NADA SYIFA ASYADRI

1610533035
 OVERVIEW
Adidas Group is a multinational company that was founded on 18th August 1949
by a man called Adolf Dassler. He was commonly known as ‘Ádi Dassler’. This
popular company was started by Adolf Dassler in his mother's house; he was joined by
his elder brother Rudolf in 1924 under the name Dassler Brothers Shoe Factory. Dassler
assisted in the development of spiked running shoes (spikes) for multiple athletic
events. To enhance the quality of spiked athletic footwear, he transitioned from a
previous model of heavy metal spikes to utilising canvas and rubber. Dassler persuaded
U.S. sprinter Jesse Owens to use his handmade spikes at the 1936 Summer Olympics.
In 1949, following a breakdown in the relationship between the brothers, Adolf created
Adidas, and Rudolf established Puma, which became Adidas' business rival.
Adidas is a German company that has based its headquarters in Herzogenaurach,
Germany. The current Chief Executive Officer of Adidas is Herbert Hainer. Adidas is
the biggest manufacturer of athletic shoes and apparel in Europe and the second largest
in the world. Around the world, Adidas employ over 57,000 people. Employees from
about 100 nations. Every year they produce over 900 million sports and sports lifestyle
products with independent manufacturing partners worldwide. In 2018 we generated
sales of € 21.915 billion. These numbers alone can easily suggest that Adidas is quite a
large and also multifaceted organization.
CONTENTS
 Become the best sports brand in

the world, by designing, building and

selling the best sports products in the

world, with the best service and

experience.

 CONSUMER OBSESSION

 CREATING FOR AND WITH

THE CREATORS

 ORIGINAL IS NEVER

FINISHED

 CORE – ACCESSIBLE

SPORTSWEAR FOR ALL

 Adidas has been quite good at controlling and managing costs accounting. It has been able
to achieve this through:

It has been able to decrease its costs By using recycled materials, they are able

by outsourcing a big part of its to save money that would have gone into waste

production. They work with over 1200 disposal and buying new supplies. Most of the

independent factories across the world, sustainable materials they use are recycled

with most of its suppliers coming from rubber, recycled polyester and many more. This

Asia. This is a good way for them to is a good way to control costs because it does

reduce costs because production costs not just help them but its also good for the

like labour costs are much lower in Asia, natural environment. This can be seen through

which makes it cost less than it would if their recent project, where they have created

they were producing the products trainers that are made out of recycled ocean

themselves. waste.

Adidas will be opening a new factory in

Adidas has been able to reduce
Germany that will depend on robots and
costs while maintaining good quality
customized automation to manufacture about
through two projects,that they have
500,000 pairs of sport shoes a year. This new
been working on. These projects are
factory will help to reduce logistics and supply
consolidation of hashtag shapes and
chain costs. This also a good way to reduce
introduction of single-wall
costs because the factory will lead to higher
transportation cartons. This is a good
quality, it will also increase efficiency and it will
way of maintaining costs because
also save the time that it usually takes to bring
they are also minimizing the
manufactured products from outsourced
utilization of paper which creates
suppliers to the market
less waste.
Key Capital investment

One of the key capital investments made by Adidas is the introduction of what they call
the ‘speedfactory’. The first factory will be in Germany followed by the United States. They
will be employing and utilizing intelligent robotic technology in this factory, which they
believe will help them respond faster with customization in different locations in the world.
Their first speedfactory will be in Ansbach, Germany where they will produce their first 500
shoes next year. These robots built shoes will be different than the shoes they sell now as it
will have the boost cushioning technology. They are getting the support from the federal
republic of Germany. The Federal Ministry for Economic affairs and energy (BMWi) will be
financing the speedfactory project.
The speedfactory is among the 14 projects they will be financing in the project called
“Áutonomic” for Industry 4.0’ as the German governments has a high tech 2023 strategy of
digitalize manufacturing. This acquisition will improve the company’s revenue performance
because the specialty of this speedfactory project will help them have a competitive
advantage, which can lead to more sales. They will be more likely to attract new customers
because of the unique kind of shoes they will be producing, new customers will help them
have a bigger market share and therefore make more profit.
Adidas Group’s Outsourcing

Adidas designs and develops its products in Germany but outsources 90% of
its manufacturing activities. They team up with more than 1200 independent
factories worldwide in 65 different counties to help produce their products. 65% of
its production is done in Asia in countries like Japan, China, Vietnam, Korea and
Indonesia. 25% in North and South America in Brazil, Mexico, United States,
Canada, Brazil and Argentina. Lastly the 10% are from Europe, the Middle East
and Africa (EMEA) in Turkey, South Africa, and Spain etc.

