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Adidas Group IT Multi Sourcing At Adidas Case Solution
There are different views and opinions on supplier relationship management with different vendors. Some authors explains that through outsourcing resources, the companies can compete in the market and would maintain the positive image among their customers. But some contrast this opinion that outsourcing from different suppliers would lead to sense of fear, loss of control, skills redundancies and insecurity among employees and that would negatively impact on image of organization in the market. Below is mentioned the explanation of different authors regarding this statement that having a good relationship with a supplier will usually assist in the process of contract management.
Following questions are answered in this case study solution
Having a good relationship with a supplier will usually assist in the process of contract management. Consider the spectrum of B2B relationship types. In your answer, deliberate on the need to align the category, business needs, and supplier risks.
Evaluate the factors that affect, that enable the development of a close working relationship such as a partnership.
Case Analysis for Adidas Group IT Multi Sourcing At Adidas
According to (Moeller, 2006), maintaining the strong healthy relationships with suppliers will help companies to gain better value in their businesses. In business, success is defines by relationships. Each company while sitting in the middle of a chain and formed the relationships with the customers and suppliers, taking products, raw material and services from one end and adding value to generate the overall profit out the other end. At the basic level, company needs suppliers for resources of their products and services they sell or resources needed to run the business. The more company know their suppliers and the more suppliers know the company then it’s more likely that the company will benefit from the dedicated services, special terms and the preferential pricing. And the strong supplier relationship management would lead to more efficient, productive and cost effective supply chain. Things are hardly as simple as signing a contract and automatically the process run by itself. Supplier management is all about the people management and the value added by the aspect of human in business operations (Jiang & Henneberg, 2012). Having a good relationship with suppliers will usually assist in the process of contract management as the purpose of suppler and contract management is to closely work with the internal customers and suppliers to maximize the supply chain efficiencies and the minimizing the total cost of ownership. It also resulted in the process improvements, increased knowledge experiences regarding procurement function which would be used inn benefitting overall organization.
For example: according to (Adidas Group: IT Multi sourcing at Adidas, 2014), the Adidas’ supply chain is big, multi-level and varied and have a organized and in depth approach to accomplish the contractual relationship with their vendors and these suppliers play a central role in their sustainability program. Adidas knew that their long term success of their multi sourcing IT strategy is not only dependent on internal management skills but also managing the relationships with external vendors/supplier for smooth functioning and implementation of the strategy. However, Adidas IT Global managed to create a highly competitive environment with suppliers while, while at the same time they established good relationships with all three vendors: Alpha, Beta and Gamma.
Another author (Oshri & Kotlarsky, 2016) argue that sometime maintaining relationship with different suppliers and outsourcing skills through multi sourcing strategy would create the sense of insecurity among employees. As it would lead to loss of organizational skills due to overdependence on outside vendors. Also according to him, too much dependence on an outside organization would lead to the significant threat of loss of control over operations and on the well-being of the company. Another factor he mentioned that relationship with different outsider vendors would create an issue of the loss of quality control over the items provided by suppliers as the control is totally on the suppliers and if they bring the resources lately and in case they found it of the poor quality then it would lead an organization in big difficulty in sense of managing the orders and operating machine timely and can be a threat to the Company Image. Additionally, different vendor’s relationship and outsourcing resources from them would lead to the sense of fears and employees resistance. For example: the outsourcing is linked with the organizational changes with layoffs and redundancies. Based on research and experiences, where it shows that outsourcing signals effectively to employees their employees to initiate the change which may include the redundancies and deskilling.
For Example: As the Adidas IT Global work is more related to intangible services, and there is there is the risk factor that involves in the outsourcing. Moreover, is necessary for every firm to consider the risk factor while going for outsourcing. As risk is a contrary function of control. In a same way, as company through outsourcing relinquished their more control, it would takes on more risk towards them. In general, when there is more cultured engagement of the outsourcing then it would bring the more advantages but also it would comprise the more risk. So below diagram shows the several risk factors that firm need to consider before passing the more power and responsibility to the external suppliers:
As the task scope passed to the vendor increases, the intent to manage the task would decline. No doubt the key task of outsourcing is to the tap into the unique capability and talent of the supplier. However, the challenge here would be to identify the value and key performance indicators of the clients particularly for services task which is intangible in nature like the Adidas IT Global where quantifying the results would be difficult. So the handover of the task and controlling them is the significant risk feature that needs to be considered. And for that, it is necessary to evaluate thoroughly the firm’s client individual capabilities as opposed to the suppliers.
It is necessary for every business to understand their core capabilities and how these capabilities would add value in to their business. In general, companies do not outsource those capabilities that contribute directly to their sustainable competitive advantage and those companies who does so they should understand that they are tapping themselves at a risk. As take example of Adidas Group who outsource the software development and IT solutions from the three vendors to meet the client’s objectives and demands. Although the IT is not considered as a core competency but it’s difficult to separate the information technology from the company’s core competency as they are creating value in meeting the demands and queries of the clients. So company should carefully outsource those activities for functions which are not providing company with a competitive advantage or do not support directly to the core competencies of the firm but rather help in achieving the competitive advantage in future.
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