Adidas is clicking “print” on your next pair of shoes
Want a new pair of personalized kicks by tomorrow? Adidas is sprinting to the printers.
German sports-goods company Adidas is running as fast as possible to win over the hearts and feet of its consumers. In its latest annual report, Adidas declared its ambition to achieve 50% of its net sales (approximately 20 billion euros) through “speed enabled” manufacturing by 2020.[1] Reaching this lofty goal will require a drastic transformation of its global supply chain: Adidas will move away from advanced, seasonal merchandise planning and labor-intensive assembly, towards in-season product development and robotics-enabled manufacturing.
Though digitization is not new to the footwear world – in 2016, Nike partnered with multinational information technology company HP to prototype footwear using 3D printing, and New Balance released a shoe with a 3D-printed midsole – Adidas seems to be marketing 3D-printing as its new, widespread manufacturing strategy.[2][3]
Ready, Set, Go…
In September 2016, Adidas unveiled the Futurecraft M.F.G (“Made for Germany”), the first running shoe created at a manufacturing facility coined by Adidas as a “Speedfactory”.[4] This Speedfactory, located in Germany, replaces manual tasks such as stitching and gluing with mechanized molding and bonding performed by 3D printers.[5] Adidas’ primary motivation for Speedfactories is in the name: speed to market. Currently, the development process for running shoes – from design sketch to retailer shelf (with intermediate steps such as raw materials procurement and factory retooling) – can take up to 18 months in total.[6] With the Speedfactory, Adidas hopes to shorten its time to market to less than one week, and eventually even one day.[7] At the core of this creation process is the belief that digitalization will enable consumer-driven innovation and customization. Imagine a world where the consumer can design shoes to the exact size, shape and gait of each foot, creating a unique design that only she will have, and walk out the door with a bespoke pair that same day. This futuristic world may soon be a reality, according to Adidas.
…Ready, Set, Wait.
Mass production of customized goods is recently imaginable due to the expanding capabilities of information technology.[8] However, imagination can be expensive. In the apparel industry, 3D body digitizers are beginning to play the role of “electronic tailors”, allowing the consumer to be sized based on automatic measurements from a digital scanner.[9] These machines are still incredibly costly (one very basic digitizer, produced by the company Size Stream, is quoted at $15,000).[10] In the short term, mass customization of shoe sizing does not seem like a financially viable option for Adidas – at least not on a large scale. Each of Adidas’ Speedfactories (of which the company plans to operate two by year-end 2017) are designed to produce 500,000 pairs of shoes annually, a mere 0.1% of Adidas’ current annual shoe volume of 360 million pairs.[11]
Over time, however, as technology advances and diffuses, prices should fall. Adidas could serve its customers and shareholders well in the long term by closely monitoring the innovations in 3D body imaging, and becoming a mass adopter when the price is right.
Adidas has announced plans to launch city-themed, 3D-printed shoes within the next two years, designed to meet the particular needs of city-dwellers in London, Paris, New York, Los Angeles, Tokyo, and Shanghai. For instance, the “AM4LDN Adidas Made For London” shoe will emphasize reflectors and waterproofing for Londoners who tend to jog in the dark and rain, while sneakers for Shanghai will be adapted for performance on indoor tracks.[12] With each new specification, though, Adidas must acquire deep knowledge of the relevant 3D printing landscape. Contrary to popular belief, there are major differences between 3D printing processes (also known as additive manufacturing) for various materials. Plastic additive manufacturing differs from metal additive manufacturing, which differs from knitted materials additive manufacturing, and expertise in one does not imply expertise in another.[13] In the short term, Adidas should focus on building its supply of high-skilled labor, such as engineers with training in various 3D printing technologies. To beat the world’s toughest competitors – Nike, Under Armour, New Balance, and a wealth of Silicon Valley startups – in the digitalization race will require more than just speed. It will require brains!
Is Adidas Running a Race to the Bottom?
