ISO 9000 and Six Sigma in improving quality in the operations of
Adidas....................................................................................................................................9
RECOMMENDATIONS.........................................................................................................10
CONCLUSION........................................................................................................................11
REFERENCES.........................................................................................................................12
Books and journals...............................................................................................................12

INTRODUCTION
` There is continuous development within the infrastructure and technology which is
used for doing the business in an economy. If it is talk about global level then there is also
changes between the climate geology geographical conditions infrastructure and economy of
different nation which impacted on the business operations directly. Business operations can
be defined as outcome of harvesting of the value from the assets owned by the business.
These assets can be either physical or intangible which are required to perform different
business activity. Adidas is the chosen organisation in this report. It is a multinational
corporation which is founded and headquartered in Germany. Company is known for
designing and manufacturing of shoes, clothing and accessories where it is a largest post wear
manufacturer in Europe and second largest in the world. The company was started by Adolf
DASSLER from his mother's house in 1924. This report is consistent Adidas where different
aspects related to Adidas supply chain management operations and quality of within the
business operations will be discussed.in the beginning of the report there will be discussion
about the merits and limitation of LIFO, FIFO and EOQ in supply chain management. The
middle of the report is consisting of the merits and limitation of the JIT and BPR in
improving the business operations of Adidas. In the end of this report, there will be
discussion about the impact of total quality management, ISO 9000 and six sigma’s for
improving the quality of the operations within company. There are also some
recommendations which can be used by Adidas for improving its operation.
MAIN BODY
The merits and limitations of Adidas LIFO, FIFO and EOQ in supply chain management
Supply chain management can be defined as the management of flow of goods and
services within the organisation which also involved the moment in storage of raw material
work in progress unfinished inventory and finished goods. This are generally originated from
the point of consumption. This is a combination of production services provided by the
business to the end consumer for making the supply chain effective. Contents of Adidas
Company also following structure of supply chain management for providing its product to
the consumers.
Last in first out

Last in first out is the method of accounting for inventory which is used to record the
most recently produced item and sold them first. According to this method the items which
are come last in organisation must be sold first. Under the LIFO, the cost of the most recent
product purchased is the first to be expensed as a cost of goods sold. This means that the
lower cost of older product will be reported as inventory(Von Below and Thoursie, 2010). In
context of Adidas, this company is a large inventory relative compared to other competitors
this helped company in taking the advantage of lower test and high cash flow within the
organisation that's why this method is used for generally accepting the accounting principles
based on international financial reporting standards.
Merits of LIFO
Live match the most recent cost against the current revenue: the living matter
provide a better measurement of the current earning by matching the most recent cost against
the current revenues. Other method than this match the old cost against the current revenue
which doesn't help company in finding the current performance as well as matching the
current revenue in this inflationary environment. The inventory profit or a paper profit is
created where the inventory profit occur when a replacement cost of inventory is more than
the inventory cost matched against the revenue. LIFO helps in reducing the inventory profit
by matching the most recent cost against the current revenue. So, it is helpful for Adidas in
doing so.
Tax benefits and improvement in cash flow: the major reason of popularity of this
method is that inventory valuation in this method will help in tax benefits. When LIFO is
used in the period of inflation the current purchase at higher prices are matched again the
revenue that elevate the over statement of the profit and therefore reduce the tax burden from
the organisation which also help form in reducing its tax liability and improve the cash flow
within the organisation (Couch and Fairlie, 2010).
Physical flow of inventory: in certain situations, important for organisation that the
physical flow of inventory must or respond to the leaf cost flow. This is the benefit which
also make this method popular because a situation where the physical flow of the inventory
correspondent to relief cost flow is very rare to find. This also makes this method popular and
effective in use by companies like Adidas.
Demerits of LIFO

