FOCUS ON FIVE INITIATIVES
Global Operations is focusing on
five key initiatives to optimize processes in our supply chain:
Replenishment: Providing high availability of product to our
customers while minimizing our inventory of finished goods.
End-to-End Profitability: Identifying our key cost and profitability
drivers and their interrelationships to optimize decisionmaking.
Adaptive Supply Network: Enhancing the flexibility of both
our sourcing and logistics functions to address quick-changing
market needs.
End-to-End Planning: Fundamentally challenging and optimizing
our Group-wide demand and supply planning processes
to create more efficient, transparent and cross-functionally
interlinked
processes.
Accelerated Creation-to-Shelf: Building capabilities and
technology that drive faster and more efficient product creation
to enhance the Group’s top- and bottom-line growth.
ADVANCEMENTS WITH ALL INITIATIVES
In 2007, we made
first steps in all five areas. We started utilizing real-time sell-through
data on a Stock Keeping Unit (SKU) level to determine
replenishment needs at adidas own-retail stores in Europe.
This helped us identify additional sales potential and reduce
overall markdowns. As part of our End-to-End Profitability
initiative,
we developed a profitability simulation model that
incorporates
product creation and delivery costs (i. e. total cost
perspective) to support decision-making in sourcing and
transportation.
With respect to the Adaptive Supply
Network
initiative, we made significant progress in warehousing and
launched several IT projects to improve speed and flexibility in
our supply chain. During the year, we also started our End-to-End Planning initiative with new demand
and supply planning
concepts.
Within the scope of the Accelerated Creation-to-Shelf initiative, we implemented 6- and 13-month concept-to-shelf processes (i. e. all activities from the first product sketch to the final delivery to retailers) to support newly introduced business models at brand adidas. 30 % of the fall / winter 2008 product range was placed on those quicker timelines. In addition, for the first time we used virtual product prototypes to accelerate our product review process and reducing sampling costs.
SUCCESSFUL COMPLETION OF "WORLD CLASS BUYER" PROGRAM
In 2007, we were able to realize significant benefits as
a result of our “World Class Buyer” program. The objective
of this program was to maximize purchasing leverage across
the adidas and Reebok brands. During the year, we finalized
the implementation of a standardized costing framework for
both brands in footwear and made significant progress with
the roll-out of a similar framework in apparel. As a result,
we generated cost synergies at both brands. 
see Income
Statement
FURTHER INTEGRATION BENEFITS IN LOGISTICS
In 2007,
we achieved significant synergies in freight and transportation
costs as a result of the harmonization of our global service
provider network. We also made major headway in warehouse
integration. In the UK, construction of our new central distribution
center for the adidas and Reebok brands in Manchester
was completed in December. Operations are planned to commence
in the first half of 2008, so we expect to see the first
cost savings materialize in 2008. Also, construction work for
our two new central US distribution centers in Spartanburg,
South Carolina, began in 2007. We expect to start operating our
US apparel distribution center in the fourth quarter of 2008
and our US footwear warehouse a year later. These two new
facilities will replace five existing adidas and Reebok warehouses.
FIRST SUCCESS IN REEBOK APPAREL BUILD-UP
In 2007, we
stepped up our efforts to establish an in-house apparel organization
for the Reebok brand. On the sourcing side, we phased
out Reebok’s former sourcing agents. This means that we will
source Reebok apparel solely through our own supply base
utilizing the established network of the adidas brand. Reebok
also developed its first full apparel collection (spring / summer
2008) in the new organizational set-up following adidas best
practice processes. In the coming years, we will focus on
further
improving Reebok’s apparel processes to achieve
performance
levels in line with the adidas brand.
PROGRESSIVE RAMP-UP OF “WORLD CLASS SUPPLY CHAIN”
AT BRAND ADIDAS
In 2005, we started our “World Class
Supply
Chain” initiative to optimize adidas’ product offering, to
best attack market opportunities and to improve profitability.
In 2007, we further extended its global footprint by implementing
the brand model to all markets globally.
The brand
model delivers adidas brand concepts (e. g. adiSTAR, TECHFIT ™,
Predator®) to all markets globally with first priority in our
supply
chain, communications support and retail execution.
The evergreen model provides short lead time and never-out-of-stock capabilities for our most commercial
long-lifecycle
products (e. g. basic apparel lines) through continuous replenishment.
In 2007, we also launched the quick response and global / regional models. The quick response model allows us to seize additional market opportunities with six-month concept-to-shelf processes. We also put in place a customization business model for “mi adidas”, which is being extended to customized football team wear. Under our global / regional model, we have established four product creation centers around the globe to ensure that we have the right mix between global consistency and regional specifics to best address consumer needs in the respective markets. Together, these four business models give the adidas brand a competitive advantage to service a diverse set of market needs in a more relevant and specific way.
