Global Operations

Global Operations manages the development, production planning, sourcing, and distribution of our company’s products. The function strives to increase efficiency throughout the company’s supply chain and ensures the highest standards in product quality, availability, and delivery. With the consumer in mind, we deliver competitively priced products in a sustainable manner, when and where they are wanted.

Global Operations delivers upon our company’s mission to be the best sports brand in the world. The function creates the best products by establishing state-of-the-art infrastructure, processes, and systems that enable us to focus on innovative and sustainable materials and manufacturing capabilities. Moreover, Global Operations is focused on delivering the best services through flexible and agile distribution capabilities by enabling product availability through an omni-channel approach. Thereby, Global Operations contributes to delivering the best experience to our customers and consumers in a sustainable way.

Global Operations in go-to-market process

In 2020, our Tech and Non-Trade Procurement teams joined Global Operations and are now reporting into the Executive Board Member responsible for Global Operations.

Production through independent manufacturing partners

To keep our production costs competitive, we outsource almost 100% of our production to independent manufacturing partners. While we provide our manufacturing partners with detailed specifications for production and delivery, they possess excellent expertise in cost-efficient, high-volume production of footwear, apparel, and accessories and gear.

In 2020, we worked with 132 independent manufacturing partners (2019: 138) that were producing in 277 manufacturing facilities (2019: 304)¹. The majority (68%) of our independent manufacturing partners are located in Asia (2019: 73%).

We value long-term relationships: 61% of our independent manufacturing partners have worked with adidas for at least ten years, and 30% have a tenure of more than 20 years.

Relationships >20 years

30%

Overall, our independent manufacturing partners produced 943 million pieces of apparel, footwear and accessories and gear in 2020 (2019: 1,103 million pieces).

All our manufacturing partners are subject to specific performance criteria which are regularly measured and reviewed by Global Operations. To ensure the high quality that consumers expect from our products, we enforce strict control and inspection procedures of our manufacturing partners and in our own factories. Effectiveness of product-related standards is constantly measured through quality and material claim procedures. In addition, we track social and environmental performance criteria of our suppliers through the compliance and environmental KPI (C-KPI and E-KPI) tracking system. Adherence to social and environmental standards is promoted throughout our supply chain. The current list of our independent manufacturing partners can be found on our website. adidas-group.com/s/supply-chain-approach See Sustainability

Impact of the coronavirus pandemic on our manufacturing partners

Due to the global outbreak of the coronavirus, our independent manufacturing partners had to deal with facility closures, reduced working hours, and changes in operating procedures to implement social distancing and necessary safety measures. We reduced our production volumes to meet the lower global demand. At the same time, to keep the production volume relatively stable, we managed factory fill rates by pulling forward demand and production of ’evergreen’ products, such as Adilette slides, that are usually not subject to seasonal or trend-related change. We kept in touch with our manufacturing partners throughout the crisis and did not terminate any relationship due to the pandemic in 2020.

Vietnam remains largest footwear sourcing country

97% of our total 2020 footwear volume was produced in Asia (2019: 98%). Vietnam represents our largest sourcing country with 42% of the total volume (2019: 43%), followed by Indonesia with 29% (2019: 28%), and China with 15% (2019: 16%). In 2020, our footwear manufacturing partners produced approximately 379 million pairs of shoes (2019: 448 million pairs). Our largest footwear factory located in Vietnam produced approximately 8% of the footwear sourcing volume (2019: 8%).

Cambodia remains largest source country for apparel

In 2020, we sourced 93% of the total apparel volume from Asia (2019: 91%). Cambodia is the largest sourcing country, representing 22% of the produced volume (2019: 23%), followed by Vietnam with 21% (2019: 19%), and China with 20% (2019: 19%).

In total, our manufacturing partners produced approximately 465 million units of apparel in 2020 (2019: 528 million units). The largest apparel factory, which is in China, produced approximately 11% of this apparel volume (2019: 9%). Overall, apparel production is more fragmented than footwear.

