Adidas revamps manufacturing process, offers customers greater customisation
Adidas plans to speed up production and allow shoppers to customize more shoes and clothes, aiming to accelerate sales and profit growth over the next five years.
The German sportswear firm, which has been losing ground for years to fast-growing rival Nike, said it was testing automated production units that would allow it to shift manufacturing from Asia closer to consumers.
"We will bring production back to where the main markets are," said Chief Executive Herbert Hainer, adding the current six weeks it took to ship from Asia to Europe was too long. "Robots can be everywhere."
Manufacturing closer to consumers should allow it to react more quickly to fast changing trends - like floral prints this spring - as it seeks to challenge market leader Nike as well as fashion retailers like H&M, which are already much more responsive and are moving into sportswear.
Adidas said it would extend innovations pioneered by its NEO teen fashion brand which gets new products into store in 45 days, compared with a sports industry standard of 12-18 months.
Global brand chief Eric Liedtke, seen as the strongest internal candidate to succeed under-pressure Hainer, said Adidas was seeking to shake up the market in the same way that Nike did when it moved production to Asia in the 1980s.
Liedtke, a former American football player, said the German company's priorities included reversing falling sales in North America, retaining its global leadership in soccer, doubling sales in running and doing more to appeal to female consumers.
Nike has been taking market share from Adidas and is seen as doing a better job at setting trends.
Adidas said it expects sales to grow by almost half to above 22 billion euros ($24 billion) by 2020 and net income to rise around 15 percent per year on average, which Hainer conceded would not translate into a double-digit operating margin.
Hainer faced calls to step down last year after he was forced to abandon the company's previous five-year targets - including a 2015 goal for a 11 percent operating margin.
"Their main problem is weak profitability and we are hearing very little about that," said Ingo Speich, fund manager for Union Investment which has a 1.3 percent stake in Adidas, who has repeatedly criticized Hainer in the last year.
"The strategy will only be credible under new management as Hainer could not deliver on what he promised."
The company said last month the board had launched a formal search to replace Hainer, in the job since 2001, although the CEO has said that did not mean his departure was imminent.
Adidas shares, which have risen 20 percent so far this year in part due to high expectations for the strategy presentation, were down 0.15 percent at 1030 EDT but still outperformed a 1.3 percent weaker German blue-chip index .GDAXI.
Adidas, founded by German shoe maker Adi Dassler in 1949, laid out its new strategy in its innovation center, where it demonstrated machines which allow shoppers to print their own names and logos on to its popular "Superstar" sneakers, tapping into a broader trend for personalized products.
It said it was working with German companies and the government on innovations in robotics and machines which can "knit" sneakers rather than having them sewn by hand, which could allow it to move production away from hubs in China, Cambodia, Laos and Vietnam.
To help it get closer to consumers, Adidas, which until a decade ago only sold its products wholesale, plans to open another 500-600 stores so that its own retail business accounts for above 60 percent of sales, from about half in 2014.
Adidas expects its cash flow to grow at a faster rate than operating profit in the next five years, allowing it to raise its range for future dividend payments to 30-50 percent of net income from a previous 20-40 percent.
Fluent.ai x BSH: Voice Automating the Assembly Line
Fluent.ai has deployed its voice recognition solutions in one of BSH’s German factories. BSH leads the market in producing connected appliances—its brands include Bosch, Siemens, Gaggenau, NEFF, and Thermador, and with this new partnership, the company intends to cut transition time in its assembly lines.
According to BSH, voice automation will yield 75-100% efficiency gains—but it’s the collaboration between the two companies that stands out. ‘After considering 11 companies for this partnership, we chose Fluent.ai because of their key competitive differentiators’, explained Ion Hauer, Venture Partner at BSH Startup Kitchen.
What Sets Fluent.ai Apart?
After seven years of research, the company developed a wide range of artificial intelligence (AI) software products to help original equipment manufacturers (OEM) expand their services. Three key aspects stood out to BSH, which operates across the world and in unique factory environments.
- Robust noise controls. The system can operate even in loud conditions.
- Low latency. The AI understands commands quickly and accurately.
- Multilingual support. BSH can expand the automation to any of its 50+ country operations.
How Voice Automation Works
Instead of pressing buttons, BSH factory workers will now be able to speak into a headset fitted with Fluent.ai’s voice recognition technology. After uttering a WakeWord, workers can use a command to start assembly line movement. As the technology is hands-free, workers benefit from less physical strain, which will both reduce employee fatigue and boost line production.
‘Implementing Fluent’s technology has already improved efficiencies within our factory, with initial implementation of the solution cutting down the transition time from four seconds to one and a half”, said Markus Maier, Project Lead at the BSH factory. ‘In the long run, the production time savings will be invaluable’.
Future Global Adoption
In the coming years, BSH and Fluent.ai will continue to push for artificial intelligence on factory lines, pursuing efficiency, ergonomics, and a healthy work environment. ‘We started with Fluent.ai on one factory assembly line, moved to three, and [are now] considering rolling the technology out worldwide’, said Maier.
Said Probal Lala, Fluent.ai’s CEO: ‘We are thrilled to be working with BSH, a company at the forefront of innovation. Seeing your solution out in the real world is incredibly rewarding, and we look forward to continuing and growing our collaboration’.