Challenge: Managing an external supply chain
Our supply chain is large, multi-layered and complex. It comprises many different suppliers that can be broadly categorised as one of main factories, subcontractors and material suppliers.
While we strive to consolidate the supply chain for our core business and international export market production, in other areas we are also expanding our supplier base. We are entering into licensing arrangements with specialty firms, supporting investment and green field development by our existing business partners who are building new factories, and finding new suppliers to fill orders for each local market.
Certain adidas Group business entities work with agents who act as intermediaries who manage sourcing operations with individual suppliers.
A simplified illustration about our supply chain and its tiers is shown in the Managing our supply chain section.
Outsourced production is not without its risks. We have less control over how our suppliers operate and the conditions at their factories than we do at company-owned sites.
Not enough capable managers
We have our Workplace Standards, which guide our suppliers on achieving acceptable working conditions. Our efforts are directed at addressing the root causes of problems and helping factories improve by developing and running their own management and governance systems. To operate and maintain these, factories need capable people who are trained, competent and experienced. Within our major sourcing countries we have found that there is a very limited supply of qualified middle managers with health and safety and human resource management skills, and where there are capable people, turnover rates are high.
Peak demand stretches suppliers
Major sporting events create challenges in managing product demands and peak production loads in a limited base of suppliers. Also, marketing and promotion campaigns for major sports events often include specialty and give-away items, which are ordered through agents who operate outside of our main supply chain.
Response: How we work with suppliers
Our strategy is based on a long-term vision of self-governance for our suppliers and focuses on:
- Supporting business partners in their efforts to establish effective human resources, health, safety and environmental management systems
- Building capacity within the workforce and the management of our supply chain to ensure fair and safe working conditions
- Raising environmental awareness and promoting best environmental practice, and
- Expanding our engagement with local worker organisations and NGOs to better understand working conditions in places where our products are made.
Within our core supply chain we act as both inspectors and advisors, assessing management commitment to our Workplace Standards but also training our suppliers on the key issues. We use a Key Performance Indicator to measure the effectiveness of actions taken by suppliers and also provide training on establishing effective human resources and environmental management systems to help suppliers understand what is needed from them to achieve self-governance. To ensure that management systems are overseen by knowledgeable managers and they are retained in factories, we have been introducing innovative registration procedures for factory health and safety managers.
We are extending the contractual obligations of those agents and licensees who operate outside of our main supply chain to include compliance with our Workplace Standards. We require agents and licensees to develop strategic compliance plans that show how they manage their suppliers' compliance. These plans are subject to review by the adidas Group.
For more, see Managing our supply chain.
- Our efforts are directed at addressing the root causes of problems and helping factories improve by developing and running management and governance systems.