Reduce the earning inflationary time: major demerit of LIFO method is that it
reduces the reported earnings during the period of inflation within the economy. This is a
reason that there are number of companies who fear that the accounting chain images to the
leaf can have negative impact on the organisation as well as reduce the trust of investor
within the organisation.
Understatement of inventory: Adidas must be a consideration on this demerit as it is
the negative impact on the balance sheet of the company because under the leaf method the
balance sheet inventory figure is usually under stated because they are based on the old cost.
This can impact negatively on the working capital position and may look bad than the reality.
Manipulation of income: if company use the last in first out method then it can
easily manipulate its record and report earnings for the period by changing its purchase
pattern at the end of the year. Adidas is operating as ethical and social organisation so it have
to clearly identify all the functions and improve the function within the organisation and can't
use this function because of this negative impact (Helfand, White and Becker, 2015).
First in first out
First in first out is the most common method which is used by the organisation for
managing is assist an inventory.it is the method of valuation of inventory in which assets are
produced or acquire first are sold used or disposed of first (Widjaja, Zeno Semiconductor Inc,
2017). The first in first out method is used for cost flow assumption purpose.in manufacturing
as item progress to the latest development stage and the finish inventory items are sold the
associated cost with the product must be recognised as an expense. This method can also use
in Adidas for the purpose of managing inventory within the organisation.
Merits of FIFO
 FIFA can be used Adidas this method save the money and time in calculating the
exact cost of inventory being sold because the cost of each inventory will depend on
the most former cash flow of the purchase to be used first (Batra, STMicroelectronics
International NV, 2016).
 the next married for the Adidas is that it is easy and simple method to be used
understand which also reduce the cost of management and help organisation in using
this method

 it is fairly particular approach to use as sometime it become the difficult to identify
the cost of the product sold at the point of sale and FIFO rectify this and proper.
Demerits of FIFO
 The major demerit of this approach is that the valuation of inventory of the stock
within the organisation is that in the times of inflation it result in higher profit due to
which company have to pay taxes and the burden of taxes are also increased.
 It is not suitable for the hyperinflation time this is because in such time there are no
reasonable pattern of the inflation and price of the goods could drastically. Impact
negative on the stock of the organisation in can lead to loss in revenue (Batra,
STMicroelectronics International NV, 2016).
 One more disadvantage for Adidas of using the FIFO method is that it will not an
appropriate measure in the materials are the good purchase which have fluctuating
prices patterns. This is because this can result in stated profit for the same period and
different cost of the same goods during the particular period or record.
Economic order quantity
Economic order quantity is an ideal order quantity which companies should purchase
to minimise the inventory cost such as holding cost shortage cost and order cost. This
production scheduling model was developed by ford w Harris in 1913 and has been refined
over the time (Kumar, 2016). This function is permanently based on the formula that assumes
the demand ordering and holding the cost of all remain constant.
Merits
Minimise the storage and holding cost: the first merit of using this system by the
Adidas is that it minimise the storing inventory cost for the businesses as they can’t use the
EOQ model in customising the recommendation by providing effective number of quantity
per unit order for maintaining the cost and inventory according to their warehouses.
Specific to business: this also provide advantage two Adidas that it maintain the
sufficient inventory level which can match the customer demand and balancing the AC for
the business.it provide the adequate and specific number of particular business regarding how
much inventory should be holder and when the reorder must be placed for the items(Zhou,
Chen, Li and Zhong, 2016).

Demerit
Involve mathematical calculation: for understanding the economic order quantity
model it is important for the organisation like Adidas to employee the different analysis. This
also includes the cost because of the complicated mathematical calculations which are
involved within this method.
Based on assumption: the economic order quantity model assume the study demand
of the business product and immediate availability of the item to be restock which are not
adequate and proper for the real life business situation because of fluctuations within the
economic environment where the Adidas working.so it is a major disadvantage of this
function and model for companies like Adidas (Roach, 2018).
The merits and limitations of Adidas JIT and BPR is improving business operations
For improving the business operations and bring effectiveness within the organisation
production activities a form can use different type of tools.in context of Adidas there are two
types of tools which organisation used for improving the production. The first is just in time
manufacturing and second one is business process reengineering. Both are effective tools
which are discussed below with their merits and demerits in context of Adidas.
Just in time manufacturing
Just in time manufacturing is also known as just in time production which is produced
by the to your tum for improving their working conditions and operation management.it is a
methodology which is aim to primary reducing the time within the production system as well
as response time from the supply and consumer (Madanhire and Mbohwa, 2016). This
method is developed by the Japanese in 1960 for improving the production within the Toyota
Company.
Merit
 From the point of view of Adidas the first advantage of just in time is that it require
less space as with the fast turnaround of the stock company required storage space to
store goods where this reduce the amount of storage as an organisation need to rent or
buy freezing a fund for other part of the business.

