Case 1: In a Race Against Time, ADIDAS Leaps Forward (supply chain strategies)

abril 12, 2010

An athelete may use a pair of adidas shoes to increase his running speed. As part of global initiative, adidas is using lean manufacturing to increase how quickly those shoes get to the athelte.

The company makes a broad spectrum of footwear, appareal and accesories at more than 500 factories in 63 countries. Designing, manufacturing and distributing those products takes careful planning, large-sacle production, and complex logistics – and it takes time

That’s the problem. If adidas takes too mucha time to spot and respond to changing consumer preferences – not to mention manufacture the products – it may miss sales opportunities and/or find itself stuck with foot wear nobody wants.

That’s why adidas is now tageting a 50% reduction in time-to-maket every year. And that’s why the company  is more than 2 years into learn manufacturing initiative designed to help achieve that goal.

It’s an effort that already is starting to bear fruit. It used to take 90 days from and initial request for a product to having it delivered. Today, in many cases, it takes only 60 days, according to David Freni, head of strategic planning – global operations for adidas International. Thar broad improvement results from an accumulation of gains in a variety of areas, including dock-to-dock time within factories, “cut-to-box” time, packaged adn delivered inccordance with the original plan.

The 30-day reduction can make a big difference. “If we have 30 days more to delay the actual commitment of, let’s say,the sizes of a particular color of a particular product, the decission-making process of chosing the correct product improves anywhere from 25 to 55 percent”, Freni says. “What we’re seeing is two things: one is that our customer is ordering the correct thing, more accuracy in terms of size and color, and we’re getting larger orders as well. They’re less risk-averse, willing to commit to more production.”

Freni believes this will ultimately produce both greater sales for adidas and fewer markdowns, with imporvements of up tp 20 percent in each of those two areas, or a total “window of opportunity” of as much as 40%. It will take several more seasons to see the results, he adds, nothing that a “season” in the footwear industry lasts about six months.

In August, parent company adidas-Salomon announced a net sales increase of 10 percent in the second quarter. Operatind expenses were 40.2 percent of sales, up 0.4 percentage points. However, inventories were down 12 percent from a year earlier, and receivables were up 4 percent (which was less than sales growth). Net debt decreased 10 percent, the biggest year-over-year debt reduction since the Salomon acquisition.

The time-to-market initiative involves a coordinated, global effort on the part of adidas and its consultants. A major part of that effort on the part od adidas and its consultants. A major part of that effort has been training that leads to lean implementations in factories around the world. The effort  also involves technology improvements in supply chain planning, and it is beginning to close on the compnany’s internal design process.

Transforming Factories Worldwide

adidas outsources most of its manufacturing; the vast majority of factories that make adidas products are owned by other companies. But those companies – nearly 60 of them – are jumping on the adidaslean bandwagon “because of adidas” influene and he amount of capacity they consumed at these factories”, notes Fred Flynn, one of several consultants with Productivity, Inc., who worked with adidas for more than four years.

“adidas is probably the first company I’m aware of that has taken on such a large responsibility for educationof their tier on suppliers,” Flynn adds.

It’s a daunting task, not only because of the number of factories involved, bur also because of the size of some operations. One of the largest is a vast complex in Guangdong, China, employing nearly 90.000 people. A second complex nearby emplys another 20.000.

Operations were traditional batch-queue. For exmaple, a five story building at the site was divided up by process. Cutting of raw materials occured in batches on the first floor. The cut pieces  were bundled and sent to storage in warehouse, then brought back several days later for preparation on another floor. More warehouse storage would follow, until the prepared materials were brought back for sewing on still another floor.

In China, and everywhere else the consultants went, training has been a critical part of transformantion. Several dozen  managers at a timewent through a four-week training program. That was followed by the consultants working with the graduates to transform the shop floor, creating manufacturing cells. Visual controls have also been established in many operations.

Results vary among factories, but the benefits are clear. Work in process was reduced by amounts rangin from 54 precent to 98 percent, Flynn says, while lead times went down from 25 percent to 97 percent. Improvements in productivity – pairs per person per hour – also covered a broad range, but averaged about 50 percent, he adds.

