nike supply chain management case study

Sunday, October 16, 2022

• Labels: Case Studies , Project Failure , Project Success

Case Study 16: Nike’s 100 Million Dollar Supply Chain "Speed bump"

“This is what you get for 400 million, huh?” 

Nike President and CEO Phil Knight famously raised the question in a conference call days before announcing the company would miss its third-quarter earnings by at least 28% due to a glitch in the new supply chain management software. The announcement would then send Nike’s stock down 19.8%. In addition, Dallas-based supply-chain vendor i2 Technologies, which Nike assigned blame, would suffer a 22.4% drop in stock price.

The relationship would ultimately cost Nike an estimated $100 million. Each company blamed the other for the failure, but the damage could have been dramatically reduced if realistic expectations had been set early on and a proper software implementation plan had been put in place. Most companies wouldn’t overcome such a disastrous supply chain glitch or “speed bump,” as Knight would call it, but Nike would recover due to its dominant position in the retail footwear and apparel market.

In 1999, two years before Knight’s famous outburst, Nike paid i2 $10 million to centralize its supply, demand, and collaboration planning system with a total estimated implementation cost of $40 million. Initially, i2 was the first phase of The Nike Supply Chain (NSC) project. The plan was to implement i2 to replace the existing system and introduce enterprise resource planning (ERP) software from SAP and customer relationship management (CRM) software from Siebel Systems.  

The goal of the NSC project was to improve Nike’s existing 9-month product cycle and fractured supply chain. As the brand experienced rapid growth and market dominance in the 1990s, it accumulated 27 separate order management systems around the globe. Each is entirely different from the next and poorly linked to Nike’s headquarters in Beaverton, Oregon.

At the time, there wasn’t a model to follow at the scale Nike required. Competitors like Reebok struggled to find a functional supply chain solution specific to the retail footwear and apparel industry. In an effort to solidify its position as the leader in sportswear, Nike decided to move forward quickly with i2’s predictive demand application and its supply chain planner software.

"Once we got into this, we quickly realized that what we originally thought was going to be a two-to-three-year effort would be more like five to seven," - Roland Wolfram, Nike’s vice president of global operations and technology.

The NCS project would be a success, and Nike would eventually accomplish all its supply chain goals. However, the process took much longer than expected, cost the company an additional $100 million, and could have been avoided had the operators or both companies taken a different approach to implementation.

"I think it will, in the long run, be a competitive advantage." – Phil Knight

In the end, Knight was right, but there are many valuable lessons to learn from the Nike i2 failure.

If you want to make sure your business critical project is off to a great start instead of on its way on my list with project failures? Then a New Project Audit is what you are looking for. If you want to know where you are standing with that large, multi-year, strategic project? Or you think one of your key projects is in trouble? Then a Project Review is what you are looking for. If you just want to read more project failure case studies? Then have a look at the overview of all case studies I have written here .

So, before we get into the case study, let’s look at precisely what happened...

Timeline of Events

1996 - 1999

Nike experienced incredible growth during this period but was at a crossroads. Strategic endorsement deals and groundbreaking marketing campaigns gave the company a clear edge over Adidas and Reebok, its two most substantial competitors in the 80s and 90s. However, as Nike became a world-renowned athletics brand, its supply chain became more complex and challenging to manage.

Part of Nike’s strategy that separated itself from competitors was the centralized approach. Product design, factory contracting, and order fulfillment were coordinated from headquarters in Oregon. The process resulted in some of the most iconic designs and athlete partnerships in sports history. However, manufacturing was much more disoriented.

During the 1970s and 80s, Nike battled to develop and control the emerging Asian sneaker supply chain. Eventually, the brand won the market but struggled to expand because of the nine-month manufacturing cycle.

At the time, there wasn’t an established method to outsource manufacturing from Asia, making the ordering process disorganized and inefficient across the industry. In addition, Nike’s fractured order management system contained tens of millions of product numbers with different business rules and data formats. The brand needed a new way to measure consumer demand and manage purchasing orders, but the state of the legacy system would make implementing new software difficult.

At the beginning of 1999, Nike decided to implement the first stage of its NSC project with the existing system. i2 cost the company $10 million but estimated the entire project would cost upwards of $400 million. The project would be one of the most ambitious supply chain overhauls by a company of Nike’s size. 

i2 Technologies is a Dallas, Texas-based software company specializing in designing solutions that simplify supply and demand chain management while maximizing efficiency and minimizing cost. Before the Nike relationship, i2 was an emerging player in logistics software with year-over-year growth. Involvement in the Nike project would position the company as the leading name in supply chain management software.

