Supply Chain Management for Adidas AG Company

This article discusses the supply chain management of Adidas AG Company, including its key flows, make process, and supply chain forecasting. It provides recommendations for improvement and the right type of forecasting model to adopt. The article emphasizes the importance of supply chain management for any manufacturing company.

Supply chain management
Supply chain management for Adidas AG Company
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Supply chain management
1. Introduction
Supply chain management is regarded to as the systematic process of
organizing, coordinating, controlling and directing the flow of goods and services that
could include all the preliminary processes involved in the transformation of raw
materials into final products. Supply chain management is dynamic in nature and it’s
often concerned with the active process of overseeing all the business activities with the
sole aim of increasing efficiency in operations, maximizing customer value and
increasing competitive advantage of an organization in its current market place (Barlas
& Gunduz, 2011).
Supply chain management is often a deliberate purpose and/or effort by suppliers that is
often developed to cover quite a wide scope; from production, product development to
the various information systems required to direct and oversee all these undertakings as
a single unit.
This write-up aims towards looking at the supply chain cycle of Adidas AG Company, a
multinational corporation that specializes in both the design and manufacture of Sport
shoes, clothes and accessories The effectiveness of the four key flows in its supply
chain, its make process and supply chain forecasting will be analyzed. Based on the
analysis made recommendations will be made by carefully applying various theories
and concepts found in the supply chain management.
2. Key flows in the supply chain
Adidas AG Company is ranked among one of the largest manufacturing company
not only in Germany but also worldwide. Its effectiveness and efficiency in operations
has been tagged to its well designed and planned supply chain (Thomassey, 2010). The
effectiveness of its products, flow of information, cash flow and return flow are
dependent on the four key flows in the supply chain. They four key flows in Adidas AG
Company are discussed below;
a) Value flow

Supply chain management
The Adidas AG Company supply chain management is value incentive. They prioritize
in the production of valuable goods and services and not just counterfeit products
(Tayur, Ganeshan, Magazine, 2010). They have therefore designed their supply chain
in such a way that it involves a series of value creation across the entire chain with the
sole purpose of providing products and services that have some value added in them to
the end user/customer.
There are various stages involved in the entire process and in each stage there exists
physical flows directly or indirectly relating to either production or actual distribution.
b) Information flow
Adidas Company has deeply invested in this flow. As a top manufacturing Company,
they do believe that in a supply chain management the flow of information is really
crucial. This information could involve the production data, bill of materials (BMO),
product descriptions and pricing, various inventory levels, delivery scheduling and
commercial documents among others (Carter & Liane, 2011) It is thus require that a lot
of communication is made that could involve suppliers, customers and other relevant
stakeholders. Therefore safeguarding this information is a number one priority for any
functional supply chain so as to avoid getting the information into the hands of the
wrong person and so is the case with Adidas AG Company.
c) The Production flow
The product flow is often associated with the movement of goods usually from the
supplier to the customer. Adidas AG Company uses this production flow because it
specializes in the downstream flow of its goods and service which is usually from the
point of origin (where goods are manufactured) to the point of consumption. It can also
involve a backward flow which is often concerned with product returns (Seuring, 2013).
d) The financial flow
Adidas Company has incorporated this in its supply chain management. It often involves
two perspectives. First and foremost, there is the Cost and investment perspective
which focuses on the always moving forward in the supply chain and the optimization of

Supply chain management
the overall supply chain cost thus being in a position to contribute directly towards the
profitability of the Company (Christopher, 2016). The second perspective is the aspect
that is based on the flow of funds. In this Adidas AG Company the supply chain that
originates from the customer of the intended product backwards and down through the
chain is the flow of funds perspective.
Recommendations
In the supply chain of Adidas AG Company there are a number of parties involved.
There are suppliers, distributors, retailers and the final customer (Gold, Seuring, Beske,
2010). It is therefore recommended that in their supply chain management, they
consider all these necessary parties involved and what are their individual requirements
but with a main purpose of ensuring satisfaction of the end customer as indicated in the
diagram below;
Diagram 1.0: Relationships between various individuals in the supply chain
management (Christopher, 2016).
For Adidas AG company to attain a maximum level of effectiveness and efficiency then
there are certain aspects that should be in order. For instance, material flows, money
flows and information flows throughout the supply chain should be coherent and be in a
position to complement each other when need be as indicated in the diagram below;
Diagram 1.1: Flow of different aspects in the supply chain (Seuring, 2013).

Supply chain management
3. The Make Process
Effectiveness of production planning/scheduling process
Production planning and scheduling is very essential for any manufacturing
company. For Adidas AG Company, their production planning and scheduling process
is very objective in nature. It is the objectivity of their production planning and
scheduling process that has made then achieve numerous economic benefits (Van,
2010).
As an already developed company, they adopted the integrated planning and
scheduling approached as opposed to other rival companies that adopted spreadsheets
and legal-pad-and-pencil methods.
Adidas AG Company has been in a position to expand and increase its operational
agility by adopting a production planning and scheduling process that is objective in
nature (Ko, Tiwari, Mehnen, 2010). Basically, there various management levels in
Adidas AG Company have their own scope of control with the main aim of production
optimization. Here planning and scheduling also has a role of acting a central
manufacturing facility and links all the other related functional areas as indicated in the
diagram below;
Diagram 1.2:Diagram for role planning and scheduling (Diabat & Govindan, 2011).

