Challenge: Being competitive
Being competitive requires we respond to consumer demands for a broad range of products. This, in turn, means we need a wide variety of suppliers.
Shorter product cycles and the demand for more individualised products are specific challenges that not only affect marketing strategies, but also our sourcing models. We are also expanding into markets that are more seasonal, such as lifestyle and fashion.
Each of these markets has its own business specialities and requirements in terms of product style, seasonality, destination, availability and flexibility. This poses challenges to our existing sourcing model. For example, the supplier set-up for high-volume sports performance apparel structurally differs from suppliers who produce goods for casual or fashion market in lower quantities. Since there is no 'one-size-fits-all' sourcing concept that meets the respective market needs of business entities, product sourcing within the adidas Group has become more decentralised. The number of sourcing entities and increased complexity in business relationships poses challenges for overseeing consistent execution of social and environmental standards across the entire
Cost-effective product manufacturing and distribution are further imperatives. To remain competitive, we have largely outsourced manufacturing to countries where production costs are low. Interestingly, the emerging countries from which we source are themselves developing into major consumer markets for our products, blurring the line between export producers and local or domestic manufacturers.
Response: One Group - One set of standards
We believe that the values and principles we share with our business partners positively impact on business and the life of people making our products. We communicate these values through our 'Workplace Standards'. The Standards are based on the International Labour Organization (ILO) and UN conventions relating to human rights and employment practices. They follow the model code of conduct of the World Federation of Sporting Goods Industry.
The Workplace Standards are fundamental to our relationships with our suppliers and are a contractual obligation. Before suppliers can become authorised business partners, they must be able to show how they comply with our Standards. But this is not the end point. We want to see our suppliers integrating the Standards fully in their management and decision-making process, and finally moving towards a system of self-governance.
In 2007 we rolled out our policies to all adidas Group entities to ensure adherence to the principle 'One Group - One set of standards'. These policies contain uniform and mandatory procedures related to disclosure of suppliers, approval of new suppliers, enforcement actions and termination practices.