Nike’s vision for the i2 phase of NSC was “achieving greater flexibility in planning execution and delivery processes…looking for better forecasting and more profitable order fulfillment." When successfully implemented, the manufacturing cycle would be reduced from nine months the six. This would convert the supply chain to make-to-order rather than make-to-sell, an accomplishment not yet achieved in the footwear and apparel industry.

Predicting demand required inputting historical sales numbers into i2’s software. “Crystal balling” the market had substantial support at the time among SCM companies. While the belief that entering numbers into an algorithm and spitting out a magical prediction didn’t age well, the methodology required reliable, uniform data sets to function.

Nike decided to implement the “Big Bang” ERP approach when switching to i2 for the supply chain management. The method consists of going live where the business completely changes without phasing out the old system. Nike also opted for a single instance strategy for implementation. The CIO at the time, Gordon Steele, is quoted saying, “single instance is a decision, not a discussion.” Typically, global corporations choose a multi-instance ERP solution, using separate instances in various regions or for different product categories.

By June of 2000, various problems with the new system had already become apparent. According to documents filed by Nike and i2 shareholders in class-action suits, the system used different business rules and stored data in various formats, making integration difficult. In addition, the software needed customization beyond the 10-15% limit recommended by i2. Heavy customization slowed down the software. For example, entries were reportedly taking over a minute to be recorded. In addition, the SCM system frequently crashed as it struggled to handle Nike’s tens of millions of product numbers.

The issues persisted but were fixable. Unfortunately, the software was linked to core business processes, specifically factory orders, that sent a ripple effect that would result in over and under-purchasing critical products. The demand planner would also delete ordering data six to eight weeks after it was entered. As a result, planners couldn’t access purchasing orders that had been sent to factories.

Problems in the system caused far too many factory orders for the less popular shoes like the Air Garnett IIIs and not enough popular shoes like the Air Jordan to meet the market's demand. Foot Locker was forced to reduce prices for the Air Garnett to $90 instead of the projected retail price of $140 to move the product. Many shoes were also delivered late due to late production. As a result, Nike had to ship the shoes by plane at $4-$8 a pair compared to sending them across the Pacific by boat for $0.75.   

November 2000

According to Nike, all the problems with i2’s supply chain management system were resolved by the fall. Once the issues were identified, Nike built manual workarounds. For example, programmers had to download data from i2’s demand predictor and reload it into the supply chain planner on a weekly basis. While the software glitches were fixed and orders weren’t being duplicated or disappearing, the damage was done. Sales for the following quarter were dramatically affected by the purchasing order errors resulting in a loss of over $100 million in sales.

Nike made the problem public on February 27, 2001. The company was forced to report quarterly earnings to stakeholders to avoid repercussions from the SEC. As a result, the stock price dove 20%, numerous class-action lawsuits were filed, and Phil Knight famously voiced his opinion on the implementation, "This is what you get for $400 million, huh?"

In the meeting, Nike told shareholders they expected profits from the quarter to decline from around $0.50 a share to about $0.35. In addition, the inventory problems would persist for the next six to nine months as the overproduced products were sold off.

As for the future of NSC, the company, including its CEO and President, expressed optimism. Knight said, "We believe that we have addressed the issues around this implementation and that over the long term, we will achieve significant financial and organizational benefit from our global supply-chain initiative."

A spokeswoman from Nike also assured stakeholders that the problems would be resolved; she said that they were working closely with i2 to solve the problems by creating “some technical and operational workarounds” and that the supply chain software was now stable.

While Nike was positive about the implementation process moving forward, they placed full blame on the SCM software and i2 Technologies.

Nike stopped using i2’s demand-planning software for short-and-medium range sneaker planning; however, it still used the application for short range and its emerging apparel business. By the Spring of 2001, Nike integrated i2 into its more extensive SAP ERP system, focusing more on orders and invoices rather than predictive modeling.

What Went Wrong?

While the failures damaged each company’s reputation in the IT industry, both companies would go on to recover from the poorly executed software implementation. Each side has assigned blame outward, but after reviewing all the events, it's safe to say each had a role in the breakdown of the supply chain management system.

Underestimating Complexity

Implementing software at this scale always has risks. Tom Harwick, Gigi Information Group’s research director for supply chain management, said, “Implementing a supply-chain management solution is like crossing a street, high risk if you don't look both ways, but if you do it right, low risk.”

One of Nike's most significant mistakes was underestimating the complexity of implementing software at such a large scale. According to Roland Wolfram, Nike’s operators had a false sense of security regarding the i2 installation because it was small compared to the larger NSC project. "This felt like something we could do a little easier since it wasn’t changing everything else [in the business]," he says. "But it turned out it was very complicated."

