SUPPLY CHAIN MANAGEMENT IN (NIKE, ADIDAS & REEBOK)

SUBMITTED TO:DR.NEENA SINHA

SUBMITTED BY:ROHIT LOHIA(99) AASHISH KR.(076) RAJ KUMAR(084)

Definition
Supply chain management (SCM) is the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end customers Supply chain management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point of origin to point of consumption. design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand and measuring performance globally. Supply chain strategies require a total systems view of the linkages in the chain that work together efficiently to create customer satisfaction at the end point of delivery to the consumer. As a consequence costs must be lowered throughout the chain by driving out unnecessary costs and focusing attention on adding value. Throughout efficiency must be increased, bottlenecks removed and performance measurement must focus on total systems efficiency and equitable reward distribution to those in the supply chain adding value. The supply chain system must be responsive to customer requirements."

According to the Council of Supply Chain Management Professionals (CSCMP), supply chain management encompasses the planning and management of all activities involved in sourcing, procurement, conversion, and logistics management. It also includes the crucial components of coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In essence, supply chain management integrates supply and demand management within and across companies.

Also referred to as the logistics network Suppliers, manufacturers, warehouses, distribution centers and retail outlets facilities Raw materials Work-in-process (WIP) inventory
Finished products, that flow between the facilities

Importance of supply chain management.

The objective of every supply chain is to maximize the overall value generated. The value a supply chain generates is the difference between what the final product is

Worth to the customer and the effort the supply chain expends in filling the customers Request. For most commercial supply chains, value will be strongly correlated with supply chain profitability, the difference between the revenue generated from the customer and the overall cost across the supply chain. Strategic Advantage It Can Drive Strategy * Manufacturing is becoming more efficient * SCM offers opportunity for differentiation (Dell) or cost reduction (Wal-Mart) Globalization It Covers the World * Requires greater coordination of production and * Increased risk of supply chain interruption * Increases need for robust and flexible supply chains At the company level, supply chain management impacts * COST For many products, 20% to 40% of total product costs are controllable logistics costs. * SERVICE For many products, performance factors such as inventory availability and speed of delivery are critical to customer satisfaction the choice of an internal management control structure is known to impact local firm performance. distribution

The benefits too would be reflected in terms of: Lower costs Better customer service Efficient manufacturing
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Better trust among the partners leading to win-win Supply chains are very important because of flow of goods from one destination to other destination with cost effective and on timely delivery of goods to the business needs and give the profit to the organization. Supply Chain consists of many trading partners, from raw materials to finished products. Typical supply chain is denoted as below, Supplier-->Manufacturer-->Wholesaler-->Retailer each party consists of 5 logistics activities, namely, customer service, production planning, purchasing, warehousing and transportation. Logistics focuses on activities inside a company while supply chain focuses on relationship between each company. Supply Chain Management is important because of relationship between each party. If every party joins hand and work together, it will create cost savings and time to market reduction and everyone will enjoy the benefit.

Problems addressed by supply chain management

Distribution Network Configuration: number, location and network missions of suppliers, production facilities, distribution centers, warehouses, cross-docks and customers.

Distribution Strategy: questions of operating control (centralized, decentralized or shared); delivery scheme, e.g., direct shipment, pool point shipping, cross docking, DSD (direct store delivery), closed loop shipping; mode of transportation, e.g., motor carrier, including truckload, LTL, parcel; railroad; ocean freight;

Trade-Offs in Logistical Activities: The above activities must be well coordinated in order to achieve the lowest total logistics cost. Trade-offs may increase the total cost if only one of the activities is optimized.

Information: Integration of processes through the supply chain to share valuable information, including demand signals, forecasts, inventory, transportation, potential collaboration, etc.

Inventory Management: Quantity and location of inventory, including raw materials, workin-process (WIP) and finished goods.

Cash-Flow: Arranging the payment terms and methodologies for exchanging funds across entities within the supply chain.

Activities/functions
Supply chain management is a cross-function approach including managing the movement of raw materials into an organization, certain aspects of the internal processing of materials into finished goods, and the movement of finished goods out of the organization and toward the endconsumer. These functions are increasingly being outsourced to other entities that can perform the activities better or more cost effectively. The effect is to increase the number of organizations involved in satisfying customer demand, while reducing management control of daily logistics operations Strategic level

Strategic network optimization, including the number, location, and size of warehousing, distribution centers, and facilities.

