How Adidas manage their supplier relationships

Adizero Adios Pro Credit: Adidas
With a global and multi-tiered supply chain, how does sportswear giant Adidas manage their many supplier relationships ?

Adidas has now outsourced most of its production and currently work with more than 400 independent factories around the world that manufacture products in around 45 countries. Their supply chain is global and multi-layered, with some suppliers working as directly contracted factories.

Relationships with strategic partners

The company’s global supply chain extends through various tiers from strategic manufacturing partners to componentry and materials suppliers, to raw material sources, such as cotton, leather and natural rubber. Adidas works closely with key strategic partners, the vast majority of their products are produced in the facilities of around 110 manufacturing partners worldwide. 

Their strategy is constructed to value long-term relationships, with 65% of their independent manufacturing partners working with the company for at least ten years and 35% recording a tenure of more than 20 years. The length of supplier relationships is determined by specific performance criteria which is regularly measured and reviewed, with suppliers incentivised to maintain a high level of performance against the criteria through the awarding of higher orders.

Adidas World of Sports, the Adidas AG headquarters in Herzogenaurach, Germany Credit: Adidas

Sourcing relationships

Direct sourcing

Adidas holds direct contractual relationships with core suppliers who are centrally supervised by the company’s Global Operations function. Global Operations manages the development, production, planning, sourcing and distribution of the vast majority of Adidas products. These suppliers produce the predominant share of the total sourcing volume of the company.

Indirect sourcing

The remaining minor part of their product volume is sourced by agents or made under licence. Agents place orders with their preferred suppliers. Licensees may either place orders directly with their suppliers or use agents as intermediaries. Adidas’ indirect supply chain complements their direct sourcing by meeting specific requirements that cannot be serviced through the Global Operations approach.

Local market production

To remain agile and quickly seize short-term opportunities in their local markets – and to satisfy a niche market requirement or specific trade regulations – Adidas subsidiaries may also source from local suppliers in a specific country that are not overseen by Global Operations. These suppliers require authorisation from the Social and Environmental Affairs team for production.

Adidas London flagship store Credit: Adidas

How do Adidas review their supplier performance?

A critical part of Adidas’ supplier performance policy is the implementation of their Workplace Standards, and the supply chain code of conduct, which also covers workers’ health and safety and provisions to ensure environmentally sound factory operations. To enforce compliance with our Standards the company have a multi-level review and enforcement process in place. The rating results supplier receive are shared with sourcing teams and incorporated into the overall supplier rating that influences decisions whether and to which extent Adidas continues the business relationship with a specific supplier.

Alongside those monitoring activities, the company values independent and unannounced assessments by independent third parties. As a member of the Fair Labour Association (FLA), Adidas is subject to external assessment by independent monitors. In 2005, their own  monitoring program was accredited by the FLA for the first time and re-accreditation took place in 2008 and in 2017. This decision was based on independent factory monitoring and verification reports of supplier facilities and a thorough audit of monitoring protocols, training programs and auditing systems.

Read more about the key to effective supplier relationship management 

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