Part of the reason why the project was so complicated was because of Nike’s fractured legacy supply chain system and disoriented data sets. i2’s software wasn’t designed for the footwear and apparel industry, let alone Nike’s unique position in the market.  

Data Quality

Execution by both parties was also to blame. i2 Technologies is on record recommending customization not to exceed 10-15%. Nike and i2 should have recognized early on that this range would be impossible to accommodate the existing SCM system.

Choosing a Big Bang implementation strategy didn’t make sense in this scenario. Nike’s legacy system data was too disorganized to be integrated into the i2 without making dramatic changes before a full-on launch.

Poor Communication

Communication between Nike and i2 from 1999 to the summer of 2000 was poor. i2 claimed not to be aware of problems until Knight issued blame publicly. Greg Brady, the President of i2 Technologies who was directly involved with the project, reacted to the finger-pointing by saying, "If our deployment was creating a business problem for them, why were we never informed?" Brady also claimed, "There is no way that software is responsible for Nike's earnings problem." i2 blamed Nike’s failure to follow the customization limitations, which was caused by the link to Nike’s bake-end.

Rush to Market

At the time, Nike was on the verge of solidifying its position as the leader in footwear and sports apparel for decades to come. Building a solid supply chain that could adapt to market trends and reduce the manufacturing cycle was the last step toward complete market dominance. In addition, the existing supply chain solutions built for the footwear and apparel industry weren’t ready to deploy on a large scale. This gave Nike the opportunity to develop its own SCM system putting the company years ahead of competitors. Implementing functional demand-planning software would be highly valuable for Nike and its retail clients.

i2 also was experiencing market pressure to deploy a major project. Had the implementation gone smoothly, i2 would have a massive competitive advantage. The desire to please Nike likely played a factor in i2’s missteps. Failing to provide clear expectations and communication throughout the process may not have happened with a less prominent client.  

Failure to Train

After the problems became apparent in the summer of 2000, Nike had to hire consultants to create workarounds to make the SCM system operational. This clearly indicates that Nike’s internal team wasn’t trained adequately to handle the complexity of the new ERP software.

Nike’s CIO at the time reflected on the situation. "Could we have taken more time with the rollout?" he asked. "Probably. Could we have done a better job with software quality? Sure. Could the planners have been better prepared to use the system before it went live? You can never train enough."

How Nike Could Have Done Things Differently

While Nike and i2 attempted to implement software that had never been successfully deployed in the global footwear and apparel industry, many problems could have been avoided. We can learn from the mistakes and how Nike overcame their challenges with i2 to build a functioning ERP system.

Understanding and Managing Complexity

Nike’s failure to assess the complexity of the problem is at the root of the situation. Regardless if the i2 implementation was just the beginning of a larger project, it featured a significant transition from the legacy system. Nike’s leadership should have realized the scale of the project and the importance of starting NSC off on the right foot.  

i2 also is to blame for not providing its client with realistic expectations. As a software vendor, i2 is responsible for providing its client with clear limitations and the potential risks of failing to deploy successfully.

See " Understanding and Managing Your Project’s Complexity " for more insights on this topic.

Collaborate with i2 Technologies

Both companies should have realized that Nike required more than 10-15% customization. Working together during the implementation process could have prevented the ordering issues that were the reason for the lost revenue.

Collaboration before deployment and at the early stages of implementation is critical when integrating a new system with fractured data. Nike and i2 should have coordinated throughout the process to ensure a smooth rollout; instead, both parties executed poor project management resulting in significant financial and reputational blows.  

See " Solving Your Between Problems " for more insights on this topic.

Hire a 3rd Party Integration Company

Nike’s lack of understanding of the complexity of SCM implementation is difficult to understand. If i2 had been truthful in that they did not know about problems with their software, Nike could have made a coordinated decision not to involve the software company during the process.

Assuming that is the case, Nike should have hired a 3rd party to help with the integration process. Unfortunately, Nike’s internal team was not ready for the project. Outside integrators could have prevented the problems before the damage was done.

Not seeking outside help may be the most significant aspect of Nike’s failure to implement a new SCM system.   

See " Be a Responsible Buyer of Technology " for more insights on this topic.

Deploy in Stages

A “Big Bang” implementation strategy was a massive mistake by Nike. While i2 should have made it clear this was not the logical path considering the capabilities of their software and Nike’s legacy system, this was Nike’s decision.

Ego, rush to market, or failure to understand the complexities of the project could all have been a factor in the decision. Lee Geishecker, a Gartner analyst, stated that Nike chose to go live a little over a year after starting the project, while projects of this scale should take two years before deployment. In addition, the system should be rolled out in stages, not all at once.