Initially, all the efforts focused on footwear factories. More recently, the initiative has expanded to include apparel factories, which tend to be smaller but are greater in number. Lean efforts were launched not only in China, but also in factories in Taiwan, Istanbul, Tunisia, Vietnam, Indonesia, the Philippines, Bulgaria and Turkey.

Doing It Right

“The training is fundamental,” Freni says. “You can relate the success in the factory directly to how well you’ve trained not only senior management people, but down in the factory too. They have to understand how they contribute to the overall picture, and what the overall picture is. If you spend the time up front doing that, then they become part of the soultion.”

The other key factor, he states, is establishing a baseline, “understanding where you’re at before you start changing things, so you understand hoe you’ve changed things, and how much”

“Those two things are pretty much the core of getting it right. If you do those two things well, eventually ths shop floor is pushing this and setting new limits. Then you really have a lean enviroment.”

Stanley Mao is coordinator of lean manufacturing for Apache Footwear in Guangdong, a manufacturer for adidas. In an e-mail reply to  questions about the lean transformation, he commented that “it was very difficult to get pur emloyees involved in lean implementation, due to the fact that they didn’t know what lean was… Therefore, we established a training program to train our supervisros first to let them principles and change their thoughts and minds in different stages. Furthermore, these supervisors (key trainers) were responsible for training their employees step by step to ensure everyone really understands and accpets lean principles.”

Mao also said benfits at his factoey include “freeing up floor space, reduced, staffing needs and shortened productions cycles. By running one-pair flow in stiching and assembly, WIP has been reduced by about 30 percent.”

Flynn praises adidas for developing a productive working relationship wiht the consultants. “They did it right”, he says. “The steps they took were the proper steps”. These included educating the consultants about the footwear and apparel business, so that the consultants could customize training materials for the factories.

He also stresses that adidas followed a traditional – and worthwhile –  direction in its efforts. “The first place you always go is into manufacturing,” he explains. “Because adidas doesn’t have manufacturing, they went to the supplier base”. That’s the same thing anybody would do, even in a small manufacturing operation. You look at the total value stream. Manufacturing is the first place you go. Now they are starting to workk internally. Now their design time is longer than their manufacturing lead time.”

Freni confirms that “we’re hoping in 2003 we can begin to adress the product creation process.” Some processes have been re-engineered throughout the supply chain, to facilitate rapi prototyping, for example.

An Ongoing Initiative

Freni notes that adidas has also been developing new computer  planning systems. “They’ve allowed us to plan the factories more effectivelly,” he states.”We think that through the use of the system we’ll able to plan three to four percent more production in the month it is requested.” Actions have included linking cutomers to central planning operations and moves to forge better links with material suppliers.

adidas has also established a website specific to lean. There are caht rooms, and best practices are posted.

In hindsight, Freni believes it would have been helpful early on to have translated more materials into lcal languages. He also believes in avoiding information overloa: “You should give sufficient information, but not more than is needed at various levels. Try to simplify it so people get very good at the portion the have understand, but do not get burdened with, let’s say, theoretical aspects.”

This initiative is an ongoing effort, and far from mature. Freni notes that, currently, “we’re hopingto stabilize the 60-day timeline. That’s really more an issue of getting the rest of the supply cahin of sales side the adjust to the paradigm”. Flynn notes that adidas is also starting to look at working with its tier two suppliers.

Beyond achieving the goal of a reduced time-to-maket, Freni sees another gain: “The principal benefit both for us and the factories is we have gotten to understand one another much better. We have clear measurables can communicate in a common language, a lean language. And because we as brand are initiating this training, reaching out to our supply chain partners, we are building a bond that historically has not been a traditional one. A lot of that is built on mutual understanding and clear measurements.”

TAKESAWAY

  • Supply chain improvements is one way to improve time to maket.
  • A large manufacturer can take the lead in educating suppliers.
  • Having the right relationship with cosultants can be valuable.

fac in China


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