In addition to concerns regarding cost levers, it remains to be seen whether 3D printing will have any topline implications for Adidas and other brand powerhouses. It isn’t hard to imagine a world of the future where people will print shoes – with or without an Adidas logo – in the comfort of their own homes. Will 3D printing eventually be the death of brands as we know them today, or can this manufacturing system serve as a sales catalyst, as Adidas is wagering?
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References:
[1] Adidas, 2016 Annual Report, p. 62, https://www.adidas-group.com/en/investors/financial-reports/#/2016/, accessed November 2017.
[2] Nike, Inc., “At Nike the Future Is Faster, and It’s 3-D,” https://news.nike.com/news/nike-hp-3d-printing, accessed November 2017.
[3] New Balance, “The Future of Running Is Here,” https://www.newbalance.com/article?id=4041, accessed November 2017.
[4] Richard Weiss, “Adidas Brings the Fast Shoe Revolution One Step Closer,” Bloomberg Businessweek, October 5, 2017, https://www.bloomberg.com/news/articles/2017-10-05/adidas-brings-the-fast-shoe-revolution-one-step-closer, accessed November 2017.
[5] Ibid.
[6] “Adidas’s High-Tech Factory Brings Production Back to Germany,” The Economist, January 14, 2017, https://www.economist.com/news/business/21714394-making-trainers-robots-and-3d-printers-adidass-high-tech-factory-brings-production-back, accessed November 2017.
[7] Ibid.
[8] Laurent Grimal and Philippe Guerlain, “Mass Customization in Apparel Industry – Implication of Consumer as Co-Creator,” Journal of Economics & Management 15, (2014): 112. ABI/INFORM via ProQuest, accessed November 2017.
[9] Ibid.
[10] Chris Gayomali, “Here’s What It’s Like To Step Into A 3-D Body Scanner For A Custom-Made Suit,” Fast Company, September 3, 2014, https://www.fastcompany.com/3035092/heres-what-its-like-to-step-into-a-3d-body-scanner-for-a-custom-made-suit, accessed November 2017.
[11] Adidas, 2016 Annual Report, p. 65, 68, https://www.adidas-group.com/en/investors/financial-reports/#/2016/, accessed November 2017.
[12] Weiss, “Adidas Brings the Fast Shoe Revolution One Step Closer,” Bloomberg Businessweek.
[13] Joana Mendonça, M. Granger Morgan, Jaime Bonnín Roca, and Parth Vaishnav, “Getting Past The Hype About 3-D Printing,” MIT Sloan Management Review 58, no. 3 (Spring 2017): 58-59. ABI/INFORM via ProQuest, accessed November 2017.
Thanks for the perspective. You raised interesting points.
Digitization brings in customization and I am still skeptical of its adoption for a large firm like Adidas.
1. Both Adidas and Nike (key competitor) are utilizing HP for 3D shoe printing. I wonder if this could pose a risk in the supply chain.
Source: https://news.nike.com/news/nike-hp-3d-printing
2. Being an early adopter of technology often comes with higher costs and often, firms that come in later gain from considerably reduced costs of supply chain due to learnings and efficiencies realized over time. This however, could risk losing market share.
3. At the same time, with customization, I see a loss of clear differentiation between product offerings between competitors such as Nike. Designs could be easily copied and like you mentioned, eventually, people might be able to produce their own shoes at home.
4. The last thing I struggle with is the customization aspect. Is it worth the effort to build a customized shoe, that is, will the customer see the perceived added value as great enough to shift from buying a standard running shoe?
It will be interesting to see what the future holds for the industry.
Thank for this post, Adidas always finds ways to excite me. This production strategy seems to align with its long-term strategy for market share by the way of fashion-forward collaborations and product design. Focusing on streetwear vs. performance products, which has typically been the mainstay of competitor, Nike, this rapid production will allow Adidas to replicate the quick to market supply chains of fashion forward companies such as Zara and H&M. While the initial roll-out may be perceived as visionary and technologically advanced, I wonder how this production style may undercut the premium pricing that Adidas seeks in some of its product lines? The conclusion of this essay is also thought-provoking around how 3-D printers may forever change our relationship with certain products. With brandless shoe companies such as AllBirds and the rise of minimalist designs by Stan Smith (Adidas) and Common Projects, its not hard to imagine a world where one simply prints a no-frills sneaker for everyday use!