Strategic partnerships with suppliers, distributors, and customers, creating communication channels for critical information and operational improvements such as cross docking, direct shipping, and third-party logistics.

Product life cycle management, so that new and existing products can be optimally integrated into the supply chain and capacity management activities.

Where-to-make and make-buy decisions. Aligning overall organizational strategy with supply strategy.

Tactical level

Sourcing contracts and other purchasing decisions. Production decisions, including contracting, scheduling, and planning process definition. Inventory decisions, including quantity, location, and quality of inventory. Transportation strategy, including frequency, routes, and contracting. Benchmarking of all operations against competitors and implementation of best practices throughout the enterprise.

Milestone payments. Focus on customer demand and Habits.

Operational level Daily production and distribution planning, including all nodes in the supply chain. Production scheduling for each manufacturing facility in the supply chain (minute by minute). Demand planning and forecasting, coordinating the demand forecast of all customers and sharing the forecast with all suppliers. Sourcing planning, including current inventory and forecast demand, in collaboration with all suppliers. Inbound operations, including transportation from suppliers and receiving inventory. Production operations, including the consumption of materials and flow of finished goods.

Outbound operations, including all fulfillment activities, warehousing and transportation to customers.

Order promising, accounting for all constraints in the supply chain, including all suppliers, manufacturing facilities, distribution centers, and other customers.

From production level to supply level accounting all transit damage cases & arrange to settlement at customer level by maintaining company loss through insurance company.

Managing non-moving, short-dated inventory and avoiding more products to go short-dated.

Background of companies
Nike Nike is a major publicly traded sportswear and equipment supplier based in the United States The company initially operated as a distributor for Japanese shoe maker Onitsuka Tiger (now ASICS), making most sales at track meets out of Knight's automobile.[5]he company was founded on January 25, 1964 as Blue Ribbon Sports by Bill Bowerman and Philip Knight,[1] and officially became Nike, Inc. on May 30, 1978. Nike markets its products under its own brand, as well as Nike Golf, Nike Pro, Nike+, Air Jordan, Nike Skateboarding, and subsidiaries including Cole Haan, Hurley International, Umbro and Converse. By 1980, Nike had attained a 50% market share in the U.S. athletic shoe market, and the company went public in December of that year.[8] Its growth was due largely to "word-of-foot" advertising (to quote a Nike print ad from the late 1970s), rather than television ads. Nike's first national television commercials ran in October 1982, during the broadcast of the New York Marathon. The ads were created by Portland-based advertising agency Wieden+Kennedy, which had formed several months earlier in April. Throughout the 1980s, Nike expanded its product line to encompass many sports and regions throughout the world.

Reebok Reebok International Limited, a subsidiary of the German sportswear company Adidas since 2005,[2] is a producer of Athletic shoes, apparel, and accessories. The name comes from the Afrikaans spelling of rhebok, a type of African antelope or gazelle. In 1890 in Holcombe Brook, a small village 6 miles north east of Bolton, England, Joseph William Foster was making a living producing regular running shoes when he came up with the idea to create a novelty spiked running shoe. After his ideas progressed he joined with his sons, and founded a shoe company named J.W. Foster and Sons in 1895. In 1960, two of the founder's grandsons Joe and Jeff Foster renamed the company Reebok in England, having found the name in a dictionary won in a race by Joe Foster as a boy; the dictionary was South African edition hence the spelling. The company lived up to the J.W. Foster legacy, manufacturing first-class footwear for customers throughout the UK. In 1979, Paul Fireman, a US sporting goods distributor, saw a pair of Reeboks at an international trade show and negotiated to sell them in North America. Reebok in India Reebok sponsored kits for Indian Premier League teams, such as the Royal Challengers Bangalore, Kolkata Knight Riders, Rajasthan Royals and Chennai Super Kings in the first edition of the league held in 2008. However, for the second edition held in 2009, the sponsorships included Royal Challengers Bangalore, Kolkata Knight Riders, Chennai Super Kings, Kings XI Punjab kits. The Brand Trust Report, India Study, 2011 published by the Trust Research Advisory ranked Reebok as the 14th most trusted brand in India. Adidas Adidas AG is a German sports apparel manufacturer and parent company of the Adidas Group, which consists of the Reebok sportswear company, TaylorMade-adidas golf company (including Ashworth), and Rockport. Besides sports footwear, the company also produces other products such as bags, shirts, watches, eyewear, and other sports- and clothing-related goods.The

