Adidas 2003 Annual Report Download - page 107

>Material and other service providers: Companies which
may or may not have a direct business relationship with
adidas-Salomon, but supply goods and services to the
main factories.
In addition, we have licensing arrangements with independent
companies who manage the design, manufacture and distri-
bution of specific product lines. All of these suppliers are
provided with detailed specifications for the production and
delivery of our products. In order to ensure the high quality
that the consumer expects from our product, we enforce strict
quality control and inspection procedures. Such procedures
include the regular presence of our more than 100 quality
control officers in these factories during the manufacturing
process.
FOOTWEAR PRODUCTION DOMINATED BY ASIA /// Asia
continued to be our most important sourcing region in 2003.
Approximately 95% of the adidas-Salomon footwear was
produced in this region with China, Vietnam and Indonesia
having been the largest sourcing countries, representing
approximately 53%, 24% and 18% of total footwear production
respectively. Production in other Asian countries was below
1%, while Europe and the Americas contributed 4 and 1%
respectively. The largest footwear factory produced approxi-
mately 17% of the footwear purchased by adidas-Salomon
in 2003.
APPAREL PRODUCTION AROUND THE GLOBE /// In apparel,
too, Asian countries dominated purchases in 2003. Indonesia
and China again were the largest sourcing countries, repre-
senting 18% and 17% of total apparel production. The remain-
ing 65% was produced by independent manufacturers in other
Asian countries, Europe and the Americas with 37%, 20% and
8% respectively. The largest apparel factory produced 5% of
our total apparel purchases in 2003.
HARDWARE PRODUCED CLOSE TO MARKET /// With respect
to hardware, adidas-Salomon focuses on producing close to
major markets. Salomon hardware is largely manufactured
by subcontractors in Romania. Additionally, Salomon, Mavic
and Cliché also maintain own production sites in France,
which concentrate on high-end products and new technologi-
cal developments. The majority of TaylorMade’s golf club
components are produced in China and then assembled by
TaylorMade in the major markets. All golf balls marketed by
TaylorMade-adidas Golf are produced by the Dunlop
Slazenger group in the USA.
CONSOLIDATING THE SUPPLIER BASE TO CUT COSTS AND
SPEED UP DELIVERY /// For 2004 and beyond, we strive to
strengthen the relationships with our key supply partners by
further consolidating our supplier base. This will give us more
influence with these vendors, enabling us to better drive our
quality initiatives as well as our cost-saving and delivery
performance efforts. Since 2000, we have reduced the number
of our footwear suppliers by 40%. In 2003 alone, we were able
to reduce the number of our footwear suppliers by 9%. In
apparel and hardware, we initiated focused efforts in 2003
which have already started to pay off with a reduction of the
supplier base by 7 and 21% respectively.
LEAN MANUFACTURING PRINCIPLES EXTENDED TO
APPAREL ACTIVITIES /// Reducing our lead times – the time
elapsing for product creation, order placement, raw material
preparation, manufacturing and delivering products to retail –
is a major priority within our Group as this enables us to
create products best tailored to meet current market needs
and improve customer service. In addition, it helps us to
reduce inefficiencies, enhance quality, minimize costs and
improve inventory management. Until 2003, our Global Opera-
tions activities had concentrated on reducing footwear lead
times. In 2003, however, our primary focus was on reducing
apparel manufacturing lead times. By expanding the lean
manufacturing principles that had proved successful in
footwear to our apparel organization (e.g. improved labeling,
packaging and special handling), we were able to reduce our
apparel manufacturing lead times by 17% during the last 12
months. Going forward, we remain committed to achieving
further improvements in both footwear and apparel.
SPECIAL PROJECTS TO REDUCE APPAREL LEAD TIMES ///
In addition to reducing overall apparel lead times, our Global
Operations efforts also include a variety of projects targeting
specific areas of the business. In order to increase our speed-
to-market specifically within our all-important football cate-
gory we have introduced a special program aimed at reducing
the time between retailer purchase orders and product
delivery. This has the benefit of increasing sales while reduc-
ing both the inventory carrying costs as well as close-out
sales. The program has increased significantly since its
implementation three years ago. In 2003, we designed a
“5-4-3 model” with our biggest customers. We are now able to
offer product timelines of five months from first concept to
shelf for new products, four months for color upgrades of
existing models and three months for reorders. The first
strategic partnership with one of our major retailers gener-
ated incremental business of more than 100,000 units. We
plan to extend this project to two additional customers in
early 2004.
CUSTOMIZING THE SUPPLY CHAIN /// The creation of cus-
tomized supply chain solutions is as important as lead-time
reduction. In 2003, we continued to make inroads with these
innovative supply chain solutions. In Japan, we were able to
work with factories and retailers throughout the supply chain
to provide manufacturing lead times as short as seven days.
In addition to higher volumes, this program allowed us to
capitalize on unique market and product opportunities as well
as to increase inventory turnover from factory to consumer.
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