China remains main source country for accessories and gear

In 2020, 77% of our accessories and gear, such as balls and bags, were produced in Asia (2019: 81%). China remained our largest sourcing country, accounting for 36% of the sourced volume (2019: 37%), followed by Turkey with 21% (2019: 18%) and Pakistan with 16% (2019: 22%).

The total accessories and gear sourcing volume was approximately 100 million units (2019: 127 million units), with the largest factory accounting for 21% of production (2019: 16%) located in Turkey.

Worldwide production volumes by country¹

Total production volumes by category¹

On-time in-full delivery to our customers

Global Operations strives to develop, produce, source, and distribute ordered articles on time and in full. Therefore, a non-financial KPI ‘On-Time In-Full’ (OTIF) measures on-time and in-full delivery of our products toward the desired customer date for our wholesale and franchise customers as well as own-retail stores.

At the outset of the coronavirus crisis, beginning of 2020, the factory shutdowns in Asia impacted our ability to provide the highest product availability in our distribution centers. For the most part, as of March, the closure of our wholesale customer stores affected our capability to deliver products on time, despite sufficient product availability in our distribution centers. As our wholesale customers could not receive our products, our outflows were reduced, thereby creating congestion in our distribution centers. This negatively impacted our on-time and in-full deliveries from April onward, before recovery began in August, after stores and businesses had reopened for a longer period. At that time our global demand began to increase, and the flow of goods normalized again. In 2020, adidas delivered 76% of its adidas and Reebok brand products on time and in full (2019: 79%), missing its OTIF ambition of 82%.

Agile and efficient distribution center network

By following a clear strategic framework, we enhanced our distribution center landscape in 2020 through process automation, system upgrades, and distribution center capacity expansion. These enhancements helped enable us to improve e-commerce service levels and provide more delivery choices with an overall broader product availability.

Overall, our global distribution network consists of 64 distribution centers, enabling us to efficiently and effectively service our global demand. We operate distribution centers in all our markets with twelve distribution centers in Europe, 22 in Asia-Pacific including one newly opened this year, ten in North America, eight in Latin America, two in Russia/CIS, and ten in Emerging Markets.

Through own and partnership best-in-class execution, Global Operations ensures that the health and safety of both employees and consumers are maintained equally. Of the 64 distribution centers that make our global network, 29 are owned and operated by adidas, and 35 are owned and operated by logistics partners, allowing for the operational flexibility and agility to best service our customers and consumers.

To enable a broader range of products to be available at the point of sale, 17 of our distribution centers are set up to serve all our channels, 38 are specialized to serve our retail and wholesale customers, and nine are solely dedicated to servicing our e-commerce consumers. This diverse combination of distribution centers allows us to be agile and efficient in distributing our products to our customers and consumers across the globe.

adidas vs. partner-owned and -operated distribution centers per region

Impact of the cornavirus pandemic on our supply chain

Global Operations responded with speed and agility to address the challenges emanating from the outbreak of the coronavirus. Our supply chain organization took several measures to synchronize demand and supply in a cost-conscious manner: We reduced our production volumes to avoid excess supply, while ensuring our suppliers’ production capacities were maintained for upcoming seasons. Additionally, we mitigated the impact of further inventory build-up through effectively managing our existing inventory levels across our supply chain. We delayed the flow of in-transit goods and secured temporary overflow storage in our markets for goods that were not immediately needed by our customers. These actions mitigated congestion at our distribution centers allowing us to make in-demand products available at our distribution centers for on-time delivery to our customers and consumers around the globe.

Positive impact on e-commerce volume growth

While the coronavirus pandemic negatively impacted our demand in our retail and wholesale channels, it had a significant positive impact on our e-commerce channel. For example, in Europe, our distribution centers processed daily volumes equivalent to peak e-commerce events such as Cyber Week. To secure this spike in our e-commerce demand and minimize shipping delays to our consumers, we immediately increased our e-commerce distribution center capacities. At the same time, we maintained operations by implementing protocols for security and safety measures during the coronavirus crisis. To further support our future e-commerce growth, we are continuing to invest into our warehouse footprint and improve our omni-channel fulfillment capabilities. See Strategy