company is the largest sportswear manufacturer in Europe and the second-biggest sportswear manufacturer in the world, with American rival Nike being the biggest.[3] Adidas was founded in 1948 by Adolf "Adi" Dassler, following the split of Gebrder Dassler Schuhfabrik between him and his older brother Rudolf. Rudolf later established Puma, which was the early rival of Adidas. Registered in 1949, Adidas is currently based in Herzogenaurach, Germany, along with Puma. The company's clothing and shoe designs typically feature three parallel bars, and the same motif is incorporated into Adidas's current official logo. The "Three Stripes" were bought from the Finnish sport company Karhu Sports in 1951. The company revenue for 2009 was listed at 10.38 billion and the 2008 figure at 10.80 billion. ... Our vision is clear: to enhance social and environmental performance in the company and the supply chain, thereby improving the lives of the people making our products. We are striving to be the global leader in the sporting goods industry and this demands that we return strong financial results. But leadership is not only about results, it is also about how success is achieved. We are accountable for the way we do business. In particular, we accept responsibility for the way our products are manufactured by our suppliers. By our actions we can and should improve the lives of workers who make our products. We are committed to good governance, and use our stainability statement and our corporate missions on Social and Environmental Affairs, Human Resources and Community Affairs to achieve our vision. 2% Organized and rest are unorganized sector in sports and accessories industry. In India the revenues of companies are:Nike ---- 300cr Adidas--- 700cr

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Reebok ----1300cr

Supply chain management of sports industry

Deman d estimating: this shows the demand of the particular product and for the particular industry. Demand estimating helps in sufficient supply the units. Demand estimating done by the market research.

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Fashion calculation: we know the trend do vary by changing the time and companies have to move on with the changing fashion trend they have to calculate the fashion trend and preferences of the demanded product. Shortlist and finding the demand: the company shortlist the research paper and finally reach to real demand of the population , according to area and region demand may be vary, so companies have to keep in mind that when they shortlist the demand. Vendor: vendor plays an important in supply chain; either in procurement of raw material or in the provider of demand estimation, always vendor gives the order to the company for particular demand and supply. Company warehouse: company warehouse plays the fulfillment the supply with a rule. For ex. A vendor gives order to the company for demand for coming after six month, then the company supply of the one forth demand at the given period. Rest of remaining demand will be satisfied in upcoming three months with the proportion. The major benefit of this rule is to replenish the fund and allocate the fund. It also helps in avoiding the surplus and short comes.

This is because many variable affect the supply like fashion change, taste and preferencies, economy stabilities, legal, technological etc. Division and distribution are:
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Store Distribution agents Large formed retailers Exporters E- Commerce, online.

Market share of companies

Nike Nike currently enjoys a 47% market share of the domestic footwear industry, with sales of $3.77 billion. Nike has been manufacturing throughout the Asian region for over twenty-five years, and there are over 500,000 people today directly engaged in the production of their products. They utilize an outsourcing strategy, using only subcontractors throughout the globe. Their majority of their output today is produced in factories in China, Indonesia, and Vietnam, but they also have factories in Italy, the Philippines, Taiwan, and South Korea. These factories are 100% owned by subcontractors, with the majority of their output consisting solely of Nike products. However, Nike does employ teams of four expatriates per each of the big three countries (China, Indonesia, Vietnam), that focus on both quality of product and quality of working conditions, visiting the factories weekly. They also developed their code of conduct in 1992 and have implemented it across the globe, as its goal is to set the standard for subcontractors to follow if they wish to do business with Nike. However, due to a manufacturing network of this magnitude, they have faced numerous violations involving factory conditions and human rights issues, which have been widely publicized. They have responded to these issues through the Andrew Young report, the Dartmouth Study, and Ernst & Youngs continual monitoring, but are still approximately two years away from completely addressing these problems throughout the globe. Reebok

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Reebok, as the second leading manufacturer of footwear, has domestic revenues of $1.28 billion and a market share of 16%. Similar to Nike, they also utilize a 100% outsourcing strategy and manufacture their products throughout Asia. They have created and implemented their own code of conduct for manufactures to follow, but have less infrastructure than Nike across the globe to enforce it. They are facing scrutiny in regards to wage, overtime, and air quality issues, and like Nike, are working to address these issues. However, their strength, the creation and distribution of a global brand, is allowed to foster under this manufacturing strategy, as they focus on their core competencies, and outsource their production.