Brent Thrill, an analyst at Credit Suisse First Boston, is on record saying he would have kept the old system running for three years while testing i2’s software. In another analysis, Larry Lapide commented on the i2 project by saying, "Whenever you put software in, you don't go big bang, and you don't go into production right away. Usually, you get these bugs worked out . . . before it goes live across the whole business."

At the time, Nike’s planners weren’t prepared for the project. While we will never know what would have happened if the team had been adequately trained, proper preparation would have put Nike in a much better position to handle the glitches and required customizations.

See " User Enablement is Critical for Project Success " for more insights on this topic.

Practice Patience in Software Implementation

At the time, a software glitch causing a ripple effect that would impact the entire supply chain was a novel idea. Nike likely made their decisions to risk the “Big Bang” strategy, deploy in a year without phases and proper testing, and not seek outside help because they assumed the repercussions of a glitch wouldn’t be as catastrophic.

Impatience resulted in avoidable errors. A more conservative implementation strategy with adequate testing would have likely caught the mistakes.

See " Going Live Too Early Can Be Worse as Going Late " for more insights on this topic.

Closing Thoughts

One of the most incredible aspects of Nike’s implementation failure is how quickly the company bounced back. While Nike undoubtedly made numerous mistakes during the process, NSC was 80% operational in 2004.

Nike turned the project around by making adjustments and learning patience. Few companies can suffer a $100 million “speed bump” without filing bankruptcy, but Nike is in that position because of its resilience. The SAP installation wasn’t rushed and resumed many aspects of its original strategy. In addition, a training culture was established due to the i2 failures. Customer service representatives receive 140 to 180 hours of training from highly skilled “super users,” All employees are locked out of the system until they complete their required training courses.

Aside from the $100 million loss, the NSC project was successful. Lead times were reduced from nine months to six (the initial goal), and Nike’s factory inventory levels were reduced from a month to a week in some cases. Implementing a new SCM system also created an integration between departments, better visibility of customer orders, and increased gross margins.

While Nike could have executed far more efficiently, Phil Knight’s early assessment of the i2 failure turned out to be true. In the long run, the process gave Nike a competitive advantage and was instrumental in building an effective SCM system. 

In a nutshell: A failure to demonstrate patience, seek outside help, and rush software implementation can have drastic consequences.  

> Nike says i2 hurt its profits

> I2 Technologies, Inc.

> How Not to Spend $400 Million

> i2-Nike fallout a cautionary tale

> Nike rebounds: How Nike recovered from its supply chain disaster

> Scm and Erp Software Implementation at Nike – from Failure to Success 

> I2 Says: "You Too, Nike"

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Nike rebounds: How Nike recovered from its supply chain disaster

“I thought we weren’t going to talk about i2,” growls Roland Wolfram, Nike’s vice president of global operations and technology, his eyes flashing at his PR manager with ill-concealed ire.

Wolfram, who was promoted in April to vice president and general manager of the Asia-Pacific division, is all Nike. His complexion is ruddy, his lips cracked from working out or working hard, or both. He’s casually dressed, but with a typical Nike sharpness to his turtleneck and slacks, a sharpness reflected also in his urgent, aggressive defense of his company—a Nike pride that would seem arrogant were not the company so dominant in its industry.

Wolfram calls the i2 problem—a software glitch that cost Nike more than $100 million in lost sales, depressed its stock price by 20 percent, triggered a flurry of class-action lawsuits, and caused its chairman, president and CEO, Phil Knight, to lament famously, “This is what you get for $400 million, huh?”—a “speed bump.” Some speed bump. In the athletic footwear business, only Nike, with a 32 percent worldwide market share (almost double Adidas, its nearest rival) and a $20 billion market cap that’s more than the rest of the manufacturers and retailers in the industry combined, could afford to talk about $100 million like that.

It drives Wolfram crazy that while the rest of the world knows his company for its swooshbuckling marketing and its association with the world’s most famous athletes, the IT world thinks of Nike as the company that screwed up its supply chain—specifically, the i2 demand-planning engine that, in 2000, spat out orders for thousands more Air Garnett sneakers than the market had appetite for and called for thousands fewer Air Jordans than were needed.

“For the people who follow this sort of thing, we became a poster child [for failed implementations],” Wolfram says.

But there was a lesson too for people who do, in fact, follow “this sort of thing,” specifically CIOs. The lesson of Nike’s failure and subsequent rebound lies in the fact that it had a business plan that was widely understood and accepted at every level of the company. Given that, and the resiliency it afforded the company, in the end the i2 failure turned out to be, indeed, just a “speed bump.”