They do this to reduce production costs.

That is why most of production is done in Asia
than anywhere else, this is because Asian
countries have much lower labour costs
compared to Western European countries. If they
produced most of its products themselves it
would be hard keep up with their rivals like
Nike, because its competitors also outsource
most its production in Asia. Another reason for
outsourcing is so that Adidas can specialize on
what they are actually the best at and focus on
their core competences like building and
improving their brand image.
 However this will definitely change in the
near future as they are planning to build their
new factory known as the speedfactory as
mentioned above. This factory will use robots to
manufacture the shoes rather than the use of
human labour in Asia. One of the many reasons
to build this factory is that Adidas has been
experiencing rise in labour and transportation
costs together with shortage of labour in Asia. So
in the future they might be outsourcing less
production, as they have plans of opening more
of this speed factories in France and Great
Britain.
 Based on the explanation above, Adidas reduce their non value added activity and
used Speedfactory to do cost elimination of production. This implementation of
speedfactory also have some advantage where increasing product quality, reduce the lead
time and also increasing the quantity of product to produce. In addition of this
improvement will lead the company to improve the company performance. It means that
Adidas aimed for continuous improvement step by step in order to raise the effectively
production. Where Kaizen costing has meaning that “a continuous improvement”. In
Adidas, they do improvement in capabilities, quality, service and improve the company for
the consumer. Kaizen Costing is a system of cost reduction through continuous
improvement (Riwayadi, 2016). Kaizen approaches and techniques are valuable tools
which can be used to increase productivity and gain competitive advantage and to increase
the overall performance of the organization in a tough competitive market by reducing the
cost of production or manufacturing. Adidas also renovated the new technology and the
new production system where the call as “speedfactory” in order to make sure that their
products in high standards and high quality in order to achieve cost reduction.
In the other hand , according to the information from Adidas annual report, Adidas
management also do some improvement for the customer by provide products and services
with a quality level in order satisfies customers at the right time and at the right price
through involving all members of the organization. This also called as Total Quality
Management (TQM) since all organization functions work together to build quality into
the company's products or services for the customer’s satisfaction. In this case, Kaizen
costing and TQM implementation is related each other because Kaizen costting is
implement important part of TQM.
While they have targeted the cost reduction in the past term in 2017 and they achieve
it into the increasing the margin profit in 2018. In this case they do the target costing
method where make the planning to set a target cost reduction.
 Adidas also do the outsourcing from the other
country in order to reduce cost production of the
product. That is why most of production is done in
Asia than anywhere else, this is because Asian
countries have much lower labor costs compared to
Western European countries.
 Based from discussion, Adidas include into Lean Manufacturing where they are mostly
evolved from Japanese industries especially from Toyota. Lean Manufacturing is considered to
be a waste reduction technique. Lean principles defines the value of the product/service as
perceived by the customer and then making the flow in-line with the customer pull and striving
for perfection through continuous improvement to eliminate waste by sorting out Value Added
activity(VA) and Non- Value Added activity(NVA). The sources for the NVA activity wastes are
Transportation, Inventory, Motion Waiting, Overproduction, Over processing and Defects. As
elaborated in the earlier answers, Adidas have been effective in controlling and managing its
costs. Their Key capital investment, which is the speedfactory, will help them reduce even more
costs and be more effective in the long-run. This is the best strategy to improve the reducing cost
approximately and increasing quality of product. Where speedfactory become their big issues
strategy to adopt lean manufacturing in Adidas company.
They were also able to achieve most of the targets they set for the financial year 2018,
which shows a sense of growth and development in the company. Well, this might be increase
company performance and become the huge company in the world.
R. Sundara, A.N.Balajib & R.M.SatheeshKumar, (2014), A Review on Lean Manufacturing
Implementation Techniques, 12th global congress on manufacturing and management

Riwayadi (RWD), (2016), Akuntansi Biaya, Pendekatan Tradisional dan Kontemporer, Edisi 2,
penerbit Salemba Empat Jakarta,

Young, S. Mark (MY),(2001), Reading in Management Accounting, 3th edition, Prentice Hall Inc.

B. Modarress, A.Ansari & D.L.Lockwood,(2014),Kaizen costing for lean manufacturing: a case

study,International Journal of Production Research

Adidas Annual Report 2018. https://www.adidas-group.com/en/investors/financial-reports/2018/.

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