Adidas Adidas is currently enjoying the fastest growth of any brand domestically, with a market share of 6% and revenues of $500 million. They have been shielded from bad publicity by the two Goliaths of the industry, Nike and Reebok, and are reaping the rewards substantially. They have adjusted their manufacturing strategy, from a vertical operation in Germany in the 60s and 70s, to an outsourcing focus today throughout Asia. Unlike the big two, they do not have a code of conduct, and their factories are considered to be the worst in the industry. It is just a matter of time before they are exposed, with an underground swelling of negativity already occurring today. In order to avoid the negative effects and lost revenues that Nike and Reebok have received, they need to immediately begin to take a proactive stance in regards to the working conditions of their factories.

Reebok and Adidas: A Good Fit Their merger could put the combined outfit on the fast track. Then again, Nike may still prove to agile to catch. Germanys Adidas-Salomon agreed to buy Reebok International for 3.1 billion euros ($3.78 billion), or $59 a share -- a 34% premium over the $43.95 at which its shares closed the day before the announcement. Adidas has a market capitalization of about $8.4 billion, and reported net income of $423 million last year on sales of $8.1 billion. Reebok reported net income of $209 million on sales of about $4 billion.
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GROWING SHADOW. The objective of the tieup is clear. The two companies, which jockey for No. 2 and No. 3 slots behind Nike (NKE ), view their prospects for competing against the Beaverton, Ore., behemoth as better together than apart. In the U.S., Nike reigns supreme. In 2004, it had about 36% market share in the athletic-footwear market, according to the Sporting Goods Manufacturers Association International, while Adidas has 8.9% of the U.S. market and Reebok 12.2%. The U.S. ranks as the world's biggest athleticshoe market, accounting for half the $33 billion spent globally each year on athletic shoes.