The i2 Failure: Tactical or Strategic?

Nike’s June 2000 problems with its i2 system reflect the double whammy typical of high-profile enterprise computing failures. First, there’s a software problem closely tied to a core business process—in this case, factory orders. Then the glitch sends a ripple through product delivery that grows into a wave crashing on the balance sheet. The wave is big enough that the company must reveal the losses at a quarterly conference call with analysts or risk the wrath of the Securities and Exchange Commission, shareholders or both. And that’s when it hits the pages of The Wall Street Journal, inspiring articles and white papers on the general subject of IT’s hubris, limitations, value and cost.

The idea that something so mundane as a computer glitch could affect the performance of a huge company is still so novel that it makes headlines. But what doesn’t usually enter the analysis is whether the problem was tactical (and fixable) or strategic (meaning the company should never have bought the software in the first place and most likely won’t ever get any value from it). The latter is a goof worthy of a poster; the former is a speed bump.

Nike claims that the problems with its i2 demand-planning software were tactical and therefore fixable. It was too slow, didn’t integrate well, had some bugs, and Nike’s planners were inadequately trained in how to use the system before it went live. Nike says all these problems were fixed by fall 2000. And the company asserts that its business wasn’t affected after that quarter. Indeed, at press time, Nike had just announced that its third-quarter 2003 profit margins were its highest ever.

If there was a strategic failure in Nike’s supply chain project, it was that Nike had bought in to software designed to crystal ball demand. Throwing a bunch of historical sales numbers into a program and waiting for a magic number to emerge from the algorithm—the basic concept behind demand-planning software—doesn’t work well anywhere, and in this case didn’t even support Nike’s business model. Nike depends upon tightly controlling the athletic footwear supply chain and getting retailers to commit to orders far in advance. There’s not much room for a crystal ball in that scenario.

Indeed, Nike confirms that it stopped using i2’s demand planner for its short- and medium-range sneaker planning (it’s still used for Nike’s small but growing apparel business) in the spring of 2001, moving those functions into its SAP ERP system, which is grounded more in orders and invoices than in predictive algorithms. “This allows us to simplify some of our integration requirements,” says Nike CIO Gordon Steele.

Wolfram says Nike’s demand-planning strategy was and continues to be a mixture of art and technology. Nike sells too many products (120,000) in too many cycles (four per year) to do things by intuition alone. “We’ve tuned our system so we do our runs against [historical models], and then people look at it to make sure it makes sense,” he says. The computer models are trusted more when the product is a reliable seller (that is, just about anything with Michael Jordan’s name on it) and the planners’ intuition plays a bigger role in new or more volatile products. In this case, says Wolfram, talking with retailers does more good than consulting the system.

“There’s been a change in the technology for demand planning,” says AMR Research Vice President Bill Swanton, who declined to address the Nike case specifically. “In the late ’90s, companies said all we need is the data and we can plan everything perfectly. Today, companies are trying to do consensus planning rather than demand planning.” That means moving away from the crystal ball and toward sharing information up and down the supply chain with customers, retailers, distributors and manufacturers. “If you can share information faster and more accurately among a lot of people, you will see trends a lot sooner, and that’s where the true value of supply chain projects are,” Swanton says.

If You Have a Game Plan, You Can Snag the Rebound

Another thing that makes Wolfram angry (his already ruddy complexion going completely red) is the widespread assumption that Nike was betting on algorithms and changed course when that didn’t work out. Wolfram says that, on the contrary, i2’s demand-planning software was never intended to be the hero of Nike’s supply chain project—one of the most ambitious ever attempted by a company its size. It was (and still is), he claims, part of a wider strategy to integrate ERP, supply chain planning and CRM software onto a single platform shared by Nike operations in North America, as well as Europe, the Middle East and Africa (EMEA). “Frankly,” he asserts, “we pretty much stayed the course.”

Nike made a bold early bet on the risky and difficult strategy of creating a single, giant, integrated database within its SAP ERP system for every employee in North America and EMEA. (Nike’s Asia-Pacific division will be on a separate instance of the software.) This meant getting everyone to agree on business practices and common data definitions before the software went in—a rarity in ERP project management.

The difficulty of integrating information across a distributed company has brought down many ERP projects, such as drugstore chain FoxMeyer’s SAP ERP system in the late ’90s and Tri-Valley Growers’ 1997 choice of Oracle’s ill-fated ERP package for the consumer packaged-good industry. Neither company ever got its systems working properly and that contributed to both eventually shutting their doors. Other companies gave up on the vision of total information integration and installed many different versions of their ERP systems—as many as 400 different versions, or instances, of a single vendor’s ERP system at some really large companies, according to AMR.

