Adidas 2003 Annual Report Download - page 106

Global Operations /// adidas-Salomon’s CORE COMPE-
TENCIES ARE THE DESIGN, DEVELOPMENT AND MARKETING
OF TOP-NOTCH SPORTING GOODS PRODUCTS. HOWEVER,
OUR GLOBAL OPERATIONS UNIT IS CRITICAL FOR COORDI-
NATING THE DEVELOPMENT, COMMERCIALIZATION AND
MANUFACTURING OF OUR PRODUCTS, AND IT LEADS OUR
EFFORTS IN SUPPLY CHAIN IMPROVEMENT. IN ADDITION TO
OUR GLOBAL OPERATIONS TEAM, OUR SUPPLY CHAIN
INCLUDES RETAILERS, SALES SUBSIDIARIES, INDEPEN-
DENT MANUFACTURERS, RAW MATERIAL SUPPLIERS,
TRANSPORT COMPANIES, FINANCIAL INSTITUTIONS, AND
MANY OTHERS INVOLVED IN GETTING OUR PRODUCTS TO
THE CONSUMER. THE adidas-Salomon SUPPLY CHAIN CAN
BE DIVIDED INTO TWO DIFFERENT CYCLES: PRODUCT
CREATION AND PROCUREMENT. THE PRODUCT CREATION
CYCLE DESCRIBES OUR ACTIVITIES FROM THE INITIAL
PRODUCT CONCEPT TO PRODUCT OFFERING AND COM-
PRISES THE DESIGN, DEVELOPMENT AND COMMERCIAL-
IZATION OF OUR PRODUCT. THIS PART OF THE PROCESS
IS FOLLOWED BY THE PROCUREMENT CYCLE, WHICH
INCLUDES ORDER MANAGEMENT, MANUFACTURING AND
DISTRIBUTION. WE REMAIN COMMITTED TO MAKING SIG-
NIFICANT PERMANENT IMPROVEMENTS IN BOTH THE
CREATION AND PROCUREMENT AREAS TO ACHIEVE
OPTIMAL EFFECTS IN TERMS OF QUALITY, COSTS AND
DELIVERY PERFORMANCE.
ALIGNING ACTIVITIES AND SHARING BEST PRACTICE ///
In 2003, we have continued our efforts to consolidate the
footwear supply base to further increase efficiencies, leading
to greater investment in technologies and innovation in both
product and manufacturing. However, the restructuring of
our apparel organization has been our priority in 2003 and
focuses on positioning our Group to benefit from the removal
of quotas which are set to occur over the next few years.
While this has largely meant centralizing our sourcing opera-
tions, in some cases it has been necessary or expedient, as a
result of import restrictions or duties, to continue sourcing
directly via our operating subsidiaries. We therefore maintain
17 regional sourcing offices (liaison offices) in Asia, Europe
and the Americas. Their functions cover merchandising, order
placement and monitoring, as well as quality assurance and
on-site control of manufacturing facilities. In order to facili-
tate quick decision-making and to optimize the balance
between quality, product costs and delivery performance, we
increased our on-site presence in 2003 by relocating some of
our Asian liaison offices from cities closer to the actual
production sites. The relocation of the liaison offices is also
indicative of our future sourcing strategy, which will rely on
fewer overall countries and the growing importance of China.
WORKING TOGETHER WITH SUPPLIERS TO ENSURE TOP-
QUALITY PRODUCTS /// Given that the vast majority of our
products are being produced by independent manufacturers,
the relationship to our suppliers remains a critical factor to
both the outcome of our Global Operations activities and the
Group’s overall success (see Risk Management). The different
types of supplier we utilize can be categorized as follows:
>Main factories: Suppliers who have a direct contractual
business relationship with adidas-Salomon. These com-
panies manufacture our product for both export and local
market consumption.
>Subcontractors: Companies that have been subcontracted
by our suppliers and do not have a direct business rela-
tionship with adidas-Salomon.
102 REPORTING GLOBAL OPERATIONS
FOOTWEAR PRODUCTION BY REGION
Americas 1%
Europe 4%
Asia 95%
APPAREL PRODUCTION BY REGION
Americas 8%
Europe 20% Asia 72%