World Monitor Mag, Industrial Overview WM_November_2018_WEB_Version - Page 87

additional content represents only 6 percent of the U.S. GDP, but the impact of New York from a global fashion standpoint is huge. costs. The goal is to meet demand better by delivering more speedily to the consumer. Tell us about your speed strategy. Accelerators for Strategy RØRSTED: How do we enable our supply chain to respond to rapid changes in consumer demand? Our supply chain had been more rigid than most. That meant the demand forecasts for any given item were always wrong — either too high or too low. Now we use technology to speed up our operations. We built our two Speedfactories, in Germany and Atlanta, using digital technologies like 3D printing to enable faster production and get closer to a real-time supply chain. You’re talking about making shoes to order. RØRSTED: Eventually, yes. But the difference between us and a car manufacturer is that last year, we manufactured a billion products and 400 million pairs of shoes. For some of those, we are getting closer and closer to making them to order. In a Speedfactory, with 3D, the order-to- deliver time can be days instead of months. But that is not at volume. At high volume, we’re currently in a 30- or 60-day time frame. And if we see demand picking up, we need to be able to change our volumes. Does manufacturing at higher speed reduce your costs? RØRSTED: Yes. One of the biggest costs we have is returns. We order a million pairs of shoes, and if they don’t sell, we sit with 800,000 pairs in inventory. Add to that opportunity cost when we don’t actually satisfy customer demand. Nonetheless, our speed strategy is not primarily about reducing Do you see these three strategic choices as imperatives for every successful company? RØRSTED: For Adidas, they are highly relevant. But I couldn’t say that these initiatives would be equally relevant for every company. Open source, yes. Speed, to a lesser extent. It would depend on the dynamics within the industry, and also, the strategic position of different elements within the company. How do you translate your strategic priorities into day- to-day execution? RØRSTED: Shortly after I came in, we defined four “accelerators” of the strategy. These are operational elements that ensure that we become very disciplined in getting things done. They are generating significant value for our company. The first is reviewing our portfolio. The second, improving our position in North America. Third is “One Adidas”: being best in class in operational excellence and getting more scale into our business model. And the fourth is digital. What are you doing with respect to your portfolio? RØRSTED: We define our portfolio in terms of subgroups, entities organized by brand, country, and strategic business unit. On a quarterly basis, we look at the 10 lowest-performing entities in terms of profitability, and put action plans in place for them. Then we review our progress on a quarterly basis by country. One example was Brazil. Before 2012, everybody expected Brazil to rule the sports world. It had the World Cup and Olympics coming up. So we overbuilt our organization there. Later, we put a restructuring plan in place to get Brazil back to profitability. Another example was our outdoor [apparel] business, which we didn’t believe was getting the right level of focus within the organization. We put it into a different building, and gave those people freedom to change their operating model. A third example: We decided we didn’t want to be in golf or hockey. Every company tries to focus its portfolio. Not everyone succeeds. How does one make it work? RØRSTED: Being disciplined about what you say you’re going to do. Putting in key performance indicators to which you hold people accountable, including their compensation. For the restructuring of Reebok (the U.K.-origin athletic footwear and apparel company that Adidas acquired in 2005), the management board is accountable; we go through the numbers rigorously each quarter, driving accountability and rewarding people accordingly. That can be an uncomfortable process. But it’s the only way you can succeed, because people don’t like to do things that are uncomfortable, even when they have to be done. Why did you decide you needed a separate accelerator for North America? RØRSTED: It is the single biggest market in the world — and the only global market of any significance where we are underrepresented. Ninety percent supported by EUROBAK 85