Adidas Logistics and Inventory Management

This assignment delves into the intricate workings of Adidas's logistics department, examining its interfaces with production, marketing, and accounting. It explores the company's current order processing system, highlighting areas for enhancement. A key focus is on Adidas's inventory management practices, analyzing challenges and proposing solutions based on flexibility theory to reduce holding costs while meeting customer demand.

Logistics in Adidas
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Contents
Introduction...................................................................................................................... 3
Brief introduction to the Adidas........................................................................................3
Interference of the Logistics with the three main department of the selected organization
......................................................................................................................................... 3
Analysis of Effectiveness and Efficiency of Current Order Processing System of Adidas5
Inventory Management.................................................................................................... 8
Conclusion....................................................................................................................... 9
References.....................................................................................................................10
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Introduction
Logistics is referred to as the most important part of the supply chain
management and it involves various functions in regards to the inventory management
cycle. It is true that every company totally dependent upon its inventory management
system implied in the business operation cycle. Logistics helps in planning, implements
and also controlling the flow of goods and service from the point of origin to the point at
where it ends. So it can be said that it is management driven system that truly based on
the customer demand. Logistics management assures the efficient and effective
management, reverse flow and storage of inventory.
In this report the logistics system of Adidas has been evaluated in detail through
analyzing the different interfaces of logistics and order cycle. This report also guides on
the inventory management of the goods provided by the Adidas at stores and online
processing.
Brief introduction to the Adidas
Adidas it one of the famous company from German that is involved in designing,
manufacturing and sales of clothing products, shoes category and other accessories.
Adidas is known for its brand name and its quality products. Adidas is the largest
company in Germany that manufactures shoes and also the second largest sportswear
company in the world. The logistic system of the Adidas is the most complex one due to
level of demand it handles with the assurance of highest quality products (History of
Adidas, 2013).
Interference of the Logistics with the three main department of the selected
organization
There are mainly three dimensions of the supply chain network of any
organization. It can be classified as below:
 Intrafunctional Coordination: This dimension administrate the different activities
of the one main function of the supply chain management that is logistics
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 Interfunctional Coordination: As per dimension there must be perfect coordination
between logistics and production, marketing, and accounting as they are the
most important functional areas of any company
 Interorganizational coordination: It is the relation between two different firms,
particularly in supply chain management it can be suppliers and company itself
In this section of the report, the concern in the second dimension ie
Interfunctional Coordination. The production of any goods requires procurement of raw
material, machines to work on, labour to work on and various parts and components
that are put in series of process to have a required product. It is also true that quality of
finished goods will definitely dependent upon the type of raw material has been
obtained from the supplier (Coyle, J.J., et. al.2012). The interface of logistics come here
as logistics plays an important role in managing the procurement of quality raw material
and also to make proper arrangements of its storage. So the use of logistics starts
directly from the suppliers through procurement of the raw materials and sending them
to the production department. In Adidas mostly the manufacturing work has been
outsourced but company manufactures their core product that is shoes in their home
production unit. Adidas logistics is most easy to handle as it has simplifies each rule to
make the transfer the goods from the suppliers end to the production department. After
production has been carried out goods has to be sent for warehousing purpose and
after that it is moved for sales made to wholesalers and retailers. Company is also
involved with the sales of goods through online shop and it is through appointing the
agents that triggers the sales directly from the different warehouses in various part of
the country.
Marketing is also the important concept in the organization as it involves with the
marketing mix the four Ps, namely price, product, promotion and place. The price of
product covers the cost of transport, so larger the shipment lesser will be the
transportation rate (Chakravarty and Eliashberg, 2005). Adidas usually uses its own
transport vehicles to deliver goods in its own nation. For outbound sales goods are
generally send through ships. Product packaging and its storage must be done
precisely and advice of logistics manager is very useful as changing the dimensions of
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the product packaging will definitely hampers the storage capacity. Adidas uses definite
packing style of packing their finished goods such as same size cardboard boxes for
packing the shoes. Logistics department plays an important role while making the
promotions. Logistics are aware of any changes that are made in demand patterns of
goods. Adidas believes that pull strategies will be more erratic as compare to push
strategies that are more predictable. Place of keeping the goods also matters a lot in
marketing as warehouse serves both the wholesalers and retail department (Min, 2015).
(Source: https://www.slideshare.net/SudeeptaManna/marketing-and-logistic-interface )
Accounting is department that has a relationship with every department of the
organization. There is the intense relationship between the accounting department and
logistics department. While performing the auditing work of the freights bills and finding
any errors there is use of logistics departments.
Analysis of Effectiveness and Efficiency of Current Order Processing System of
Adidas
The company is having a large and complex logistic and supply chain system
that works in integration for effectively meeting the customer demands and
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expectations. The effectiveness and efficiency of the order processing system of Adidas
depends on adequate performance of its various supply chain departments such as
information, inventory and logistics unit. The procedures after the order placement by a
customer consist of various processes involving finding the product ordered in the
inventory to its final delivery to the customer (Gallouj and Djellal, 2011). The various
steps involve din the order processing system of the company can be described as
follows:
 Use of information System: The Company incorporates the use of DSI system
(Dry sales of inventory) for storing information about its product style, color, size
and availability of the product. The system is used for selecting the right type of
product ordered from the customer. In addition to this, the company also adopts
the use of point of sales system for processing and shipping the products
ordered to the distributor and retail outlet within 24 hours of time.