But Nike claims it has never wavered from its single-instance strategy, even when problems with the first piece of that strategy, the i2 system, hit the news on Feb. 26, 2001. The same project leaders who were in place at the time of the i2 problems (CIO Steele and the business lead, Shelley Dewey, Nike’s vice president of supply chain) are still running the project today. The reason Steele and Dewey survived was because when their system failed, they had a lifeline to hang onto: a clear business case for the overall supply chain project. If achieved, they claim it will save the company a lot more than Knight’s $400 million and the $100 million in wayward sneakers.

Nike’s supply chain project is supposed to drive the manufacturing cycle for a sneaker down from nine months to six. Cutting out that three months would match Nike’s manufacturing cycle to its retailers’ ordering schedule—they order 90 percent of their sneakers six months in advance of delivery. This means Nike could begin manufacturing its sneakers to order rather than three months in advance and then hoping they can sell them. Converting the supply chain from make-to-sell to make-to-order is the dream of any company desirous of gaining competitive advantage through its supply chain. Dell has done it, famously, with PCs; Nike wants to do it just as famously with sneakers.

Nike hasn’t gotten there yet. And its business case relies on a nearly 30-year-old model that some analysts and retailers grumble is out of touch with the reality of today’s market. But it’s a business case Nike’s leaders believe in. This is how CIOs keep their jobs when a project goes off track and it’s how they keep getting funding to keep it going.

Like many truths, this one is simple yet profound: Projects that survive breakdowns do so because everyone in the business, not just IT, understands what the system is supposed to do for the company—and sees value in it. Indeed, after his infamous conference call outburst in 2001, Knight added that, “I think it will, in the long run, be a competitive advantage.”

“We wish to God Phil [Knight] hadn’t said what he said,” says Steele with a laugh. “But his belief in this project has never wavered. [When the i2 problems emerged], we sat down and talked about what the issues were and he said, OK, I understand, carry on.” (Knight declined to be interviewed by CIO.)

How Nike Built a Robust Business Case

Knight, not normally known for self-control, has shown extraordinary patience with Nike’s supply chain project. And he’s needed it. “Once we got into this, we quickly realized that what we originally thought was going to be a two-to-three-year effort would be more like five to seven,” says Wolfram.

It’s been six years now and counting, with the final stage of the project due to be finished sometime in 2006 at a total cost that has gone from a projected $400 million to $500 million, according to Wolfram.

The theme of Nike’s sneaker supply chain is centralization. All product design, factory contracting and delivery is planned and coordinated from Beaverton, Ore. The supply chain is built around a six-month order cycle, called the “Futures” program, that was developed in 1975 in response to the then-chaotic market for running shoes. In those days, the Far East sneaker supply chain was in its infancy, deliveries were spotty, inflation was high, and runners bought whatever shoes they could find regardless of brand. Nike won that market by guaranteeing delivery and an inflation-proof discount in return for getting its orders six months in advance. Retailers went along happily because runners didn’t much care about style or looks—they wanted technically advanced shoes that fit and were in steady supply. Retailers knew their Nike shoes would sell no matter how far in advance they ordered them.

But as Nike became increasingly global, its supply chain began to fragment. By 1998, Nike had 27 order management systems around the globe, all highly customized and poorly linked to Beaverton. To gain control over its nine-month manufacturing cycle, Nike decided that it needed systems as centralized as its planning processes. ERP software, specifically SAP’s R/3 software, would be the bedrock of Nike’s strategy, with i2 supply, demand and collaboration planner software applications and Siebel’s CRM software also knitted into the overall system using middleware from STC (now SeeBeyond).

Nike’s patience was a virtue here too. It skipped AFS (Apparel and Footwear Solution), the initial version of SAP’s R/3 software developed specifically for the apparel and footwear industry. Archrival Reebok, which partnered with VF (makers of Wrangler Jeans and Vanity Fair bras, among other things) on the beta effort to develop AFS beginning in 1996, struggled for years to implement the buggy, unstable AFS software. (Reebok declined to be interviewed for this story.) And although Nike purchased AFS in 1998, it didn’t attempt to install it until SAP began working on the second, more stable version of the software. “Most of the early adopters were busy installing AFS in 1999,” says Steele with a satisfied smile. “That’s when we began spending a lot of time with SAP, sending our people over to Germany to tell them what we’d like to see in the second version.”

Why I2 Went Wrong

Unfortunately, Nike didn’t apply that same patience to the implementation of the first part of its supply chain strategy: i2’s demand and supply planner software applications. Rather than wait to deploy i2 as part of its SAP ERP project, Nike decided to install i2 beginning in 1999, while it was still using its legacy systems.

