Global sourcing can no doubt be challenging for the multitude of aspects that must be considered, but athletic wear retailer Adidas said the key to a successful sourcing model is long-term partnerships.
In a story on its website titled, “The Dilemma of Sourcing Globally,” Adidas—which outsources nearly 100 percent of its production to global suppliers—said the way to address the challenges of determining where to source is by collaborating with strategic suppliers.
John McNamara, Adidas Group senior vice president for sourcing said, “Our sourcing strategy embodies the very spirit this company is built upon: only the best for the athletes. We do not simply buy products from our suppliers, but we instead have built outstanding, long-term partnerships with them which ultimately allow us to develop and bring the best-performing product to market.”
Adidas’ Global Operations department, specifically sourcing, looks into a potential sourcing locale’s infrastructure, innovation, competitive price structures and political stability before deciding where to source, and works in collaboration with its Social and Environmental Affairs department. Though the company spreads its sourcing over multiple countries, 80 percent of its global production comes from strategic suppliers.
Instead of chasing the cheapest price and changing suppliers to suit, Adidas said it focuses on developing relationships with its long-term partners, some of which have been in place for more than a decade, and which are also disclosed on its global supplier list in an effort to promote transparency. And according to Adidas, not even rising labor costs have sent the company running from established suppliers. Wages have gone up 45 percent in Vietnam over the 2011 to 2013 period, and 54 percent in Indonesia, and the company hasn’t balked.
“In the long run, it is these long-standing partnerships that carry greater benefits for both parties rather than constantly changing to maximise short-term profits,” the company noted.
And the supplier/brand relationship extends beyond just ordering and purchasing. Adidas has worked to develop programs for suppliers that address productivity, efficiency and quality. The company also places its own personnel at the strategic factories, which allows them to work closely with local personnel to develop the next innovations.
When it comes to compliance, and social and environmental considerations, Adidas said relationships with suppliers are guided by its workplace standards which contain clauses to ensure fair labor practices, wages and safe working conditions. The company performs hundreds of yearly factory visits to review and reevaluate suppliers, and nine relationships with subpar suppliers were terminated last year.
“This is not all we do. We also proactively engage with governments to tackle critical issues such as minimum wages, freedom of association or environmental standards. Ultimately, business can thrive only if the right conditions are in place,” Frank Henke, Adidas Group VP for social and environmental affairs.
Adidas said effectively managing its supply chain is a work in progress, and that to maintaining a balance between shareholder expectations, economic success and social and environmental advancement, there remains much to do—but the long-term relationships are the right way to achieve that balance.
“If you want to successfully cater for that demand as a top player in the industry you have to be fast and efficient, you need to minimise your sourcing risks and you have to partner with the best possible suppliers you can find, no matter where,” the company noted.