The New Nike No longer the brat of sports marketing, it has a higher level of discipline and performance In the past few years, the company has devoted as much energy to the mundane details of running a business -- such as developing top-flight information systems, logistics, and (yawn) supply-chain management -- as it does to marketing coups and cutting-edge sneaker design. More and more, Nike is searching for the right balance between its creative and its business sides, relying on a newfound financial and managerial discipline to drive growth. "Senior management now has a clear understanding of managing the creative process and bringing it to the bottom line. That's the big difference compared to the past," says Robert Toomey, an equity analyst at RBC Dain Rauscher Inc. in Seattle. FILLING THE ORDERS Nike also overhauled its supply-chain system, which often left retailers either desperately awaiting delivery of hot shoes or struggling to get rid of the duds. The old jerry-built compilation strung together 27 different computer systems worldwide, most of which couldn't talk with the others. Under Denson's direction, Nike has spent $500 million to build a new system. Almost complete, it is already contributing to quicker design and manufacturing times, and fatter gross margins -- 42.9% last year, up from 39.9% five years ago. Nike says that the percentage of shoes it makes without a firm order from a retailer has fallen from 30% to 3%, while the lead time for getting new sneaker styles to market has been cut to six months from nine. Meanwhile, Nike has started paying serious attention to its handful of acquisitions, once treated
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as more of an afterthought. After buying up Cole Haan almost 15 years ago, Nike struggled to add any real value at the dress-shoe outfit. But lately, Nike managers have figured out that by giving their acquired brands some independence, rather than forcing Nike's testosterone-laced corporate culture on them, they can achieve better results. "We've learned to let those brands pull resources and expertise out of the mother ship as opposed to pushing the mother ship onto the brands," Blair says. Nike doesn't break out results for each sub-brand, but the group's sales grew 51%, to $1.4 billion last year. With nearly a quarter of the sales growth, Converse was the star. That still-modest portfolio of different brands helps to lessen the company's dependence on hit shoes and could help Nike turn in a more consistent performance. That's why Nike is eager to snap up complementary brands as they become available. In mid-August it paid $43 million for Official Starter Properties, licensors of sneakers and athletic apparel whose brands include the budget-level Shaq label. "What we're trying to do is move toward more of a consumer, noncyclical model," says Blair. "The key is trying to find the right balance of discipline, innovation, creativity, and structure." Nike has also had to grapple with the touchy topic of sweatshop labor at the 900-odd independent overseas factories that make its clothes and sneakers. When Nike was getting pummeled on the subject in the 1990s, it typically had only two responses: anger and panic. Executives would issue denials, lash out at critics, and then rush someone to the offending supplier to put out the fire. But since 2002, Nike has built an elaborate program to deal with charges of labor exploitation. It allows random factory inspections by the Fair Labor Assn., a monitoring outfit it founded with human rights groups and other big companies, such as Reebok International Ltd. and Liz Claiborne Inc., that use overseas contractors. Nike also has an in-house staff of 97 which has inspected 600 factories in the past two years, grading them on labor standards. "You haven't heard about us recently because we have had our head down doing it the hard way. Now we have a system to deal with the labor issue, not a crisis mentality," says Maria S. Eitel, Nike vice-president for corporate responsibility. It's overseas, in fact, where most of Nike's sales now come from. Last year, for the first time, international sales exceeded U.S. sales -- still the company's single largest market. Under Grossman, Nike is making sports fashion a core business, something unthinkable until recently
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inside Nike's male-dominated culture. Thanks to stylish athletic wear -- think tennis star Serena Williams at the U.S. Open -- Nike's worldwide apparel sales climbed 30% in three years, to $3.5 billion in fiscal 2004. Of course, Nike still faces challenges. After several years of red-hot growth, European sales of higher-priced shoes have started to slide. In the U.S., retro-sneaker makers like K-Swiss, Diesel, and Puma are filling a rising demand. And adidas-Salomon has redoubled efforts to attack the North America basketball market, where Nike has a 60% share. Taking a leaf from Nike's book, Adidas just signed three NBA all-stars: Tracy McGrady, Tim Duncan, and Kevin Garnett, each of whom will have his own sneaker. On the technology front, Adidas has unveiled the Adidas 1, a $250 shoe slated for December that has a computer chip that automatically adjusts the fit as the wearer runs. Nike aims to keep pace in the techno-battle with Nike Free, a shoe still being tested, that makes runners feel as if they were barefoot. It's inspired by the barefoot runners of Kenya, who have proved that shoeless training builds strength and improves performance. Meanwhile the company continues to refine its Shox technology -- a special cushioning system first developed for runners, which is now becoming a top seller in categories from running to basketball to cross training. The shoes, which sell for up to $135 a pair, helped put to rest the idea that high-priced sneakers no longer sell well in the U.S. Supply Chain of adidas ... On 31 December 2010, we worked with more than 1,230 independent factories from around the world who manufactured our products in 69 countries. Many of these are in one of the following five countries: China, India, Indonesia, Thailand or Vietnam. Workers in our suppliers' factories play a central role in our programme. It was concern for their working conditions that led us to write our 'Workplace Standards'. These standards set out the Groups position on a number of challenging labour issues workers can face including: Working hours

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Fair wages Freedom of association Child labour.

Our strategy is based on a long-term vision of self-governance in our supply chain where suppliers take ownership of their compliance programme. To achieve this, we need to act both as inspectors and advisors assessing management commitment to compliance and the effectiveness of the programme, and providing help and support to suppliers to ensure success in the long term. Supplier factory list and licensee factory list In early 2007, the adidas Group published a question and answer booklet on the integration of the adidas and Reebok social compliance programmes. In that booklet, we pledged to finalise our Group-wide compliance data management system that is, the Fair Factories Clearinghouse (FFC) and achieve greater supply chain transparency. We have met our target and as a result we are posting a global supplier factory list and a licensee factory list which we regularly update. You find the lists on the top right side of this page. The first list includes international export and local market factories as well as sewing subcontractors but excludes our licensees factories. These are disclosed in the second document.

