THE “MI ADIDAS” MASS CUSTOMIZATION

INITIATIVE

Question for discussion:

Critically discuss some major supply chain challenges a company may face
when it undertakes a mass customisation initiative. Use mi adidas as an
example to illustrate your points.
 Discussion

https://padletuq.padlet.org/hxu32/critically-discuss-some-major-supply-
chain-challenges-a-comp-wy0b3hsymud5dp8s
LARGE CASE
STUDY-
“MI ADIDAS”
PRESENTATION OVERVIEW

01 02 03 04
Background of mi Identify the key Discuss the Conclude by
adidas and an issues and how proposed solutions offering our
overview of mass they pertain to recommendations
customization course theory &
literature
 Founded in 1949

By 2000, global footwear market valued at 16.4

billion USD
Adidas and
the global Nike leader at 35% market share, adidas at 15% and
Reebok at 10%
footwear
market adidas far behind in US, in close competition with
Nike in EUR

- Forever Sport
adidas in three consumer-
- Originals
oriented divisions;
- Equipment
 • Launched in April 2000
mi adidas • Allowed customers to create their own unique
athletic footwear
• Four phases, over four years
‘mi adidas’ Order and Product Process Flow
 • Focuses on accessing feasibility
• Helped project team get familiar with
mi adidas: marketing, production and distribution etc
• Used invite-only events to engage customers, 6
Phase 1 events in 6 cities around Europe
• Consumer feedback was overwhelmingly
positive
  Elicitation
▪ Identifying exactly what customers want
▪ Choice navigation to identify choices

 Flexible production
 Robust process design
Mass
Logistics
Customization 
▪ Highly coordinated distribution system

 Integrating Mi Adidas mass customization

with other Adidas operations
 • Based of the currently in-production Predator
Precision boot
• Customers have their feet scanned to determine
exact length, width and pressure distribution
• Consultation with event ‘experts’ to determine the
best fit
Mass • Testing of sample shoe
Customization • Final customization phase, customer decides on;
1. Fit (size and width)
2. Performance (outsole, materials, support)
3. Design (colours and embroidery)
• Delivered in 14 days
 • Mi Adidas uses Component Swapping Modularity in
each of their individual manufacturing cell.

Mi F50 Adizero Mass production of basic Fit

shoe parts
order coming into
Fuzhou china Design

Packaging & Performance

Distribution
 • Process of transitioning into retail market
• Phase 1 occurred in a ‘vacuum’, didn’t fully
mi adidas: prepare adidas for the transition
Phase 2 • No back-end processes and need to restructure
consultations, scanning etc. for a retail setting
• Fell 40-50% short of target
 ▪ A strategy that aims to produce a standardized good/service
whilst also incorporating some degree of customisation
▪ Two dominant forms;
1. Modular design: more standardised, components are
subdivided into modules that are easily
replaced/interchanged based on preference
Mass 2. Delayed differentiation: postponement tactic, generic
production up until a ‘point of differentiation’ in the
Customization supply chain
▪ Four specific types;
1. Collaborative
2. Cosmetic
3. Transparent
4. Adaptive
Problem identification
Minor issue; problem in selection of retailers
1. Retailer selection became a sensitive issue within adidas
• There were so many retailers who wanted to participate Mi
Adidas, however, Adidas employed much smaller number of
retailers than the number of retailers who wanted to
participate Mi Adidas
2. Country selection was also controversial
• Retailers in different countries were treated unequally
• in some countries, retailers paid a fee to a manufacturer to
host mi adidas, however, in other countries, retailers had never
paid a fee for mi adidas and might even demand a fee from
the manufacturer instead

➢ This problem affected the reputation of adidas among

retailers; Retailers’ feedback ranged from enormous
enthusiasm to huge disappointment
 Problem
identification

1. Major issues; problems in information management

1) Challenges in terms of the scope and integration of the IT infrastructure
• The mi adidas kiosk system for order creation led to technical
problems with synchronising information generated offline with
adidas backbone system such as the sales system and customer
mater database
• Consumer data captured via mi adidas could not be transferred to
the adidas CRM system
 Problem identification

1. Major issues; problems in information management (cont.)

2) Under-budget issue for its Information Technology (IT)
• The initial rollout was clearly under-budgeted for
its IT system
• No costs had been charged to the project budget
for IT solutions, beyond the mi adidas kiosk
application and scanning software.
• there was not enough investment for its
information management; no helpdesk was
available for kiosk-support and future system
integration

➔ resulted in limited centralisation and poor accessibility of data for mi adidas

➔ the conclusion that adidas fail to maximally deliver mi adidas globally
 Problem identification
2. Major issues; problems in production process
1) Adidas was not suitable to take mass
customisation in-house. Furthermore,
Adidas’ factory in Scheinfeld also was too far
away from volume production sites and
suppliers.
➢ Delays were exacerbated when material was
needed that was not available for in-line
production. In this case, extra inventory cost
was required for specific customisation
Problem identification

