BUS 4008-L12: Adidas's Global Supply Chain in Vietnam Report

This report provides an in-depth analysis of Adidas's global supply chain, with a specific focus on its operations in Vietnam. The report begins by outlining the operational aspects of Adidas, including its manufacturing plants and workforce in Vietnam. It then explores the reasons behind Adidas's strategic shift to Vietnam, highlighting the impact of the US-China trade war, Vietnam's geographic advantages, free trade agreements, and the country's cost-effective labor force. The report further examines the raw materials and supplies used by Adidas, emphasizing the company's commitment to sustainability and the use of recycled materials. It details the logistics involved in Adidas's supply chain, including transportation methods and distribution networks, and discusses the impact of the COVID-19 pandemic on Adidas's retail strategy. The report concludes with a list of references used in the analysis, providing a comprehensive overview of Adidas's global supply chain management.

Reylend Steffin Yanata
Student Name: Reylend Steffin Yanata
Student ID: 10214556
Program: Diploma In International Business
Course: Global Supply Chain Management
Class Code: BUS 4008-L12
CA-1 ASSIGNMENT
Date: 17 January 2020
Submit to: Mr. Toh
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Operational Aspects
Adidas had been considered worldwide sportswear. They had numerous
varieties of products from sports equipment to fashionwear. It was
founded on August 18, 1949, by Adolf Dassler. As the Financial reports
had been remarkable, and it started to grow successfully for the past
decades. They had a huge number of facilities in the world as “Pouyuen
Vietnam Company Limited” one of the manufacturing plants located in
Vietnam. They produced footwear
with consist of “12,755” Employees along with 23 other
facilities in Vietnam. Report that “Our largest footwear
factory located in Vietnam produced approximately 8%
of the footwear sourcing volume” (Adidas,2019: p.g65).
Reason Moved to Vietnam
With the on-going US-China Trade war, due to impose “tariffs”(Pham,2018) on China goods
& services. Firms relocate to Vietnam. With business costs rose exponentially in China,
Adidas are now shifting their production to Vietnam shielding their business from the
increased cost.
Vietnam's advantages of the geographic location make it convenient to export to the US and
UK. Vietnam had signed a “Free trade agreement” (Shenglu,2020) with the UK to eliminate
taxes on imported goods despite an increase in the competitor. Not only they are motivated
with expanded market scope, but It also brings an impact on the potential customer, supplier,
and more time-efficient.
Vietnam is the 3rd largest country in Southeast Asia. They consist of a 97.3 million
population. According to Kennemer ` (2020), “the cost of labor in Vietnam can be as little as
1/3 of that of China”. Although the Vietnamese economy is poor, its workforce is young and
skilled. China's economy experience growth these decades which convincing Adidas to shift
their production to Vietnam as their quality output are merely identical.
Vietnam's political stability reduces international or domestic conflicts. As more foreign
investors willing to set up retailers and conduct business, “Vietnamese Dong peg to the US
dollar” (East Asia Forum,2015). Hence, it will increase exports at a cheaper cost and more
demand.
Raw Material & Supplies
Adidas footwear is considered made of recycled materials. They utilized this source because
they support the environmental impact. They were part of “Better Cotton Initiatives”,
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preventing utilizes of non-renewable goods. Their quality product does not use pesticides that
could harm human life and is much more sustainable. Not only they are affordable, but also
they can produce high-quality fabric. According to Adidas BCI Cotton ‘(2019) “Sourcing
countries include Turkey, Brazil, US, Mali, Pakistan, and India” are mainly the largest
producing cotton.
Polyester fibers are also the main component of their footwear. One of
the companies was supplied from the “Far Eastern New Century”
Group. “The Company has also partnered with Adidas and Parley for
the Oceans, an environmental NGO.” (Far Easter Group,2019).
Polyester Fibre is a strong material and its wrinkle resistant. As
retaining its shoes back to their original shape if uses multiple times. It
will be decomposed between 20 years to 200 years which manufacturer
should not be worried about their bad conditions. Their cotton
production is located in Vietnam which they can be delivered a huge amount of Polyester on
land with a medium transportation cost.
EVA is a primary component for the Adidas shoe soles. They are mainly sourced from
Germany or the USA. According to (Shoe reviews,2019) “they provide cushioning, and
shock absorptions. The lifespan running shoes made of EVA last runner around 500-600
miles.” The foam lasts a long time and it is harm-free to humans uses their Adidas foot-wear.
Logistics
Adidas uses three types of
transportation, firstly, is
by air freight which can be
high in fee cost despite it
arrives the product much
faster. Secondly is by
ocean freight, they the
longest time to arrive their
product but the lowest cost. Lastly by land, medium speed, and cost. Among these three,
Adidas choose via sea as the primary transportation. Speculate the demand, if it's low in
demand it will be more convenient to use sea freight as the majority of the production takes
place in “Asia”(Adidas Shoes Commodity Chain;N.D)
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Above the soles, the
foam is made out
recycle polyester fibre.
Adidas Shoes Commodity Chain