According to court documents filed by Nike and i2 shareholders in class-action suits, little went right before June 2000. i2’s predictive demand application and its supply chain planner (which maps out the manufacturing of specific products) used different business rules and stored data in different formats, making it difficult to integrate the two applications. The i2 software needed to be so heavily customized to operate with Nike’s legacy systems that it took as much as a minute for a single entry to be recorded by the software. And, overwhelmed by the tens of millions of product numbers Nike used, the system frequently crashed.

But these problems would have remained only glitches had they not spilled over into factory orders. The system ignored some orders and duplicated others. The demand planner also deleted ordering data six to eight weeks after it was entered, making it impossible for planners to recall what they had asked each factory to produce. Soon, way too many orders for Air Garnetts were going over the wires to Asian factories while calls for Air Jordans were lost or deleted.

When the problems were discovered, Nike had to develop workarounds. Data from i2’s demand predictor had to be downloaded and manually reloaded into the supply chain planner by occupying programmers, quality assurance personnel and businesspeople whenever the applications were required to share data—which was as often as weekly. Consultants were brought in to build databases to bypass portions of the i2 applications, and custom bridges were constructed to enable the i2 demand and supply planner applications to share.

Nike claims the kinks were ironed out by November 2000, but the damage was done, affecting sales and inventory deep into Nike’s next quarter. When the company’s SAP system arrived, short- and medium-range planning moved out of i2 altogether and into SAP. Nike says the $10 million i2 system was a small part of the $500 million overall project cost, although some observers assert that the i2 cost was higher.

Why did things go so wrong? Wolfram says Nike lulled itself into a false sense of security about the i2 installation because, by comparison with the SAP plan, it was a much smaller project. (Nike has about 200 planners who use the demand and supply planning systems.) “This felt like something we could do a little easier since it wasn’t changing everything else [in the business],” he says. “But it turned out it was very complicated.”

“Could we have taken more time with the rollout?” asks Steele. “Probably. Could we have done a better job with software quality? Sure. Could the planners have been better prepared to use the system before it went live? You can never train enough.”

Nike Learns Patience

Nike learned from its mistakes. There would be no rushing the SAP installation. And even though Nike executives occasionally questioned the project’s complexity and expense, Steele never considered abandoning the single-instance strategy. “We said single instance is a decision, not a discussion,” says Steele.

Nike wanted to do a staged, geographically based rollout of SAP, but it also wanted to avoid making each rollout so specific to a region that it would require specialized support. That meant building a design for the U.S. rollout that accommodated some of the peculiarities of the EMEA rollout—such as multiple currency support and different legal restrictions—even though those things were not required for doing business in the United States. This necessitated creating a global template for SAP processes, with all the regions agreeing on the minutiae of doing business. Naturally, this made each rollout longer and more complex.

Canada, a relatively small (roughly $300 million) piece of Nike’s $11 billion business, went first, on Thanksgiving weekend 2000 (the pre-spring rush quiet time), with SAP’s AFS ERP, a bundle of i2 applications and Siebel’s CRM system. Steele and regional Nike executives, dressed in smocks, served Thanksgiving dinner to project employees working around the clock. Other regions—the United States and EMEA—followed on successive Thanksgivings, putting 6,350 users worldwide on the system by the end of 2002. (The last two regions, Asia-Pacific and Latin America, are scheduled for rollout before the end of 2006, according to Nike.) Steele claims he’s never had to serve humble pie along with the turkey, saying to date there have been no disruptions to Nike’s business from the three rollouts.

This may be because of Nike’s newfound respect for training, another weakness of the i2 implementation. Nike’s U.S. customer service representatives received 140 to 180 hours of training from highly trained fellow Nike “super users,” says Andy Russell, Nike’s global transition director. Employees are locked out of the system until they complete the full training course, he says.

What Phil Knight ULTIMATELY Got for His Money

So what have six years and $500 million done for Nike’s business? Wolfram claims that better collaboration with Far East factories has reduced the amount of “pre-building” of shoes from 30 percent of Nike’s total manufacturing units to around 3 percent. The lead time for shoes, he asserts, has gone from nine months to six (in some periods of high demand, seven). But John Shanley, managing director with Wells Fargo, says, “Retailers are saying it’s still closer to nine months than six.” Gross margins have increased slightly since 2001 but not significantly.

Inventory levels have been reduced, says Supply Chain Vice President Dewey, by cutting Nike’s factory order interval time from one month to a week in some cases. But here, too, the effects may not be trickling down to the balance sheet as fast as Nike would like. Inventory levels are still at the mercy of Nike’s fickle audience of teens. Nike’s inventory turns were 4.34 per year in 2003, according to Footwear News, an industry trade magazine, slightly less than the industry average of 4.39 and behind rivals Reebok (5.07) and K-Swiss (4.47).

