The Future of adidas
Are robots the solution to adidas' need for speed?
The New Sneaker World
In a world where speed to market determines the winner and limited-edition runs drive sales, the old way of sneaker making no longer applies. adidas no longer just competes with Nike and Under Armour, but also with Supreme and for the attention of a mobile-trained generation. Customers want innovation and fresh designs – fast [1]. “Buy now, wear now” has become the norm in an industry used to lead times of 18 months or more. [2]
In addition, customization at the individual level is the new name of the game. Take Nike ID for example, Nike’s co-creation platform, which in 2009 generated $100M, and is indicative of the growing Gen Y mentality where consumers demand something tailored to their wants and needs. [3]
Digital seems the obvious path forward. However, while digitization in retail has been used in a limited capacity to predict consumer demand, provide in-store customer service, and inventory tracking [4], retailers have seen far less digitization on the manufacturing side. This is primarily due to technical challenges in existing robotics [5] – soft fabrics are more pliable, and thus their variable reactions make it hard for existing robots to work with – but also a prevailing idea that design can only come from human creativity. This has born out in the numbers – global sales of industrial robots reached almost 230,000 units in 2014, but shipments in the textiles, leather, and apparel sectors a mere 289. [6]
adidas’ Solution: Robots
Enter: adidas’ Speedfactory, the first shoe manufacturing plant controlled mainly by robots. Described by the company as “design driven by athlete data, radical accelerated footwear production, hyper-flexible and localized manufacturing” [7], adidas has brought manufacturing back to Ansbach, Germany.
In the short run, adidas is leveraging this as a way to prototype rapidly. Their existing factories in Asia takes between 60 to 90 days to produce a shoe, but the Speedfactory allows adidas to turn raw materials into shoes in a single day. The Speedfactory, equipped with technology like the robotic knitting method Primeknit and artificially produced fibers that can be easily manipulated to spec, also enables small runs to be completed cost-efficiently. These collective systems, called “additive manufacturing” can create 20,000 shoes at once – all different. [8]
This has also enabled adidas to integrate data better into their designs. At the end of October 2017, adidas launched six different sneakers customized to the needs of runners in six cities. Through sensors and motion capture, adidas was able to monitor runners’ strides and conduct gait analysis to craft a shoe unique to each city. [9]
The next step is a second factory opening in Atlanta, Georgia, later in 2017. From the 500 units they started with at the Ansbach factory in 2016, adidas expects to scale production to one million shoes in three years through these two Speedfactories. [10] By 2023, Morgan Stanley anticipates that adidas could have nearly 20% of their production done through more automation [11], a view echoed by McKinsey, which predicts that sewing, a key component of the shoe making process, consists 100% of potentially fully automatable activities. [12]
The Road Ahead
Looking forward, adidas should consider how to integrate other types of technology into their Speedfactories. Currently 3D printing is being developed separately, with a goal to produce 100,000 pairs of 3D-printed midsoles by 2018. [13] It seems counter-intuitive to separate the technologies that are optimizing different parts of the production process and adidas should consider embedding 3D printing into the Speedfactory technology.
In addition, adidas could go much further in integrating data collecting technology in their products, which begun in 2011’s chip-embedded soccer shoe that allows players to measure performance [14], but has only been developed as embedded NFC chips for shoes in the Speedfactory to track them through the production process. This data could be run through artificial intelligence technology to sift through trends and more accurately predict what customers want. [15]
In the longer-term, scale becomes a much bigger issue. One million shoes in the next three years is a drop in the bucket for a company producing 720 million shoes a year. It is unclear if the existing Speedfactories are able to ramp up production to more significant levels, or if adidas has plans to build more Speedfactories around the world in the next 5-10 years. This is also an extremely costly investment, and adidas needs to decide if they are getting the return on investment they are looking for and if this scale of innovative manufacturing is required to compete.
Some outstanding issues are: is there potential government or community push back? Moving manufacturing back to Germany is a great newspaper headline, but the Ansbasch Speedfactory is run with only 150 relatively highly skilled workers. Furthermore, how can they integrate this innovation into their flagship products, like Stan Smith sneakers, or other products outside of footwear?