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Distribution Network
Since the Covid-19 pandemic hit numerous firms out there. Due to this lockdown, Adidas is
reducing their brick-mortar because of falls in sales. As they are focusing on online retail
stores due to safety protocols. They have different variations on how they can deliver the
goods to the end customer.
Firstly, Consumer can choose “Click & Collect” (Adidas Annual report;2019). As the
consumer ordered, the retail store received the order delivered it to the manufacturer then
deliver back as the consumer will pick it up from local store It will be more cost-effective and
consumer are much more convenient to pick up their order at any-time. The consumer could
also complain about their product directly to their staff if there are not accordingly.
Secondly, Adidas covered its distribution all around the world. The majority of it had their
retail store as they can deliver to your home directly (Drop-shipping). As more users are
using e-commerce, they have the best customer experience when it comes to drop shipping.
The order will send from their warehouse to your location. As “Our online shop will only
ship within Vietnam”. It will reduce the issues from the complexity of multiple ordering. On
the other hand, the firms will face high logistics cost despite their goal to receive good
feedback from customers.
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References List
1. Adidas Global Supplier List (N.A;2020) Title:Global Factory List
2. Adidas Annual Report (2019: Page 65) Title: VIETNAM REMAINS LARGEST
FOOTWEAR SOURCING COUNTRY.
3. Forbes (Pham,2018) Title: Vietnam Trade War Balancing Act “Tariffs” (Paragraph 8)
4. Shenglufashion (Lu,2018) Title: EU-Vietnam Free Trade Agreement and Outlook of
Vietnam’s Apparel Export (Paragraph 1)
5.Cosmo Sourcing (Kennemer,2020) (Paragraph 8) Title: CHINA VS. VIETNAM
MANUFACTURING // SOURCING IN VIETNAM AND CHINA PROS AND CONS
ULTIMATE GUIDE.
6. Economy watch (Asia Forum,2015; Paragraph 2) Title: The Vietnamese Currency Peg to
the US Dollar is Under Pressure
7. Adidas-group (Adidas;n.d; Paragraph 4) Title: MATERIALS
8. Far eastern Group Annual Report (2019;P.g 78;Paragraph 4) Title:2019 ANNUAL
REPORT FAR EASTERN NEW CENTURY
9.Best walking shoes review (Shoe reviews;2021; Paragraph 2) Title: How is EVA MADE?
10.Adidasshoescommoditychain (N.A; N.D, Paragraph 3) Title: Transportation
11. Adidas Annual Report (2019: Page 61; First bullet point) Title: SALES AND
DISTRIBUTION STRATEGY. Sub-Head: Premium consumer experiences
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SITE
1. ..\..\..\Downloads\08132020_adidas_global_supplier_list
(2).xlsxhttps://www.annualreports.com/HostedData/AnnualReports/PDF/
OTC_ADDDF_2019.pdf
2. https://www.annualreports.com/HostedData/AnnualReports/PDF/
OTC_ADDDF_2019.pdf
3. https://www.forbes.com/sites/peterpham/2018/11/29/vietnams-trade-war-balancing-
act/?sh=e9bbc547b36f
4. https://shenglufashion.com/2020/06/12/eu-vietnam-free-trade-agreement-and-
outlook-of-vietnams-apparel-export/#:~:text=About%20FASH455-,EU%2DVietnam
%20Free%20Trade%20Agreement%20and%20Outlook%20of%20Vietnam's
%20Apparel,early%20as%20in%20August%202020.
5. https://www.cosmosourcing.com/blog/china-vs-vietnam-manufacturing-sourcing-
pros-and-cons
6. https://www.economywatch.com/features/The-Vietnamese-Currency-Peg-to-the-US-Dollar-
is-Under-Pressure.07-06-15.html
7. https://www.adidas-group.com/en/sustainability/products/materials/#/nachhaltige-
baumwolle-better-cotton/
8. http://investor.fenc.com/upload/ir/ir_20200622001.pdf
9. https://bestwalkingshoereviews.com/the-importance-of-having-shoes-with-eva-
midsoles/#4
10. https://adidasshoescommoditychain.wordpress.com/transportation/#:~:text=There
%20are%20mainly%20three%20kinds,time%20but%20have%20least
%20cost.&text=Most%20of%20the%20transportation%20have%20a%20very
%20long%20distance.
11. https://www.annualreports.com/HostedData/AnnualReports/PDF/
OTC_ADDDF_2019.pdf
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