Supply chain management
Effectiveness of material requirement planning processes adopted by Adidas AG
Company
The material requirement planning process adopted by Adidas AG Company is a
backward technique that originates from scheduled quantities and needs for any items
that have been specified in the material planning and scheduling with the aim of
determining its requirements/components that are to be used to produce the end
product (Tayur, Ganeshan, Magazine, 2012)
With the adoption of this particular material requirement planning process, Adidas Ag
Company has been in a position to reap the following advantages
a) Reduction in the overall operational costs thus allowing the Company to be in a
position to price their products more competitively
b) Customer services have been greatly enhanced as a direct result of proper
scheduling.
c) There has been a reduced sale price thus making the organization more
competitive
d) The set up time has been greatly reduced.
Recommendation on improvement
As indicated above, the production and scheduling process as well as the
material requirement and planning process adopted by Adidas Company has given

Supply chain management
them an overall competitive advantage. However, there has not been a 100% efficiency
that has been recorder. This has been attributed to fact that all these processes cannot
operate as a standalone system; they must be complemented by other aspect within the
supply chain (Fayezi, O'Loughlin, Zutshi, 2012). However, it can be recommended that
Adidas AG Company to incorporate the Agency theory used in supply chain
management. According to this theory, one party such as the principal delegates work
to another party, the agent with the aim of compensation for the lack of expertise as well
as the focus or some core competencies in the supply chain. The agent usually acts on
behave of the principle and anything he/she does is a direct reflection of the principle as
indicated in the diagram below;
Diagram 1.3: Diagram for relationship between principle and agent as depicted by
the Agency theory (Barlas & Gunduz, 2011).
With the application of this theory, then there is no doubt that the efficiency level of
Adidas AG Company will increase.
4. Supply Chain forecasting
Forecasting comes from the word focus which means a prediction of what is
likely to occur in the future. Forecasting is supply chain management is very important
because it helps to not only anticipate expected customer demand but also to respond
effectively to the already anticipated customer demand (Diabat & Govindan, 2011).
Most of the times, forecasts are often wrong and therefore there is need to include the
expected value as well a numerical measure of the forecast error to be expected. It is

Supply chain management
also important to note that long term forecasts are often less accurate in comparison to
short term errors.
There are different forecasting models in supply chain management that can be
adopted. These models are categorically divided into two and these are; The Qualitative
methods and Quantitative methods.
The Qualitative methods of forecasting are often based on an evaluation that is not
random but rather judgmental and intuitive in nature. These methods are normally
brought into play in scenarios where data is not available is scarce and of limited nature,
data is not available at all or when the data present is no longer relevant and/or valid.
There are different types of qualitative methods of forecasting. Some qualitative
forecasting methods are; Personal insight, sales force estimates, conducting market
research, visionary forecasting, panel consensus and the Delphi methods (Jacobs,
Chase, Lummus, 2014)
Quantitative methods of forecasting on the other hand are forecasting models that have
a very different and dynamic approach as far as forecasting is concerned. Here
historical demand data is often used to project future demand. With this type of
forecasting methods both extrinsic and intrinsic techniques can be used.
There are different types of quantitative forecasting methods. Some examples of
quantitative forecasting methods are outlined below;
a) Graphical forecasting methods-This is a method that involves plotting
information regarding demand on a graphical form. It’s often much more
convenient to convert a certain spreadsheet into a graphical form that conveys all
the relevant information in a much convenient way. With this method, it is easy to
spot trends in the demand as depicted by different patterns in the graph.
The diagram below show an example of a graphical forecasting method
Diagram 1.4 Diagram for graphical forecasting method (Thomassey, 2010).

Supply chain management
b) Trend forecasting model-This is a special method of forecasting sales and
demand when patters that could either are upward or downward exists. Some of
the models in this include regression, triple smoothing and exponential
smoothing.
Recommendation on the type of model for Adidas AG Company
As a multinational corporation, the right type of model that should be adopted is
the Quantitative model. This is so because unlike qualitative models that are based on
human judgment and opinions which could sometimes be wrong, quantitative models
are based on pure empirical data, mathematics and give projections and forecasts that
not biased in nature. Quantitative models are also objective and consistent in nature in
that they put into consideration a broader scope of data and information at a time thus
having a higher probability of giving more accurate data.

Supply chain management
5. Conclusion
Supply chain management is complex and dynamic in nature. As depicted in the
report, for any company whatsoever to progress and be a position to map itself globally
like Adidas AG Company then there are a number of very essential aspects that it must
incorporate in its supply chain management.
Most importantly, it is also advisable that a supply chain should have a very high degree
of flexibility (Goldsby & Autry, 2011).A rigid supply chain is not recommended because it
will cripple the entire operations of a company in cases where extreme remedy actions
are needed.
Generally, it can be concluded that Adidas AG Company has an efficient and unique
supply chain management system. Its supply chain management system has
contributed at a greater amount towards the success of the company as depicted in this
report. Moreover, they have a unique and very efficient material requirement planning
process that is objective in nature which facilitates smooth flow of activities within the
company.
Finally, it can be concluded that supply chain management is an important aspect of
any manufacturing company and should be greatly considered it at all a company wants
to improve its efficiency (Sarkis, Zhu & Lai, 2011).

Supply chain management
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