World Monitor Mag, Industrial Overview WM_November_2018_WEB_Version | Page 87
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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
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