Starting at the end of this year, Speedfactory Adidas gave technologies to produce athletic footwear at two of its suppliers in Asia. The company expects this to result in better utilization of existing production capacity and more flexibility in product design.
Adidas consumers will benefit as the combination of existing technical possibilities of the suppliers, and new production methods developed in Ansbach and Atlanta will allow for more variations of Speedfactory footwear models in the future.
Speedfactory Adidas what is it?
In May 2016, Adidas announced the formation of the Speedfactory Adidas shoes. The partnership with Alibaba is only the first step in a long journey. But it was the initiative itself that took us by surprise. First, the size of the system in terms of volume. Adidas forecasts that its production volumes at the Shanghai-based subsidiary will exceed 20 million pairs in 2017.
Speedfactory Adidas has decided to focus its product offering on 20 innovative product lines by 2020. That could be a 50% increase on the existing product line-up. Source: Adidas investor relations The second surprise is that to achieve this growth, Adidas expects a 55% to 60% increase in its own product assortment. The smaller market cap of Alibaba should make this target a realistic target.
Creating shoes in a factory [tools and equipment]
I like this announcement because it shows the sort of thinking that has come to characterize Adidas and has set it apart from competitors such as Nike (NKE) and Under Armour (UA). If I were an Adidas shareholder, I’d be quite happy to see the company taking such a practical approach to product design and development. I’d also like to see it work with suppliers to think about possible ways to increase manufacturing capacity while still being more cost-effective.
There are many ways to approach this problem: just changing the production line layout is one approach, for example. Another, which Under Armour has suggested, is to build several or even dozens of “war-rooms” that allow different aspects of the design process to take place together while still ensuring a minimum level of variation.
Creating shoes on an assembly line [line organization]
Who makes the shoes: all the shoes are made in Asia. Speedfactory uses robots to help knit and paint the footwear. Where they are made: Ansbach and Atlanta. How they are produced: Speedfactory Adidas uses robots to make shoes. Speedfactory also uses a new production concept to give clients maximum flexibility with fast-turnaround orders. Each Speedfactory partner has its own robots to help knit the shoes, and a packager robot to paint the shoes.
Image: Speedfactory Adidas is the production line is spread across three buildings in Ansbach: Ansbach, a 300,000 sq-ft campus built on an old German aircraft factory in 2006 that houses the paint shop, machine shop, production, and design centers, and shared-space work stations. The paint shop is dedicated to painting the soles of the shoes.
Creating shoes with high-tech machines [new processes and technologies]
Speedfactory Adidas currently uses over 400 tooling machines for producing its shoes, according to the company. For the future, the company aims to scale the number of tooling machines to 1,000. To do this, the company is designing a new production line, known as the production factory line 001, and is focusing on two aspects: processing speed and uniformity of the shoes.
Currently, for shoe production, Speedfactory Adidas uses designs and develops its own tools and for many years has designed its own production machines. In contrast, the current Speedfactory partners, the Asia-based contract manufacturers, are using several high-tech machines for producing the shoes. These machines are digital, with the aim of supporting the brands’ speed of production and allowing them to decrease their overhead costs.
Adidas has struggled with brand recognition, and as a result, it has been extremely difficult for them to get in front of many consumers. In order to compete with Nike, Adidas is going to have to make a much more aggressive push to get consumers to care about the company.
I think the Adidas Originals line has some of the greatest potentials of the company, and Adidas has already moved in that direction with this season’s Adidas Stan Smith line. Adidas is starting to make inroads in the on-court performance market, and they have all the ingredients to build a strong performance product line for players at all levels. While Nike has been quite successful in this area, Adidas has the opportunity to gain market share from the largest competitor. Disclosure: I am/we are long NKE.