Great post, Emily! It is clear that the potential benefits to Adidas, and the footwear industry more broadly, of leveraging digitization are encouraging from both a cost perspective (in the longer-term) and a product line perspective. I think it is interesting that Adidas is establishing local Speedfactories because the company appears to be betting on not only a reduction in transportation costs and time-to-market, but also a re-imagination of the shoe-purchasing experience. Though to your point on annual shoe volume, I am concerned with the scalability of this strategy and the time it will take to migrate the company to this type of manufacturing. I am also concerned with this strategy’s economies of scale given its localized nature.
I am curious as to whether Adidas’ push toward 3D-printing is more of a response to the retail industry’s movement toward “fast fashion,” a shifting consumer demand toward customization, a desire to cut costs in the longer-term or pressure to keep pace with competitors. While all of these factors may be at play, one concern I have is around the general consumer perception and whether there is demand for a 3D-printed, customizable shoe, specifically made by Adidas (potentially at a higher price point). If Adidas cannot market the benefits to consumers (and maintain a strong brand), the value proposition of these factories, and Adidas, becomes much more about cost reduction. Should that be the case, I worry about a large-scale investment in 3D technology, and I agree with your point that Adidas must focus on understanding and keeping up with innovation.
Excellent perspectives, Emily.
1. I wholeheartedly believe that our love affair with brands will exist in perpetuity because we are all irrational actors. As such, 3D printing and customization will be the death of brands that cannot compete, but the competitive advantage of brands that can.
2. “At the core of this creation process is the belief that digitalization will enable consumer-driven innovation and customization. Imagine a world where the consumer can design shoes to the exact size, shape and gait of each foot, creating a unique design that only she will have, and walk out the door with a bespoke pair that same day. This futuristic world may soon be a reality, according to Adidas.”
Until I encounter compelling evidence to prove otherwise, I am inclined to believe that such consumer-driven innovation and customization for footwear is wholly unnecessary for the masses, but a strong value add for sports organizations, individual athletes (perhaps marathoners), and consumers with unique health needs. I was actually surprised that Adidas’ strategy for 3D printing is for improving footwear customization instead of realizing manufacturing inefficiencies, streamlining manual processes, and reducing costs. I imagine that with 3D printing, Adidas could dramatically increase its machine utilization while reducing down time and set up time, as well as eliminating manual labor.
“Will 3D printing eventually be the death of brands as we know them today, or can this manufacturing system serve as a sales catalyst, as Adidas is wagering?”
I certainly agree that the Adidas SpeedFactory is a great example of how traditional apparel and accessories retailers are looking to technological innovation, in this instance–digitalized manufacturing–to build their capabilities in true mass customization. You raise an interesting question/concern as to whether 3D printing technology could become so ubiquitous as to spur disintermediation in the apparel industry all together.
As I consider the role of the 3-D printer of the future, I am inclined to call it the “new sewing machine,” the instrument through which designers execute their visions. In the future, even if end consumers are able to 3-D print clothing, there will likely still be demand for clothing ‘designed’ by a brand’s creative director. I believe the greater threat to Adidas and its competitors could come in the form of lower barriers to entry as 3-D printing machine capacity increases and cost associated with purchasing and maintaining machines decreases. Even so, where incumbents will likely have an continued advantage is in other elements of the supply chain, including raw materials sourcing for instance (e.g. bulk ordering or manufacturing of raw material inputs will enable companies like Adidas to maintain lower per unit costs). Thus, the competitive landscape may be significantly impacted. Perhaps one thing that Adidas must do is determine the specific products and customer segments that are most economically attractive to aggressively introduce digitalized manufacturing into the supply chain. Developing expertise in these segments may help protect its brand as well as its top line.
Consider these two articles for more detailed analysis of cost and market implications:
http://www.sciencedirect.com/science/article/pii/S0925527315000547
http://www.sciencedirect.com/science/article/pii/S0040162515000530