Our Workplace Standards PERFORMANCE. PASSION. INTEGRITY. DIVERSITY ... These are the core values found in sport. Sport is the soul of the adidas Group. We measure ourselves by these values, and we measure our business partners in the same way. Consistent with these values, we expect our partners contractors, subcontractors, suppliers, and others to conduct themselves with the utmost fairness, honesty and responsibility in all aspects of their business. We use the adidas Group Workplace Standards as a tool to assist us in selecting and retaining business partners who follow business practices consistent with our policies and values. As a set of guiding principles, the Workplace Standards also help identify potential problems so
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that we can work with our business partners to address issues of concern as they arise. Business partners will develop and implement action plans for continuous improvement in factory working conditions. Progress against these plans will be monitored by the business partners themselves, our internal monitoring team and external independent monitors. Specifically, we expect our business partners to operate work places where the following standards and practices are implemented:

How We Work With Suppliers ... Over the past ten years, we have continually refined our methods, tools and techniques to promote compliance in our supply chain. The principal cornerstones of our management approach are described below. Standards and guidelines We have had a supplier code of conduct for more than ten years the latest version is our Workplace Standards. Based on extensive experience of applying the Standards, we have produced guidelines for our suppliers, which help us to work together to find solutions to problems in the workplace. The Workplace Standards are part of the manufacturing agreement that the adidas Group signs with each business partner. An approved factory has to place a poster with our Standards distinctly and visibly on the wall that tells workers in local language that it is now making products for the adidas Group. The poster also informs workers that we will help them find solutions to factory issues, and it gives them local numbers to call and addresses to write to. In some cases the telephone hotlines that we use are run by non-profit organisations and in other cases our own field staff take the calls and respond to the workers' concerns. Capacity building and outreach We train our suppliers so they understand the importance of establishing and maintaining management systems and open lines of communication with those concerned about how they operate, such as government officials, local communities or the workers themselves.
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... Monitoring and verification We have a dedicated team of auditors, which monitors suppliers performance against our Standards. We also value independent monitoring by third parties because it helps us to improve how we work and adds credibility to our programme. So in 1999 we joined the Fair Labor Association (FLA) in the United States, which is a non-profit organisation dedicated to improving working conditions in factories around the world. By working cooperatively with companies, NGOs and universities, the FLA developed a workplace code of conduct based on International Labour Organization standards, and appoints accredited inspectors to conduct unannounced factory visits and check if suppliers are meeting the standards Rating We audit our suppliers against our Standards and rate them according to their performance. We use an innovative way to rate the supplier on its ability to deliver fair, healthy and environmentally sound workplace conditions in an effective manner. Sourcing decision Rating results are incorporated in the overall supplier rating that informs our decision of which suppliers to use.

Responsible Management of Factory Closures and Downsizing... The economic downturn is having a significant adverse impact on global supply chains. In March 2009 WTO economists reported a precipitous drop in global production and trade which began first in the developed economies and then in the developing world, which is more heavily dependent on exports for growth. In China for instance, total exports for the month of February 2009 were down 26% compared with the same month in the previous year and 28% compared with January 2009. Due to weak consumer demand and a declining order book, suppliers are being forced to make difficult decisions. It is requiring them to become leaner and more efficient and to right-size their businesses. And in some cases, it is leading to factory closures and job losses.Over the past two decades the adidas Group has faced several periods of consolidation and factory closures. Some have been planned: as part of our long term strategy to
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concentrate more orders in fewer but better suppliers, or as a consequence of mergers, acquisitions and divestitures. And some have been the result of past economic crises: the most recent being the 1998 Asia Financial Crisis. Our previous experience in dealing with closures and downsizing means that we have well-developed systems in place to monitor and manage such eventualities, including the impact on workers and local communities. So what have we done in response to the current global financial crisis?

Our Social and Environmental Affairs team has worked collaboratively with our Global Sourcing division to manage potential adverse impacts along our supply chain:

As early as November 2008 all internal sourcing managers we reminded of the Groups long standing Termination Standard Operating Procedure, which details the ethical handling of any planned order reductions or termination of our supplier relationships. Moreover, as part of our commitment to transparency we have published these guidelines on the adidas Group website.

We have prepared and issued a Handling Layoffs and Redundancies Guideline to all our sourcing partners globally. The guideline draws on international best practice for the handling of layoffs and redundancies and also specifies the minimum expectations of the adidas Group.

We have intensified engagement with our suppliers, to understand their issues and concerns and to be as transparent as possible about our plans and order situation.

In our allocation system we have given priority in our order placement to our long term core suppliers, some of which produce up to 100% for the adidas Group.

We are tracking individual suppliers to understand the actions they are taking to manage their workforce during these challenging times, including any planned layoffs or restructuring initiatives and the impact that reduced order volumes may have on worker pay and benefits.