 It also helped Adidas in reduction of the wastage within the organisation as faster
turnaround of the stock prevents the stock from over dating for damaging which
reduce the wastage (Hirano, 2016).
 One of the more importance or married for of this function for Adidas is that it is
smaller investment as it is inventory management where ideal for small companies are
the large company who doesn't want to invest much in this type of function. This
helps Adidas in managing the ordering stock as and when it need it and maintain the
healthy cash flow within the organisation.
Demerits
 the major demerit of this system is that it rises the risk of out of stock within the
organisation this is because it imperative for the organisation that they have to
produce only those level of stocks which are adequate for maintaining within the
market but in the time of the boost demand this can make the stock empty for the
organisation (Omidi and Khoshtinat, 2016) .
 Lack of control over the time frame of Adidas is also a demerit of this function
because having to rely on the timeliness of the suppliers for each order put company
at the risk of delaying the customer and increase the demand and supply gap for
company like Adidas (Ramadan, Al-Maimani and Noche, 2017).
 The last disadvantage of this function used by the Adidas is that it increases the
planning requirement within the organisation as company have to make separate plans
for supplier’s raw materials and customers where it have to meet the demand and
supply in an proper manner.
Business process reengineering:
Business process reengineering is a management strategy which is used by the
organisation for focusing on analysis and designing of the workflow and business process
within the organisation (Doumeingts and Browne, 2016). Strategies also used by areas where
it came to help the organisation fundamentally where it rethink how they do their work in
order to improve the customer services and cut the operation cost.
Merits
 It gives an appropriate focus on the business as it involved all around customers

 BPR help in building a strategic view which can help organisation in operational
products by making the radical enquiries about how the different process can be
improved and objectives can be achieved
 These also help Adidas in coordinating and integrating the several functions within
the organisation (Kasemsap, 2020)
 Provider improved viability and adequacy to Adidas by eliminating the delay and an
essential phrase of the operation and management.
Demerits
 it doesn't suits to the every business needs as it depends on the factors like size and
availability of the resources which are also scared for Adidas so it usually benefits
does organisation who have different working from Adidas(Hakim, Gheitasi and
Soltani, 2016)
 In some cases the efficiency of one department was improved and the expense of the
overall processes which also impact on Adidas performance of other department.
The impact of TQM, ISO 9000 and Six Sigma in improving quality in the operations of
Adidas
Total quality management (TQM)
Total quality management is that process which helps the organisation in detecting
and reducing the errors in manufacturing streamlining supply chain management and
improving the customer experience for ensuring the employees within the organisation and
making the form and effective organisation for working in typical dynamic environment.
There is positive impact of total quality management on the performance of Adidas as it
improves different functions within the organisation.
Total quality management within the Adidas help the organisation in bringing
positivity and productivity within the operations by improving the motivation of the
employees and retaining them for the long period. It also helps Adidas in managing the
experience of the customer within the organisation by improving the quality of the products
where customer can satisfy their needs and more efficient way. It is also identified the total
quality management service Adidas number of factors which help in reducing the wastage
and improving the cost of production organisation can now reduce the cheaper class of shoes
which will help company in getting the competitive advantage within the market.

SIX SIGMA
SIX SIGMA is the Framework which is used to reduce the wastage of resources and
improving the quality of the products within the organisation for improving the performance
of the firm as well as making it effective within the competitive environment. This concept is
developed by the Motorola in 1986 but it is now also used by the Adidas within its
functioning. This has various impacts on the performance of Adidas. It can use of six sigma
within the company Adidas have improved their customer loyalty where company can retain
its customer for long period of time because of quality (Furterer, S.L., 2016). Also impacted
positively on the time management within the organisation as it help the employees in
managing their time efficiency and matching it with their six sigma also impacted positively
on reducing the cycle time within the organisation
ISO 9000
ISO 9000 also impacted positively on reducing the cycle time within the organisation
because of increased productivity ability and qualities of the employees and reduction in
wastage of the resources which directly help in motivating the employees toward the works
where they can increase their efficiency from 25 to 50% and improve the productivity within
the organisation.in the last it also impacted on the strategic planning within the organisation
which help company in managing its strength weaknesses and opportunities and compiling
with its set where it can improve its supply chain management.
RECOMMENDATIONS
Adidas is the multinational organisation which is performing globally. Company have to
clearly identify and mention different type of methods for managing the operations and
quality of the product within the global world for increasing its operation and gaining the
maximum competitive advantage. There is Some Recommendation which is mentioned
below for Adidas.
 It can use the first in first out method which will help company in managing the
inventory as well as trend within the market where it can sell the old product first.
 It is also recommended to the company that it can use both total quality management
as well as six sigma for improving the operations within the organisation and in
getting the maximum advantage this is because it help company in reducing the

