[Document title]

INDEPENDENT UNIVERITY, BANGLADESH

Course Title

Introduction to Production and Operation Management (MGT330)

Section: 1

Semester: Summer’ 2021

Submitted To: MRS. Seeratus Sabah

Department of Management,

School of Business & Entrepreneurship

Submitted By

STUDENT NAME STUDENT ID

Mehdy Hasan Arpon 1610190
Arif Md. Anjum Ony 1721483
Sumsuddin Al Mahmud 1830924
Tajrina Tanjin Omi 1821439
S. S. Osman Dipro 1710822
Sadia Nur Arose Mahi 1830914

1
 [Document title]

Contents
LETTER OF TRANSMITTAL..............................................................................2

EXECUTIVE SUMMARY.....................................................................................3

INTRODUCTION...................................................................................................5

SUMMARY OF CASE STUDY.............................................................................6

INVENTORY MANAGEMENT...........................................................................6

RELEVANT COST.................................................................................................7

LEAD TIME............................................................................................................7

CAPACITY PLANNING........................................................................................8

FINDING AND ANALYSIS...................................................................................9

CONCLUSION......................................................................................................12

REFERENCE........................................................................................................13

2
 [Document title]

LETTER OF TRANSMITTAL

28Th August 2021

MS Seeratus Sabah

General Management

Lecturer

Independent University, Bangladesh

Dhaka, Bangladesh

Subject: Submission of Semester Project on the case study about Adidas Company on operation
management.

Dear Miss,

With due respect, we the undersigned students from MGT330, section 01, we have completed
the semester project as assigned and worked on operation management according to your
instruction and guidance.

In this case study, we have explained our topics very briefly and clearly. We tried our level best
to give all the necessary and relevant information regarding this case study. We believe that our
report will help you to understand our Adidas Company’s case study.

Here, we have given a clear description and necessary references regarding the Adidas
Company. The contents provided in this project are free from plagiarism, although references
have been taken from different sources to facilitate our project. We have prepared this report
very sincerely. Therefore, we will be glad to clarify any discrepancies that may arise.

3
 [Document title]

We would like to conclude by expressing our gratitude for your supportive thoughts, positive
attitude, and your kind consideration.

EXECUTIVE SUMMARY

Adidas AG is a German multinational corporation, founded and headquartered in

Herzogenaurach, Germany by Adolf “Adi” Dassler who used to make sports shoes in his
mother’s laundry room. They're now Europe's biggest sportswear company that designs,
manufactures, and distributes shoes, clothing, and accessories for athletes of all ages. To become
the global leader in sporting goods, Adidas has created sports brands that are based on a love of
sports and a healthy lifestyle. As a result of their commitment to the consumer, the company's
products and organizational structures are constantly improved to meet and exceed consumer
expectations and provide them with the highest value. Each of their products helps athletes of all
levels achieve peak performance. A global organization that is socially and environmentally
responsible, creative, and financially rewarding for its employees and shareholders Because of
this, they are committed to continually strengthening their brands and products to their
competitive position and financial results.

4
 [Document title]

INTRODUCTION

Adidas is the world's second-largest sportswear producer, after Nike. In other terms, it's Adidas'
holding company. Rudolf Dassler joined Adolf Dassler in 1924, a year after Adolf Dassler began
producing shoes in the laundry room of his mother.
Dassler worked on the development of spiked running shoes for a wide range of sports, including
track and field. As a result, he changed his spiked sporting footwear from strong metal spikes to
canvas and rubber. Adidas adds nearly 20billion euros in annual revenue and a brand value of
approximately 16.5 billion U.S. dollars.
Adidas' logo consists of three stripes, which are featured on the company's clothing and shoe
designs as a marketing strategy. Adidas bought the trademark for 1600 euros and two bottles of
whiskey from the Finnish sports firm Karhu Sports in 1952, and it became so popular that
Dassler named Adidas as "the three stripes company."
It's hard to pay attention to every detail of running a huge sports equipment company that
specializes in clothes. Procurement and production of materials take a long time to assure the
greatest quality of product.

5
 [Document title]

SUMMARY OF CASE STUDY

Case Study: Improving Inventory Management for ADIDAS Apparel Factory To increase lead
time and minimize delays, a case study was conducted to determine a new inventory capability.
In this case, the investigation was conducted because the company's manufacturing quality was
not up to par, according to the study. It also explains the main objective, which was to determine
how much safety stock to keep on hand in case inventory ran out in the future.

A second problem is that inventory runs out before a new collection of inventory arrives. This
case study shows that the problem begins with raw material sourcing. Due to the possibility of an
imbalance, inventory must be recalculated, and a new safety stock assigned as a fail-safe in case
the inventory runs out.

There is a risk of a fatal time delay as a result of this.

INVENTORY MANAGEMENT

Inventory management is the optimal finished goods of the company that are usually made from
the raw materials that the company usually buys from their supplier and makes a profit by selling
to its buyer or the final consumer of the finished product. The supply chain is one of the most
important parts of inventory management. A well-managed procurement function is implied by
the term supply chain management (Jay Heizer and Barry Render, 2008). However, procurement
is often a collection of disparate suppliers selected at random because they are perceived to be
able to deliver the product at an affordable price.

 Supply chain management (SCM) encompasses all the activities associated with
managing an organization's procurement to ensure that.
 Cost reduction
 Aiming to improve efficiency
 Fulfilling a need

6
 [Document title]

Organizations must devise and implement supply chain plans or strategies that determine service
levels and long-term and short-term procurement goals because achieving these goals comes at a
price. A company's corporate strategies should be able to link and work with these goals.
It's important to keep track of inventory because it dictates how a company runs its business,
serves its customers, and grows its revenue. Efficiently plays a key role in achieving your goals.

