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Challenges Faced By Adidas In Distribution Area Marketing Essay

Paper Type: Free Essay Subject: Marketing
Wordcount: 4143 words Published: 1st Jan 2015

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With increasing globalization and evolving technological advancements today, the function of physical distribution is not as it was in past. Today, the transport and distribution area has evolved significantly as now various advanced tools are available to manage these aspects as well as use of IT in this regard. Different advancements in this field really present businesses with number of opportunities to improve their business by effectively handling specific strategic challenges (Berger, 2008, p. 20).

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Similar is the case with Adidas, as it may also effectively deal with distribution related strategic challenges by making use a range of distribution tools and techniques as discussed here in this paper. The paper evaluates the company information, and the strategic challenges faced by it in regard to distribution. Subsequently, descriptions of the major tasks that need to be carried out to tackle issues are given in concern to the selection of an aspect, which is “Application of a range of distribution tools and techniques”.

Company Background

Adidas is a well known German multinational corporation involved in designing and manufacturing sports clothing and accessories. From the time of its establishment, the company has attained immense success and this is the reason that along with the production of sports footwear, it also produces bags, watches, shirts, eyewear, and other various sports- and clothing-related goods (Berger, 2008, p. 22). In present, Adidas operates as a leading sportswear producer in Germany and Europe. As well, it also operates as the 2nd major sportswear producer throughout the world. From last 80 years, the company has been a part of the world of sports on every level, offering state-of-the-art sports footwear, clothing and accessories.

Nowadays, the Adidas Group is a worldwide leader in the sporting goods industry and provides an extensive portfolio of products. Products offered by the company are available in every part of the world, and this has become possible due to its effective supply-chain strategy and its management. The company operates with a simple strategy of strengthening its brand and products to continuously improve its position and financial performance. The company work with more than 1,070 independent factories throughout the world, which produces its products in 67 countries. Its supply chain is worldwide and multi-layered, with a lot of business partner, some of whom are instantly contracted and others who are not (Our Supply Chain, 2013).

Challenges faced by Adidas in Distribution Area

The company being operating with a global and multi-layers supply chain effectively manages transport and distribution, but still it really confront a strategic challenge of weak distribution network. The company being in operations more than 80 years operates in all countries, which in turn make it difficult for it operates with a strong distribution network. In addition to this, the company’s supply chain is also long and complex, depending on about 570 factories through the world (Berger, 2008, 39). With large supply chain it becomes difficult to manage distribution in an effective manner.

An extensive range of product lines, the company also confront a challenge of increasing individualization of demand. Changes in purchasing power of consumers and having individual product choice have made it difficult for the company to do effective planning and forecasting, which in turn also creates issues to handle warehouse and distribution. Due to all these issues, the company find it critical to strengthen or improve its distribution network. In present ever-increasing competitive environment, the acquisition and distribution of goods has been significantly inclined by the globalization and markets liberalization.

With the initiation of trade liberalization and the emersion of economies like Brazil, Russia, and India, worldwide supply chains of several industries would need to change drastically in continuous manner. This is the reason, the challenge of improving distribution network of Adidas is selected so that, it can be improved in time and company may become able to deal with future demands (Rhodes, Warren and Carter, 2009, p. 52). Changes taking place throughout the world and emersion of different economies, demand companies from different industries to reconfigure and re-optimize its distribution and supply networks.

In addition to this, to deal with increasing competition and extending networks, it also essential for the company to reconfigure and re-optimize its distribution networks as well as make use of new distribution tools and techniques. Adidas if, also make use of some new and advanced distribution tools and techniques, would become able to improve its distribution network as well as re-structure it in a way to operate effectively in future.

Tasks need to be carried out to deal with Strategic Challenges

For effectively dealing with the issue of weak distribution network or strengthening its overall distribution, the company really need to focus a lot on improving its different aspects like in-store logistics, warehouse, inventory, transport, planning, monitoring etc. as all parts are related to each other (Rhodes, Warren and Carter, 2009, p. 55). For strengthening company’s distribution network, it is vital to concentrate on handling all these aspects in a coordinated manner, which can be done only when a range of distribution tools and techniques are applied which are as follows:

In-Store Logistics:

For making company distribution network effective, it is vital for to do improvement initially within the store and concentrate on keep adding value to the consumer and decreasing its business costs. Solutions in this regard require in-store visibility. Use of RFID technology, would be helpful for the company to have a real-time insight into inventory, along with alerts through computer when suppliers are running low or at the time when theft is noticed. Another key tool in regard to handling in-store logistics is shopper interaction, as it needs enhanced availability of consumer data for facilitating both the manufacturer and retailer (2016 Future Supply Chain, 2008, p. 24). Shopper interaction may also be used with the help of mobile devices to make information handier and used effectively at time to undertaking further decisions.

