Magazine Article | October 20, 2008

Inside adidas' Inventory Management Initiative

Source: Innovative Retail Technologies

A real-time, wireless order management system helped $1.3 billion adidas eliminate a two-week lag time for inventory status.

Integrated Solutions For Retailers, November 2008

Feature Remember the days of needing to own the latest pair of sneakers — the pair that promised to catapult you to popularity or transform you from an average athlete to a bona fide phenom as soon as you tied the laces? Perhaps your need for the latest and greatest styles has subsided, but, chances are, the need for features like quality and reasonable price has not. As a retailer, it's your job to ensure those 'must have' products are in stock, or you risk losing your best customers. To that end, how anxious do you get when your inventory is low — or worse, empty — and your wholesaler can't provide answers to your questions about stock status? Ultimately, if you are not given real-time information regarding inventory and shipping status, productivity is stalled, employee frustration ensues, customer relationships are jeopardized, and profits are lost. As sporting goods giant adidas has learned, providing employees with the tools they need to perform their jobs properly is instrumental to keeping adidas retailers happy and customers in their stores.

Adidas America, a subsidiary of adidas Group based in Germany, functions primarily as a wholesaler to retailers including Foot Locker, Champs, and Dick's Sporting Goods, as well as independently owned and operated 'mom and pop' stores. The company also operates three adidas-branded retail divisions: sports performance stores (i.e. sporting goods), sports-style stores (i.e. sport-inspired lifestyle apparel), and outlet stores. Annette Stroud, director of business planning and sales operations, and Tim Oligmueller, sales force automation and training manager, faced a years-long plight that became dire with one of its largest customers. Sales reps were incapable of providing immediate answers to questions about inventory and shipping status during meetings with retail buyers. This problem risked the forfeiture of shelf space and decreasing profits for adidas in general and potential out-of-stocks for adidas retailers. The issue became even more prevalent when Foot Locker approached adidas about the issue and asked the company to remedy it immediately, as adidas' latency issues were affecting the retailer's sales. "Foot Locker was feeling the pain, and incidentally it was our largest customer at the time," explains Stroud. "We had to find a way to enable our sales reps, when they're standing in the store with the retailer, to address problems and answer questions right there on the spot. Our previous system didn't allow us to capitalize on the sales in real-time meetings with retailers, nor did it help our retailers fill their shelves in a timely manner."

Adidas sales representatives travel all over the country to meet with retailers in their stores to discuss inventory status and open order profiles (i.e. orders that haven't shipped yet). The sales reps travel up to 60% of the year. It is not uncommon for them to be away from the office for up to two weeks, conducting meetings with several different retailers during that time. Inevitably, the retailer has questions concerning shipments, open order profiles, marketing campaigns, and so on. For example, retailers may ask: "What is the status of the men's green Sambas order? When can we expect this shipment to arrive?" For years, sales reps relied on paper files and telephone calls back to adidas customer service via their company-owned and issued BlackBerrys for answers. Sales reps called customer service representatives to have them check the company's ERP (enterprise resource planning) database because they did not have access to it while traveling. This process disrupted the flow of the meeting, and it wasted time. Therefore, the reps typically made note of the questions and promised to answer the retailers as soon as they returned to the office, which could be days or weeks later, depending on their travel schedules. By the time the sales representatives returned to the office and sent inventory information back to the retailers, in-stock positions had changed, and sales opportunities were lost. As a result, both adidas and the retailers they serviced risked losing valuable sales, customers, and profits.

Leverage Existing Service Plans For Maximum ROI
By 2006, Stroud had had enough with the debilitating issues stemming from the lack of real-time information. Together with Oligmueller, she researched ways (e.g. a Web tool or laptops) to remedy the problems. "Our reps were blind in the field," says Stroud. "The lack of real-time information was an indescribable hurdle for them to overcome." She and Oligmueller sent an RFP to several vendors and ultimately chose AT&T because its solution came without an additional service plan fee. AT&T had provided adidas' data service plans (i.e. voice, text, and email) for years. "AT&T made it clear to us that we were not using our BlackBerrys to their highest potential," explains Oligmueller. "To save money, we needed to implement a solution that would leverage our existing hardware." AT&T partners with BlackBerry to provide an order management solution. Since adidas' data services infrastructure was already in place, AT&T assisted adidas' in-house technician in developing atlas2go — a free downloadable order management software program available on BlackBerry's website. Atlas2go accesses and delivers database reports from adidas' ERP system right to the BlackBerrys.