We have reviewed and updated ourselves and our suppliers on the statutory requirements for worker dismissals and mass layoffs in each of our primary sourcing countries in Asia
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and have engaged with governments to understand how their response to the financial crisis will impact on enforcement practices and policies, such as minimum wage setting and social insurance. Supporting Guidelines ... The Workplace Standards are a set of rules that our suppliers must abide by, but to illustrate how suppliers should implement our Standards, we have created a set of guidelines for use in factory settings. These expand on our Workplace Standards, giving detailed instructions and practical examples for implementation. The guidelines are also used by our SEA team to: Determine whether a supplier is complying with our Standards Advise and train our suppliers in improving their performance.

We regularly create new guidelines and revise existing ones. There are currently seven guidelines and those seven are further complemented by specific supplementary materials. The seven guidelines are: Health & Safety Guidelines Guidelines on Employment Standards Environmental Guidelines Worker Cooperative Guidelines Enforcement Guidelines Guidelines on Sustainable Compliance Termination Guidelines.

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Nike
Supply Chain Freedom of Association. We are updating Nike's Code and Code Leadership Standards to make clearer the responsibility of contracted factories to respect their employees' right to freedom of association and collective bargaining to the extent permitted by local law. This includes the right to form and join trade unions and other worker organizations of their own choosing without harassment, intimidation, interference or retaliation. Where national law restricts freedom of association, the contracted factories are required to facilitate alternate means to individually and collectively engage with their employees and for employees to express their grievances and protect their rights regarding working conditions and terms of employment. The updated requirements will also address the obligation to comply with any local laws providing special protection to employees or worker representatives engaged in union activities, a prohibition on disciplining employees having engaged in legal strikes, the duty to bargain in good faith and honoring the terms of any negotiated collective bargaining agreement. Responsible Transitions. We are updating Nike's Code Leadership Standards to include worker protections in the event of factory closure or retrenchment. These steps include standards for factories that include, at a minimum, notice, consultation, severance and collective bargaining. Contracted manufacturers are also required to make payment to workers of retirement or severance funds, in compliance with local law. This requirement includes contracted manufacturers facilitating payments of social security provisions to which the employee may be entitled, such as unemployment insurance, and accurate record keeping on payment into and maintenance of funds to ensure workers are protected. In addition, contracted manufacturers are encouraged to go beyond what is required by law or collective bargaining to provide outplacement or retraining assistance, additional financial support, medical benefits and assistance in obtaining government benefits. The contractor is encouraged to provide these either directly or in coordination with governments, NGOs or third parties.

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Developing/Enabling Competitive Supply Chains. NIKE, Inc. recognizes the need for a wellcoordinated and efficient supply chain for its business and the industry. Because the supply chain spans multiple jurisdictions from raw materials to production to shipping to retail and, ultimately, to consumers, a consistent and mature public policy position is needed. We support policies that deliver efficient, cost-effective delivery of NIKE, Inc. products in a responsible manner. Our efforts concentrate on ensuring efficient transport, security and safety of NIKE, Inc. products throughout the supply chain. In addition, we advocate for policies that help to ensure that NIKE, Inc.'s supply chain - from factory to consumer - operates in a manner that considers both people and the environment at each step of the way. We work with a number of bodies to advocate for these policies. These include national governments, industry associations and NGOs. Infrastructure in Vietnam. Nike has played a leadership role, along with other businesses and multilateral development organizations, in supporting infrastructure development in Vietnam. Nike created and led a public-private partnership that offered an Infrastructure Exchange Program for Vietnamese government officials. The first component of the program involved having key Vietnamese government officials visit a Nike footwear factory in Vietnam and subsequently physically follow the movement of finished products from the factory to the port. The group traveled to southern China, an area well known for its development of physical infrastructure. They also visited Singapore to see world-class port facilities and operations and learn about infrastructure planning and financing. Each component included presentations and dialogue with experts in various fields. We believe improved infrastructure, specifically roads and ports, will lead to additional investment and job creation in Vietnam, thereby improving economic opportunities and the standard of living. Improved roads and related infrastructure lead to more efficient transport of goods, contribute to a decrease in traffic congestion, and reduce emissions and related pollution. These improvements benefit businesses, including Nike, that contribute to job creation and economic development. This model of cooperation is an example of how the private sector can work with other key stakeholders on important development issues and opportunities.

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