wastage as well as maintaining the quality of the product for getting the advantage
within the competitive market.
 Just in time manufacturing is the system which cannot be adopted by the organisation
Adidas because it make it complex for the firm to get the work done in time.it can use
the business process reengineering method which will help company in getting
maximum advantage as well as main managing the workflow within the firm for
improving its operations.
CONCLUSION
It can be concluded from the above mentioned report that it is important for an
organisation like Adidas to manufacture the products in an effective manner where it can
easily operate its business. Company have to choose wisely the method of inventory
management and supply chain management where it can get maximum advantage. This can is
also concluded that for reducing the wastage as well as improving the performance of
organisation and improving its operation there are a number of factors like total quality
management, six sigma and ISO 9000 which can be used by the company, by identifying
their impact in proper manner.

REFERENCES
Books and journals
Batra, K., STMicroelectronics International NV, 2016. First-in first-out (FIFO) memory with
multi-port functionality. U.S. Patent 9,436,432.
Bramson, M., D’Auria, B. and Walton, N., 2017. Proportional switching in first-in, first-out
networks. Operations research, 65(2), pp.496-513.
Couch, K.A. and Fairlie, R., 2010. Last hired, first fired? Black-white unemployment and the
business cycle. Demography, 47(1), pp.227-247.
Doumeingts, G. and Browne, J. eds., 2016. Modelling techniques for business process re-
engineering and benchmarking. Springer.
Furterer, S.L., 2016. Lean Six Sigma in service: applications and case studies. CRC press.
Hakim, A., Gheitasi, M. and Soltani, F., 2016. Fuzzy model on selecting processes in
business process reengineering. Business Process Management Journal.
Helfand, D.J., White, R.L. and Becker, R.H., 2015. The last of FIRST: The final catalog and
source identifications. The Astrophysical Journal, 801(1), p.26.
Hirano, H., 2016. JIT Implementation Manual--The Complete Guide to Just-In-Time
Manufacturing: Volume 2--Waste and the 5S's. Crc Press.
Kasemsap, K., 2020. The roles of business process modeling and business process
reengineering in e-government. In Open Government: Concepts, Methodologies,
Tools, and Applications (pp. 2236-2267). IGI Global.
Kumar, R., 2016. Economic Order Quantity (EOQ) Model. Global Journal of finance and
economic management, 5(1), pp.1-5.
Madanhire, I. and Mbohwa, C., 2016. Application of just in time as a total quality
management tool: the case of an aluminium foundry manufacturing. Total Quality
Management & Business Excellence, 27(1-2), pp.184-197.
Majumdar, J.P. and Manohar, B.M., 2016. Why Indian manufacturing SMEs are still
reluctant in adopting total quality management. International Journal of Productivity
and Quality Management, 17(1), pp.16-35.
Omidi, A. and Khoshtinat, B., 2016. Factors affecting the implementation of business process
reengineering: taking into account the moderating role of organizational culture
(Case Study: Iran Air). Procedia Economics and Finance, 36(16), pp.425-432.
Ramadan, M., Al-Maimani, H. and Noche, B., 2017. RFID-enabled smart real-time
manufacturing cost tracking system. The International Journal of Advanced
Manufacturing Technology, 89(1-4), pp.969-985.
Roach, B., 2018. Origins of the Economic Order Quantity Formula.
Von Below, D. and Thoursie, P.S., 2010. Last in, first out?: Estimating the effect of seniority
rules in Sweden. Labour Economics, 17(6), pp.987-997.

Widjaja, Y., Zeno Semiconductor Inc, 2017. Dual-port semiconductor memory and first in
first out (FIFO) memory having electrically floating body transistor. U.S. Patent
9,812,456.
Zhou, Y., Chen, C., Li, C. and Zhong, Y., 2016. A synergic economic order quantity model
with trade credit, shortages, imperfect quality and inspection errors. Applied
Mathematical Modelling, 40(2), pp.1012-1028.