 Inventory Management: The Company has developed an effective inventory
management system for proving real-time information about the availability of
products. The development of a good management system for controlling the
inventory is essential so that the products ordered are readily available. The
company integrates the use of ERP system that helps the sales representative of
the company to effectively mange the inventory as per the customer demands
(Sage, 2015).
 Warehouse: This is regarded as major link between the procedure and
consumers as it store products between points of origin to the point of its
utilization. The warehouse department provides information to the management
of the company regarding the availability of the product ordered for distribution
for sale.
Transportation: This is the physical link that helps the firm to supply its products
to the customers. The company integrates the use of water and air carrier for shipping
their products so that they are received by the customers in a quick span of time. The
company is known to operate about 220 retail stores in approximately 60 countries
across the world. As such the company ensures that right products are available for the
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customers at the right time. Therefore, the company in order to meet the customer
demands effectively has developed an integrated logistic between for co-coordinating its
various departments such as suppliers, manufacturers, wholesalers, retailers and
customers demands (Hofmann, Beck and Füger, 2012).
As such, it can be said that the company has developed an effective order
processing system to meet the customer expectations properly. However, the
development of a large logistic network for ordered processing involves the company to
incur high cost. As such the company is recommended to implement the use of
outsourcing for reducing its logistics cost and increasing its operational profits. In this
context, the theory of transaction-cost analysis states that business firms exist for
maximizing their operation profits by minimizing the transaction costs. As such the
company can reduce its logistic cost rough outsourcing all of its logistic activities to a
cheaper country where there is adequate supply of labor and there is presence of
related information technology (Groenewegen, 2012).
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(Source: http://ieeexplore.ieee.org/document/1301652/)
Inventory Management
The company ‘Adidas’ is placing large emphasis on developing an effective
inventory management system for achieving customer satisfaction. The development of
a sound inventory management system is essential to avoid the occurrence of out of
stock of its different products. The inventory management system is also used for
gaining information regarding the order fulfillment and shipping status. Thus, it largely
helps in providing good customer service through delivering them timely order of the
products demanded by them. The Company in order to develop an effective inventory
management system has integrated the use of Enterprise Resource Planning that
integrates its various departments such as finance, marketing, human resources and
information technology with the supply chain management system. Thus, the company
can communicate effectively the current position of its inventory to its various
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departments that helps in managing the inventory level properly and maintaining the
stocks level as per the customer demands (Hofmann, Beck and Füger, 2012).
The use of ERP system in inventory management has helped the company to
gain an operational control of its various processes involved in inventory management
and integrating the overall supply chain system. In addition to this, the company has
also adopted the use of TQM (Total Quality Management) for improving the productivity
level of the company. The use of the system enables the company to continuously
improve its inventory system through identifying the area of loopholes and developing
effective strategies for overcoming them (Banfield, Eriksson and Walkingshaw, 2017).
However, the company is currently facing issue regarding the reducing of its holding
costs through improving its inventory management practices. This is because the
company is maintaining high level of stocks for meeting the customer demands and this
is leading to an increase in its holding costs. In this context, the flexibility theory in
inventory management states that a company should maintain flexible inventory
practice that helps it to avoiding the overstocking of its products by reacting quickly to
market situations. Thus, the company can adjust quickly as per the current needs and
expectation of the customers through incorporating flexibility in its inventory
management practices. Thus, the company through introducing a flexible inventory
management model can reduce its operational cost involved in managing the inventory
levels and also meet the customer demands adequately (Adidas Stepping Up Inventory
Management, 2014).
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(Source: http://ieeexplore.ieee.org/document/1301652/)
Conclusion
As this report provides the how efficiently and effectively the Adidas manages its
logistics department. There is discussion of various interfaces between the logistics and
other departments of organization such as production, marketing and accounting. It has
been founded that there has been intense relationship of logistics department and all
the other departments of the organization. Current order processing system of the
company is also discussed in detail and improvements have also been provided.
Information on how inventory is managed by the Adidas is also provided in detail.
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References
Adidas Stepping Up Inventory Management. 2014. Retrieved on September 28, 2017,
from https://opsmgt.edublogs.org/2014/11/11/adidas-stepping-up-inventory-
management/
Banfield, R., Eriksson, M. and Walkingshaw, N. 2017. Product Leadership: How Top
Product Managers Launch Awesome Products and Build Successful Teams.
"O'Reilly Media, Inc.".
Chakravarty, A.K. and Eliashberg, J. 2005. Managing Business Interfaces: Marketing
and Engineering Issues in the Supply Chain and Internet Domains. Springer
Science & Business Media.
Coyle, J.J., Langley, J., Novack, R.A. and Gibson, B. 2012. Supply Chain Management:
A Logistics Perspective. Cengage Learning.
Gallouj, F and Djellal, F. 2011. The Handbook of Innovation and Services: A Multi-
disciplinary Perspective. Edward Elgar Publishing.
Groenewegen, J. 2012. Transaction Cost Economics and Beyond. Springer Science &
Business Media.
History of Adidas. 2013. Retrieved on September 28, 2017, from
http://taylorsadidas.blogspot.in/2013/04/history-of-addidas.html
Hofmann, E., Beck, P. and Füger, E. 2012. The Supply Chain Differentiation Guide: A
Roadmap to Operational Excellence. Springer Science & Business Media.
Min, H. 2015. The Essentials of Supply Chain Management: New Business Concepts
and Applications. FT Press.
Sage, G. 2015. Globalizing Sport: How Organizations, Corporations, Media, and Politics
are Changing Sport. Routledge.
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