Collaborative Physical Logistics:

Subsequent to focussing on in-store logistics, the company need to focus on using collaborative physical logistics. With the use of collaborative physical logistics, the company would become able to share its physical infrastructure like warehouse storage and transportation vehicles to modify the on the whole physical footprint, and to unify flows so that product distribution and asset utilisation can be improved. With the use of this technique, the company would become able to gain benefit of sharing and collaboration between and throughout different nodes of its competitive supply chains. The technique can be implemented in the following manner:

Shared Transport: With the help of a collaborative approach between manufacturers, between retailers, and among manufacturers and retailers, it would become easy to share load planning and truck capacity and operate with an effective distribution network (2016 Future Supply Chain, 2008, p. 25).

Shared physical infrastructures: The manufacturers, retailers and maybe third-party logistics providers may also collaborate to share warehouses and different distribution centres for different activities like storing goods or effective cross-docking.

Shared information: By sharing information, it would become easy to effectively manage flows among producers, retailers, and third-party logistics providers, which in turn will assist in combining deliveries from more than one source towards numerous stores through a warehouse or distribution centre (2016 Future Supply Chain, 2008).

An effective use of collaborative physical logistics would not only assist Adidas in strengthening its distribution network but would also help it in reducing the impact of transport in economic as well as environmentally sustainable manner.

Reverse Logistics:

With increasing environmental concerns, it has become critical for the company to have a distribution network in place with reverse logistics so, that packaging materials, components not in use can be reprocessed and recycled. In this regard, the company can make use of traditional backhauling, packaging reuse and packaging recycling (2016 Future Supply Chain, 2008, p. 25).

Demand Fluctuation Management:

With increasing fluctuations in demand, it is critical for the company to have new models in place, which are able to smooth the demand signals usually coming from its customers. With increasing challenges and uncertainties in demand, effective models are needed which exceed conventional approaches to retailer supplier integration and alliance. In this regard, the company can make use of vertical solutions like promotion/introduction calendars, and supply/demand capacities to line up initiations and promotions (2016 Future Supply Chain, 2008, p. 26).

In addition to this, other tools which can also be used in this regard are collaboration on execution that refers to shared supply/demand expectancy on the basis of real-time visibility the goods and consumers physical flow. Collaboration on monitoring includes shared, real-time access to outcomes of launch and promotions, on the basis of safe systems (2016 Future Supply Chain, 2008, p. 27). With the help of these tools, it would become easy to anticipate and manage demand as well as handle distribution in an effective manner.

Use of Time-sensitive strategies:

Another key task, in this concern is to make use of effective strategies which in turn could improve or strengthen overall distribution process. Previously companies using the Just-in-time philosophy have now directed towards advance practices like Quick Response (QR), Continuous Replenishment Programs (CRP), and Efficient Consumer Response (ECR). With the use of these time-sensitive strategies, it would become easy for the company to value time throughout its warehouse and distribution process (Rushton, 2010, p. 57).

In addition to the use of time-sensitive strategies, the company also need to keep updating its information and communication technologies. With rapid advancements taking place in technologies, it has become critical to keep updating with new information and communication technologies, so that all business process could be managed effectively. Some advanced information and communication technologies, which can be used by Adidas, are CPFR (Collaborative Planning, Forecasting and Replenishment) and RFID (Radio Frequency Identification Devices). Use of all these advanced time-sensitive strategies would appropriate the company to make use of quicker transportation modes and cross-docking facilities (Rushton, 2010, p. 219).

For dealing with the strategic challenges identified in regard to Adidas, the aspect “Application of a range of distribution tools and techniques” is selected, because with the discussion of different distribution tools and techniques, it would become easy to improve or strengthen company distribution network along with all interconnected aspects.

Major Practical Issues significant to be handled

For successful implementation of above discussed distribution tools and techniques, it is vital to deal with different practical issues such as providing sufficient training to all people involved in production, operations, and distribution management. Without effective and continuous training of all people, it won’t be possible for the company to apply advanced distribution tools and techniques. In addition to training, another significant practical aspect, which needs to be resolved, is to effective planning and design to employ these tools and techniques. Without careful planning and design, it is difficult to apply different new distribution tools and techniques (Rushton, 2010).