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[1] “Foot Locker Gets Caught in Downdraft as Athletic Sector Sags,” August 18, 2017, via eMarketer, accessed November 2017
[2] Kristen Henning, “Sneakers & Fashion Athletic Trends Continue to Drive Consumer Interest”, Footwear News, February 21, 2017, http://footwearnews.com/2017/business/retail/sneaker-sales-fashion-athletic-trends-npd-group-research-fn-platform-las-vegas-2017-315553/, accessed November 2017
[3] Danny Wong, “NikeID Makes $100M+: Co-Creation Isn’t Just a Trend,” Huffington Post, July 20, 2010, https://www.huffingtonpost.com/danny-wong/nikeid-makes-100m-co-crea_b_652214.html, accessed November 2017
[4] Roland Berger, “Robots and Retail: What Does the Future Hold for People and Robots in the Stores of Tomorrow?,” December 10, 2016
[5] Kate Abnett, “The Robot Opportunity,” Business of Fashion, May 19, 2016, https://www.businessoffashion.com/articles/fashion-tech/the-robotics-opportunity-manufacturing-efficiencies, accessed November 2017
[6] International Federation of Robotics, “World Robotics 2014 Industrial Robots”
[7] Adidas, “Speedfactory,” https://www.adidas.com/us/speedfactory, accessed November 2017
[8] Rowland Manthorpe, “To make a new kind of shoe, adidas had to change everything,” Wired Magazine, http://www.wired.co.uk/article/adidas-speedfactory-made-for-london-trainers, accessed November 2017
[9] Jake Woolf, “Adidas Is Changing the Way It Makes Sneakers—Again,” GQ, October 5, 2017, https://www.gq.com/story/adidas-made-for-london-speedfactory, accessed November 2017
[10] April Glaser, “This is the first Adidas shoe made almost entirely by robots,” Recode, September 27, 2016, https://www.recode.net/2016/9/27/13065822/adidas-shoe-robots-manufacturing-factory-jobs, accessed November 2017
[11] Marc Bain, “A revolution is coming in the way your sneakers are designed and manufactured,” Quartz, June 8, 2017, https://qz.com/1000737/a-revolution-is-coming-in-the-way-your-sneakers-are-designed-and-manufactured/, accessed November 2017
[12] McKinsey & Company, “A Future That Works: Automation, Employment, and Productivity,” January 2017
[13] Fitz Tepper, “Adidas’ latest 3D-printed shoe puts mass production within sight,” TechCrunch, April 7, 2017, https://techcrunch.com/2017/04/07/adidas-latest-3d-printed-shoe-puts-mass-production-within-sight/, accessed November 2017
[14] Julie Cruz, “Adidas Bets on a Soccer-Shoe-with-a-Chip,” Bloomberg Businessweek, November 23, 2011, https://www.bloomberg.com/news/articles/2011-11-23/adidas-bets-on-a-soccer-shoe-with-a-chip, accessed November 2017
[15] Kate Abnett, “Fashion’s Fourth Industrial Revolution,” Business of Fashion, August 16, 2016, https://www.businessoffashion.com/community/voices/discussions/what-does-the-fourth-industrial-revolution-mean-for-fashion/fashions-fourth-industrial-revolution-2, accessed November 2017
I love that Adidas is pushing the envelope in what is possible for shoe production. I agree with your conclusion that bringing this factory back to Germany is not a move to bring jobs back to Germany but is more an opportunity to have a very small factory close to corporate HQ. I hope that this factory is able to increase the speed at which Adidas is improving its product. The next to 0 turnaround time will allow the designers to experiment with more products and “fail fast”. For Adidas, I hope this is an opportunity. I worry that this factory will have an over demand for constant rush orders. I would ask Adidas how they will regulate the demand for small batches out of this factory so that the factory is ruining at full capacity while allowing for rush order availability. The tragedy for this factory would be that if it can turn out a show in 1 day but it takes 2 months to get a shoe through the factory because the wait time is soo long.
Very interesting article on how adidas is using digitization coupled with robotics to revolutionize their supply chain. I, too, wonder how can they integrate this innovation into other products and use it for mass production. This type of technology is great for rapid prototyping, but not as much for mass production. To me it seems they will use digitization to improve design, then use robotics to improve the cycle time of prototypes, but then still may need to resort to classic methods for mass production.
One of the most interesting implications of this to me is the customization ability Adidas will have with this new manufacturing speed. As the trend of custom and tailored grows, Adidas could become the leader in this market if they can scale this capability up quickly.
I understand the concern about jobs being fewer than maybe expected or other manufacturing entrants into a community, but I don’t think the government will every be opposed to manufacturing innovation that overall adds value to the industry, particularly Adidas, a German company. While people may be disappointed, I don’t think there will be opposition in such a way that hurts Adidas or inhibits them.
Very interesting post! Ultimately, I do not see great top-line potential for Adidas in the use of the Speedfactory. However, the use of extensive automation may provide them with a notable competitive advantage – a highly iterative product development process. Given the limited output of the factory in the near-term, the rapid prototyping capabilities provided by the Speedfactory might provide Adidas with the ability to conduct A/B testing with their product portfolio, thereby improving the broader company’s product portfolio and – ultimately – sales. As your second question hints at, the big question will be how Adidas can integrate these innovations into that portfolio line. I would suggest that Adidas maintains their heritage products (e.g., Stan Smiths) with minimal improvements (e.g., more comfortable soles). On the other hand, Adidas – as demonstrated in their currently fashionable products (e.g., Adidas UltraBoosts) – can introduce extensive innovation in their newer products. By doing so, I think Adidas can maintain a well-balanced product portfolio.