RELEVANT COST

Basically, there are three costs relevant for consideration in developing an inventory model.
 1. Ordering cost: paperwork cost, follow- up cost, inspection and checking cost and also labor
cost to purchase department.
2. Holding cost: interest on capital, insurance and tax charges, storage cost, spoilage and
obsolescence cost.

LEAD TIME

Lead time means the time between procurement request and material availability at the next
supply chain stage. This time interval is very important in safety stock analysis and therefore the
overall production.

However, a longer procurement lead times results in high safety stock requirements in order to
meet customer service level expectations under uncertain demand. Safety Stock acts as an
emergency buffer the company breaks out when it seems that the company is on the verge of
selling out. There must be enough safety stock to meet demand, but not so much that increased
carrying costs end up straining your financial sides.

7
 [Document title]

CAPACITY PLANNING

An organization's potential activities and production output are always maximized and under all
conditions through capacity management. Businesses' capacities are measured by how much they
can produce or sell at each time.

When planning capacity there are always two sides to consider: First, there is demand or the
amount of the product or service that might be desired, and secondly, there is the supply of the
product or service.

Products or services must be evaluated in terms of costs and a balance must be struck between
satisfying customers and keeping costs down.

For this reason, companies must be nimble enough to constantly meet expectations
cost-effectively even though capacity can change based on changing conditions or

8
 [Document title]

external influences, including seasonal demand, industry changes, and unexpected

macroeconomic events According to demand and current inventory levels, raw material
resources, for example, may need to be adapted.

As a result, you may have to work overtime, outsource operations, purchase additional
equipment, and lease or sell commercial real estate.

Companies that do not properly manage their capacity risk losing customers, revenue, and
market share. An innovative new product launched with an aggressive marketing campaign must
be prepared for a sudden surge in demand as a result. A retailer's inability to replenish its
inventory promptly is detrimental to the company's success.

Consequently, businesses face inherent challenges in their attempts to maximize production

while minimizing costs. When it comes to quality control inspections, a company may lack the
necessary time and personnel to do so. In addition, if employees are overworked, they may suffer
from stress, fatigue, and lowered morale.

FINDING AND ANALYSIS

This research was undertaken to identify the core of the problems of delayed delivery, which
had finally generated customer discontent, in order to keep sufficient stock for production and
to ensure on-time delivery. The goal of the study is to determine the material lead time as well
as the impact of material lead time uncertainty on safety stock. The final purpose was to make
recommendations for safety stock optimization or to determine the company's optimal level of
safety stock.

Adidas divides its operations into two distinct seasonal cycles. These are the following:
1. Spring Summer (SS)
2. Fall Winter (FW)
Spring summer (SS) runs from the first week of September this year to the last week of
February the next year. From the beginning of March through the end of August, the Fall
Winter (FW) season begins.
Depending on the design and material used in each type, Adidas has a varying lead time. Adidas
has a few factories in Vietnam and Cambodia that it oversees.

9
 [Document title]

Employees noted, "Unfortunately, all of them offered an extremely extended delivery time." In
the previous season, a record of 413 garment styles in 5 factories revealed that around 75
percent of them took 90 days to execute a customer order. The remaining time between
receiving the purchase order and delivery to the customer is 105 days.”
From planning to putting a material order with a supplier to receiving the materials, cutting,
printing, sewing, packing, and exporting, the manufacturing process goes through several
stages. The total lead time for the entire process is typically 90 to 120 days.

If a corporation takes a long time to respond to a customer's preference, it risks losing a sale.
Long lead times limit consumer satisfaction, according to Ms. Oanh, senior merchandiser,
because they require customers to put orders for future demand, which is not always a simple
process for them. To have products on hand for a Christmas event, for example, they must
predict demand and place an order at least three months ahead of time. Obviously, such
projections frequently result in a large mistake, and clients are continually looking for a shorter
lead time.”
Effects of a long lead time: The adidas business is adversely affected by a long lead time.
Customers may accept their offer, and Adidas will continue to make money. Adidas, on the
other hand, may lose its competitive advantage in the dynamic market for long-term business.
The crucial thing to note here is that the company's lead time is longer than the industry
average.
Analysis of safety stocks:

Many factors determine the level of safety stock. These elements include:

10
 [Document title]

1. Quality of service

2. The length of the supply lead time and its uncertainty

3. The Uncertainty of Demand

W.H.M. Zijm and R. Buitenhek (1996) stated that "the necessity of capacity planning to
reduce the delivery lead time or at least improve on time delivery" in capacity planning and
lead time management. Good capacity planning can simultaneously prevent machine overload
at this time while also increasing machine use at a later time.”
As a result, the study concludes that delivery lead time and capacity planning should be
handled in tandem.

11
 [Document title]

CONCLUSION

Adidas is unquestionably a leading sportswear company, but in this highly competitive market, it
will be very difficult to compete with others if you don't have satisfied customers. For factories,
the most important factor that affects lead time is a material delivery schedule or to separate
procurement lead time from customer order lead time, factories are encouraged to keep safety
stock on hand.

Adidas, in portion at the top, must focus on inventory management to speed chain, which will
help them to deliver products on time, which will lead to customer satisfaction, which is the most
important factor in any business.

12
 [Document title]

REFERENCE

1) https://en.wikipedia.org/wiki/Adidas
2) Adidas
3) https://www.adidas-group.com/
4) Case Study, NGUYEN NHU TUNG, 2013
5) Operations Management, Eighth Edition, William J. Stevenson, 2005

13