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Collaboration at extensive level requires significant planning and informative measures to detect issues or delays in implementation. Security is a major concern of implementing advanced distribution tools and techniques and related information and communication technologies. For secure application of various tools and techniques, it is crucial for the company management to have secure systems in place to do effective monitoring.


On the basis of above discussion, it becomes evident that physical distribution management is not as easy as it involve manifold aspects and parts to be managed and handled in a flow. With increasing customer demands, fluctuations, extended market base etc., it becomes more critical to manage overall distribution. Large and complex supply chain of Adidas make it difficult for its employees to manage distribution in almost every part of the world, and this is the reason it is been recommended to apply range of distribution tools and techniques as per its needs and challenges.

With increasing competition and changing economic environment, Adidas really need to re-structure or improve its existing distribution network, which in turn can be done with the help of above discussed tools and techniques. All tools and techniques recommended would assist the company in improving its in-store visibility, logistics, inventory, warehouse, transport, and overall distribution. With the help of time-sensitive strategies, the company may become able to deal with all distribution related issues. For successfully implementing all distribution tools and techniques it vital to consider all essential practical aspects so that effective results can be attained.

Answer 2


“Effective management of the distribution (transport/warehousing) function can play a significant role in the creation of company profit, through its ability to assist in balancing service levels and costs across a wide range of activities”. The statement is really true as it is also been experienced by different companies like Dell. Distribution function plays a critical role in the success of a company as it involves number of activities to deliver the product on right time, right place, and in a right way (Chapter 10: Computer-Based Supply Chain Management and Information Systems Integration, n.d, p. 318). Effective management of distribution involves management of transport and warehousing functions, which in turn assist the company in balancing its service levels and manage costs in an optimized manner through number of related activities.

So, distribution function plays a critical role in directing a company towards profit as discussed here in this paper in the context of Dell. Here, in this paper distribution function is discussed in general including transport and warehousing along with the discussion how, Dell distribution function direct it towards profits.

Management of the Distribution Function (Transport/Warehousing)

Each and every company operating operate with an aim to attain profit through improved customer services and minimizing its costs. There are different functions used by a firm to attain profits, but the most significant function is distribution function. All products manufactured by a company are done with an aim to serve customers. For effectively serving customers, distribution functions play a key role as it involves management of different significant aspects such as warehousing and transport. Distribution is a crucial function in offering the time, place, and possession utilities to a company products or services. It has direct impact on a company’s financial performance by improving profitability (Havaldar and Cavale, 2006, p. 15.42). For effective distribution function management, two significant aspects need to be focussed are warehousing and transportation management as done by Dell.

Success of Dell is all because of its effective management of its distribution function by focussing on warehousing and transportation. The company was established by Michael Dell in 1984, and today it is known for its innovations in regard to supply chain management. From the time, of its establishment, the company had made several changes to keep ahead of its competitors (Dell Logistics Network, n.d.). With increasing competition in last several years, the company realized that the only way to win the existing marketing war is to introduce basic changes in its supply chain. The company then made use of a direct business model, in which computer systems are directly sold to its customers (Chapter 10: Computer-Based Supply Chain Management and Information Systems Integration, n.d, p. 318).

With the help of this model the company become able to eliminate retailers that used to add needless time and cost. The use of direct model has allowed the company to make use of build-to-order business model. This model was applied on an extensive scale, which in turn appropriated the company to develop a significant supply chain management including both the suppliers and customers (Dell Logistics Network, n.d.). In addition to this, another significant aspect of its success was making improvements with the help of IT throughout the supply chain.

The company new channel distribution model is significant influenced with two aspects warehousing and transportation, which in turn direct it towards making more profits. The two key aspects (warehousing/transportation) of its distribution function benefit it in the following manner:


Warehousing refers to the storage of goods for profit. The physical location, the warehouse, is actually a storage facility that takes in goods and products for the ultimate distribution to consumers or other businesses. It is also known as a distribution center. For effective management of distribution function it is vital to attain warehouse management, which is a procedure of aligning the incoming goods, the following storage and chasing of the goods, and at last, the distribution of the goods to their correct destinations (Havaldar and Cavale, 2006, p. 15.42).

