Reebok 2014 Annual Report Download - page 106

102
2014
Internal Group Management System
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03.1
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adidas Group
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2014 Annual Report
Group Management Report – Financial Review
Structured performance measurement system
We have developed an extensive performance measurement system, which utilises a variety of tools
to measure the performance of the adidas Group. The Group’s key performance indicators as well
as other important financial metrics are monitored and compared against initial targets as well
as rolling forecasts on a monthly basis. When negative deviations exist between actual and target
numbers, we perform a detailed analysis to identify and address the cause. If necessary, action
plans are implemented to optimise the development of the Group’s operating performance. We also
benchmark the Group’s financial results with those of our major competitors on a regular basis. To
assess current sales and profitability development, management analyses sell-through information
from our own-retail activities as well as short-term replenishment orders from retailers.
Taking into account year-to-date performance as well as opportunities and risks, the Group’s
full year financial performance is forecasted four times a year. In this respect, also backlogs,
sell-through data, feedback from customers and own-retail stores are assessed as available.
Finally, as a further early indicator for future performance, the results of any relevant recent
market and consumer research are assessed as available.
Enhanced integrated business planning and management approach
In order to further optimise profitability and working capital efficiency as well as operating cash
flow development, 2014 saw the continuation of the Group-wide Integrated Business Planning
initiative (IBP). This initiative focuses on developing and forming an enhanced forecasting approach
by aligning processes and timelines of major business functions such as marketing, sales and
operations at a market and global level. The centre-point of this approach is to improve the reliability
of future business planning, leading to a new efficiency level of order book building and conversion.
This, in turn, is expected to lead to improving full-margin business.
The whole process is set up in a rhythm and timeframe to facilitate full cross-functional alignment
and forecasting clarity in advance of important business decision processes – in particular those
related to product pricing, range building, material purchasing or production capacity fixing. To
create a seamless flow between achieving our strategic objectives and implementing operational
plans, we follow a rolling two-year time horizon. This ensures more focus on the mid-term
perspective, while at the same time highlighting relevant information around short-term business
events and volatilities. All target-setting is fully embedded into the integrated planning process and
communicated in advance of all relevant business milestones.
see Glossary, p. 258