Order Entry: Bring Development In-House
An in-house technician at adidas developed and customized the atlas2go code with the help of an AT&T mobility application consultant (MAC). The in-house technician spearheaded the development, and the MAC professional provided technical support and programming skills to build the solution that would mobilize data to the BlackBerrys.

For a cost of $500, AT&T developed three user interfaces that enabled adidas sales reps to use the solution. The first interface is a screen that allows the user to enter a SKU number, which the solution uses to query adidas' data sources in order to determine inventory availability. The second interface allows the user to view the retailer's open order profile as a means by which to determine shipping status. The third interface allows the user to search for a product by general or partial information such as color, name, or price point. Atlas2go development and interface development took approximately 30 hours, followed by two weeks of testing conducted by Oligmueller and other adidas employees.

Virtual Troubleshooting Saves Time And Money
The adidas in-house technician experienced a few challenges while developing the atlas2go software. He had trouble programming part of the application because he was not accustomed to programming in languages other than Java. The MAC professional worked with the in-house developer via the telephone and computer to troubleshoot these issues. He checked the code to define the problem and then simulated a BlackBerry program on the adidas technician's computer. The simulation enabled the two developers to work on the project simultaneously and remotely, saving time and money on travel between their respective locations. Also, AT&T provides a development library, which includes help files for developers to reference should programming issues arise.

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All-In-One Download Links Provide Seamless Implementation
Oligmueller demonstrated the plug and play nature of the solution when he unveiled it to 200 sales reps at adidas' national sales meeting in 2006. "I stood up at the sales meeting and said, 'I just sent an email to all of you. Scroll to the bottom of the page and click on the link,'" he says. Once the reps clicked on the download link, the application was installed. Oligmueller was concerned that 200 simultaneous installs would overload AT&T's server. However, AT&T assured him that this would not be an issue. Considering that updates and upgrades would likely follow, server reliability is of the utmost concern. Since the initial downloads, AT&T has released updates, and they, too, are received via email. New employees receive their phones on their start dates. They receive the email download one week later. "We wait one week to email the link to new employees so they get acclimated to their office duties before they learn how to work in the field," explains Stroud.

Since adidas has equipped its sales reps with the new order management software system, the two-week response time has been eliminated. Now, retailers receive real-time data and answers regarding inventory and shipment. Phone calls from sales reps to customer service have ceased, as the atlas2go software program links directly to adidas' ERP system. Also, adidas has seen an increase in real-time sales. In addition to checking order status, retailers may now place orders right at the time of the meeting with the sales reps. "We've noticed a reduction in retailer frustration," explains Stroud. "Retailers are thrilled that they can receive answers right away." Based on the success of the order management system, adidas plans to work with AT&T to implement a real-time reporting package. "The request will communicate with our report development environment, Business Objects, and it will create a series of reports for retailers [e.g. sell-through reports, sell-in reports, last year's sales reports]," explains Stroud. "The application will aggregate the data in a report package and email it directly to the retailer." Also, adidas plans to upgrade to 3G (i.e. the third generation of developments in wireless technology) BlackBerrys to increase connectivity speed (see sidebar on page 14).

Consider how detrimental the lack of real-time information can be to your store. Retailers must be perpetually cognizant of inventory and shipping information to fill coveted shelf space in a timely fashion. If your wholesaler is unable to provide important data on the spot, you stand to lose profit. Don't risk your profits because of someone else's latency issues. Pay strict attention to the time it takes for your wholesaler to get you the information you need. If your wholesaler isn't producing answers quickly, speak up. Progressive companies like adidas will likely implement the technology necessary to keep their products on your shelves — a win-win for everyone involved.