Without effective warehousing management, it is not possible to distribute the product on right time and at right place, which in turn may also affect company profits. Effective warehousing assist companies in balancing service levels and costs throughout different activities. Usually companies making use of traditional business model like Compaq develop systems before orders, warehouse, and sell through distributors and retailers, but in case of Dell this was not the case. With the build-to-order model of Dell, it operates with no dealers, distributors’, or warehouses filled with final products like assembled computers. Rather than this, the company appropriates its customers to select features on their own, and order on web, and then built each computer as per customers’ specifications (Chapter 10: Computer-Based Supply Chain Management and Information Systems Integration, n.d, p. 318).

The use of this model directed the company towards high costs related to dealing with thousands of individuals customers rather than few distributions, but on the other hand with this model it become the lowest cost producers as it didn’t have to pay for warehousing. The company does not warehouse ready or assembled computers, but it have warehouse for components, which are nearly 15 minutes away from its factories. In addition to this, the company also turns its inventory in every four days to attain benefits of minimal inventory and warehousing costs. Use of these strategies assists the company in saving cost and time that would be wasted on warehousing (Heizer, et. al., 2009, p. 423).

Warehousing done at Dell allow it to attain its objectives of profit improvement through reducing costs and improving customer service level, which is a key in present to attain competitive edge. The company believes in maintaining ultra-low inventory levels of components and minimize its warehousing costs. With the help of build-to-order model, Dell is able to eliminate excess inventory, which may become obsolete overnight in the highly dynamic personal computer industry (Dell Logistics Network, n.d.). Effective warehousing or clear process used, direct Dell towards effectively distributing its products to customers as per their own preferences.


In addition to warehousing, transportation also plays a key role in the success of a company’s distribution function. As products distribution critically depends on selection of correct and speedy transportation mode, which may not direct firms towards high costs and pass this to its customers in terms of high prices. Transportation management is a key to effective distribution function, because it is tool to supplement the distribution function, by making sure that materials needed are available at short notice (Havaldar and Cavale, 2006, p. 15.42). Different transport modes like road, rail, air, and water are available with specific advantages and cost considerations. The logistic or distribution manager may use the most suitable mode in all cases while keeping costs controlled but assuring higher level customer service.

At Dell, also transportation management plays a key role in the success of its distribution function. Dell’s new and improved design for a channel distribution model appropriates it towards effective transportation management supported electronically. All shipments done by the company are effectively arranged electronically. The company transportation system design includes optimizing inbound and outbound transportation networks (Dell Logistics Network, n.d.). At the same time, its transportation system also collaborate with the best logistics and transportation providers, such as DHL, CEVA, Panalpina, UPS etc. The common modes of transportation used by the company are ship, rail, and air (Chapter 10: Computer-Based Supply Chain Management and Information Systems Integration, n.d, p. 318).

The company operates with different transport network options on the basis of direct shipment network, which makes it easy for all people involved to understand the procedure followed and how a product can be directed towards shipment as shown in figure 1.

Figure 1: Transport Network Options (Source: Dell Logistics Network, n.d.).

The company appoints well-known freight forwarders to pick up shipments from different vendor locations, transport the gathered shipments and combine inventories of all its vendors in the freight forwarders consolidation warehouses. Then, ship out the cargo by ships or airfreight to the plant locations subsequent to finishing exports and customer clearance formalities. When the shipments are in transit, the freight forwarders may also electronically transfer shipment information and certifications to their abroad offices or agents at the destination, which in turn keep company and its vendors informed about the shipment status.

Use of a well-designed transportation procedure allows the company to manage its production as order received. The timely electronic information and tracking of orders also make it easy for the company to focus on timely delivery of the product and minimize its costs related to transportation delays as well as delay in productions (Heizer, et. al., 2009, p. 423). Timely shipments make it easy for the company to serve its customers in an effective manner and improve its profits by producing and delivering on time.


With the help of above discussion of Dell distribution function including warehousing and transportation, it becomes evident that the statement mentioned is true in case of this company. Effective management of the distribution (transport/warehousing) function at Dell plays a significant role in the creation of profit through its ability, to balance service levels and costs throughout an extensive range of activities. Effective and less expenses on warehousing make it able to spend on other service levels and ensure improved customer service. Electronically managed transportation also direct it towards timely and speedy delivery of products to customers, which in turn is a key to success in present ever-increasing competitive environment.


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