2. Major issues; problem in production process (cont.)

(Development sample room)
2) Adidas did not have enough capacity to hold
mass customisation products with a variety of
options
- Development sample room + mass production
facilities = facilities for mi adidas
- The capacity of the sample rooms was limited
and its operational format was not designed for
volume scale effects
- The mass production facilities, were also not
meant to handle customization information
- In addition, the workers lacked training and
language capabilities to handle production
according to detailed written product
specification
Problem identification (cont.) – The
communication and trade-off between
variety and costs issues

➢ The technical and highly advanced

customisation process with multiple
product categories made the
communication difficult within adidas

➢ A better understanding was needed of

the value-cost trade off between
customer value-added activities versus
inventory and production costs for
specific customisation options
 3. Major issues; adidas did not prioritise ‘mi adidas’
• the annual budget for mi adidas had basically
stayed identical during its first years
• as time progressed and volumes increased, it
naturally became more and more difficult to
persuade core business units to fully support this
initiative (mi adidas)
• although the core functions continued to support
mi adidas, the ultimate responsibility for mishaps,
rested with the project team of mi adidas.
• Should mi adidas play a more independent role or
should it be better integrated into the existing
adidas’ core business?

Problem identification ➢ A clear answer was difficult to be made, due to

the practice of attributing mi adidas sales to the
respective countries in 2001 (which hinder
separated accounting)
 SWOT analysis
Strengths Weaknesses
▪ Diverse revenue models ▪ High cost of replacing existing
▪ First mover advantage experts
▪ Low investments into Mi Adidas
initiative

Opportunities Threats
▪ Customer preferences were fast ▪ Competitors catching up with
changing the product development
▪ Local collaboration ▪ Threat of losing adidas’
intellectual property
Alternative 1： Withdraw
Withdraw mi adidas

❖ Product cycle has reached its end, the current

commitment will still be honoured, but no
new investment will be made

－ Celebrate the success and PR effect

accomplished to date

－ Quietly withdraw mi adidas in order to

focus on adidas’ core business
Pros Cons
▪ Adidas can invest more in their core ▪ Damage brand image
businesses (sportswear and running ▪ Business profit will decrease
shoes) by saving the cost used for mi ▪ Lose customers who favours
adidas customised footwear (e.g. the potential
▪ Reduced costs (e.g. operation cost, customer will possibly switch to Nike’s
production cost) customised products)
 • Maintain the developed capabilities

• Selectively run mi adidas fairs and

planned retail tours following top
events (Soccer World Cup and
world marathon series)

Alternative 2: Maintain
Pros: Cons:
-Able to charge premium price for customised products. -Certain issues (related to the back-end processes) from
the first phase of the pilot were not solved completely,
they were either adapted to current processes or not
covered at all.

-Continuous support from various functions of Adidas -Limited resources and capabilities to handle volume of
as mi adidas had a generally positive brand image and customised goods, the capacity of the sample rooms was
was widely accepted within the organisation. limited (a development of sample room could not handle
more than 500 to 1000 pairs per month).

-Investment would be minimal. -Retailers played the central role in the second phase
and accounted for 90 percent of order volume.

-Mass customisation activities would be fully integrated

into the existing functions.

-Running mi adidas fairs and planned retail tours and

attending events such as the Soccer World Cup will
continue to positively affect sales and production.
 Expand mi adidas
• To multiple product categories
Alternative 3 – Expand • Permanent retail installations (more own retail outlets)
• Elevate it to brand concept status while future building
volume and process expertise (by increasing marketing
spend and revised back-end processes)
 Pros Cons
- Good chance to gain bigger market - Current order system may become more
share complex as the size of mi adidas gets
- Lower dependence on retailers bigger
- Remain innovative to differentiate from - Costs to expand
competitors (mi adidas could not get enough support
- Offer value to the customers (customers since it is often considered as secondary
have more options to customise their concept to brand)
shoes) - Since the mi adidas budget did not
- Scale up its business by increasing support, it may not adequately promote
volume and product categories and realise extremely technical and highly
- Reduced need for forecasting product advanced customisation process
demand
 RECOMMENDATION
Our recommendation is for mi adidas to expand
But first, why not WITHDRAW or MAINTAIN?
 WHY EXPAND

• Allows the scope of mi adidas to grow, introducing multiple product categories and
volumes.
• Can meet a wider range of customer needs and increase sales.
• Fixes the retailer issue AND the information management issue by using
permanent retail installations
• Enables adidas to provide more support for the initiative.
• The only issues it doesn’t address are those associated with the production
process.
Thank you.
Any questions?