- Why do you think the megatrend you selected is important to your organization’s management of process improvement and/or product development?
- Additive manufacturing is a megatrend that can transform the shoe design and manufacturing process for companies like Adidas. Changing designs in 3D printing requires tweaks to the software, rather than retooling a manufacturing process. So, at the operating level, the unit cost of making a single piece or many is about the same. The idea for Adidas is that 3D printing will allow Adidas to more effectively and efficiently produce custom products. For example, the goal is for customers to come into an Adidas store, run on a treadmill, and purchase a customized 3D-printed shoe with the help of existing data sourcing and footscan technologies. Ideally, additive manufacturing will be very impactful to Adidas’s management of both process improvement and product development. Adidas has been using additive manufacturing for years now, but they key question is if Adidas can use it beyond the innovation and prototyping processes and mass-produce 3D-printed shoes because 3D printing is traditionally slower and more costly.
- What is the organization’s management doing to address this issue in the short term (the next two years) and the medium term (two to ten years out)?
- In 2017, Adidas partnered with a 3D-printing company, Carbon, in hopes to mass-produce a line of shoes with 3D-printed running midsoles. Carbon claims to be able to solve the problems typically experienced by traditional 3D-printing processes. Carbon’s “Digital Light Synthesis” technology uses light and oxygen to selectively harden liquid resin to make plastic objects like the sneaker midsoles. This new printing process is a lot faster and more effective than the traditional 3D-printing process. For example, 3D printing soles used to take Adidas 10 hours vs. 90 minutes now with Carbon. Adidas introduced 5,000 pairs of its first 3D-printed shoe it will mass-produce (Futurecraft 4D) in January 2018 and is set to release another 100,000 by the end of 2018 (at a price of $300 per pair). And Adidas will have access to enough printers from Carbon to make over a million pairs in 2019. Partnering with an innovative company like Carbon has allowed Adidas to make big strides towards producing customized 3D-printed shoes at a reasonable cost (“mass customization at scale”).
- What other steps do you recommend the organization’s management take to address this issue in the short and medium terms?
- Adidas still has a long way to go. The Futurecraft 4D is $300 and Adidas has to improve its processes quite a bit to make mass production of 3D-printed shoes a viable alternative to the traditional manufacturing process. Adidas has to continue to fund and innovate with Carbon or other technologies to manufacture their products more cost effectively so that the price is reasonable to the consumer. They also have to innovate the production and customization process (e.g., scanning consumers’ feet and using data to create personalized shoes) if they actually want to create an on-demand model to meet consumers’ needs and reduce excess inventory risk. Second, I think they have to address the use of Carbon’s technology from competing brands. Adidas invested in Carbon, which has raised $400M+ to date, and has representation on Carbon’s board. Adidas also has an exclusive contract to use Carbon’s technology in the sports industry to prevent rivals like Nike, Under Amour, and Puma from using Carbon. But I couldn’t find any details on the contract and not exactly sure to what extent Carbon’s technology is replicable.
- In the context of this organization, what are one or two important open questions related to this issue that you are unsure about that merit comments from your classmates?
- Although 100,000 pairs of shoes sounds like a lot, it’s still a drop in the bucket relative to the 400 million pairs Adidas makes each year. And its 3D business will supposedly be “profitable” at that volume. But not sure if this is gross profit or operating profit. In either case, just because it’s profitable doesn’t mean it’s more profitable than traditional production processes for Adidas. And I wonder if they will be able to sell enough at such a high price point to effectively penetrate the market like the Adidas Boost line, which sells over 50 million a year. I think there will be significant demand for the Futurecraft 4D this year, and they will probably sell out right away and list on secondary markets for multiples of the $300 retail price. But I wonder how much of this demand is sustainable vs. being driven off hype of a new type of product and at a limited quantity. Also, I’m not sure what steps they need to take to bridge the gap to mass-produce customized shoes – where a customer can walk into a store and buy a personalized shoe based on their specific needs at a reasonable cost (both price and time).
722 words excluding questions.