OM in the News: Adidas Sneaker Factory Does Reshoring in Reverse

Adidas plans to close its only sneaker factories in the U.S. and Germany, shifting cutting-edge automated footwear production to Asia and reversing an effort to make products closer to shoppers in the West. The German company, the world’s second-largest athletic gear maker by revenue after Nike  announced it would move technology developed at its so-called “Speedfactories” to two suppliers in Vietnam and China. The closure of the facilities in Germany and Atlanta—both opened within the past 3 years—raises questions about the feasibility of bringing manufacturing jobs back to developed markets.

Adidas said the move would result in the “better utilization of existing production capacity and more flexibility in product design,” writes Supply Chain Dive (Nov. 12, 2019). The company’s facilities in Germany and Atlanta were home to robotic production and 3D printing enabled by motion capture technology. Adidas is not totally  discounting the 3D printing technology it has lauded as a superior way to produce shoes, but it is demonstrating that location for this tech still matters to the bottom line.

With the production move, Adidas suggests the business case is still better in Asia, even with advanced technology and despite the distance from target consumers. Supply chain disruptions have weighed heavily on Adidas this year, which may be contributing to the company’s decreased inclination to pay for facilities and labor in expensive markets like Germany and the U.S. Recovery from the shortfalls is bound to be expensive. The company has already increased use of air freight to catch up, warning the cost for the next two quarters would be “substantial.”

Classroom discussion questions:

1. What was the uniqueness of the “Speedfactories”? (See our post just 2 years ago)
2.  Why move this manufacturing to Asia?