Nike also is behind its rivals in direct point-of-sale (POS) integration with retailers, says Shanley. Supply chain experts agree that actual data from stores, rather than software algorithms, are the best predictors of demand. But Nike’s SAP system cannot yet accept POS data, though the company says it’s working on it.

So far, the most direct benefits of the system have been typical for ERP: improved financial visibility, cash flow management, revenue forecasting, and an ability to juggle Nike’s cash stockpile in different currencies to take advantage of shifting exchange rates—benefits that are enhanced by the single database that holds all the data.

But Steele maintains that the best is yet to come. “We haven’t changed our processes too much yet,” he says, “because we didn’t want to complicate the rollouts.” Eventually, he believes Nike will get that six-month lead time down to three. But, he cautions, that that would require “significant changes on the part of our retail and supplier partners as well as Nike processes.”

He’d better hurry. Shanley says the sneaker market has changed a lot since Nike created its Futures program in the ’70s. Retailers don’t like having to order products six months in advance when fashions can change in a flash. Rivals are allowing retailers much more leeway in ordering practices, eroding Nike’s market lead in select areas.

But because Nike developed a plan in 1998, and stuck with it, the company claims it can make a coordinated global effort to cut that lead time. The system to make that happen is in place—which, given all that has transpired in the past seven years, is rather remarkable.

More on supply chain:

• What is supply chain management? Mastering logistics end to end
• How data can move the needle on supply chain
• How CIOs can help reduce supply chain anxieties
• Supply chain woes? Analytics may be the answer

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How is Nike changing the Supply Chain Game? MBA Case Study.

The Nike supply chain can be divided into three main stages: sourcing, manufacturing, and distribution.

Nike sources its raw materials from suppliers all over the world. The main raw materials that Nike uses are leather, rubber, and textiles. Nike works with its suppliers to ensure that they meet its high standards for quality and sustainability.

Nike’s sourcing process begins with identifying potential suppliers. Nike has a team of sourcing professionals who travel the world to visit potential suppliers and assess their capabilities. Nike also uses a variety of tools to identify potential suppliers, such as online directories and trade shows.

Once Nike has identified potential suppliers, it evaluates them based on a number of factors, including quality, price, sustainability, and delivery time. Nike also conducts audits of its suppliers’ factories to ensure that they meet its labor standards.

Once Nike has sourced its raw materials, it sends them to its contract manufacturers to be produced into finished products. Nike does not own any of its own factories, but instead relies on contract manufacturers to produce its products.

Nike’s contract manufacturers are located in over 40 countries. Nike works closely with its contract manufacturers to ensure that they produce its products according to its specifications. Nike also has a strict quality control process in place to ensure that its products meet its high standards.

Distribution

Once Nike’s products have been manufactured, they are shipped to Nike’s distribution centers. Nike has a network of distribution centers all over the world. Nike’s distribution centers help to get Nike’s products to retailers quickly and efficiently.

Nike’s distribution process begins with receiving products from its contract manufacturers. Once Nike has received products, it inspects them to ensure that they meet its quality standards. Nike then sorts and packages the products for shipment to retailers.

Nike ships its products to retailers using a variety of transportation methods, including air, ocean, and ground transportation. Nike also uses a variety of logistics providers to get its products to retailers.

Nike’s supply chain is essential to its success. Nike’s ability to produce high-quality products at a competitive price is due in large part to its efficient and effective supply chain.

Key Features of Nike Supply Chain

• Global reach:  Nike’s supply chain is global in reach, with suppliers and contract manufacturers located all over the world. This allows Nike to take advantage of lower labor costs in some countries and to be closer to its target markets.
• Efficiency:  Nike’s supply chain is very efficient. Nike uses technology and innovation to streamline its operations and to reduce costs.
• Flexibility:  Nike’s supply chain is also very flexible. Nike is able to quickly respond to changes in demand and to new trends in the market.
• Sustainability:  Nike is working to make its supply chain more sustainable. Nike has set a number of goals for itself, including reducing its environmental impact and improving the working conditions of its suppliers’ workers.
• Transparency:  Nike is working to make its supply chain more transparent. Nike has published a number of reports on its supply chain, and it allows third-party auditors to inspect its suppliers’ factories.
• Global reach:  Nike has a network of over 800 contract manufacturers in over 40 countries. Nike also has a network of distribution centers all over the world. This allows Nike to get its products to customers quickly and efficiently.
• Efficiency:  Nike uses a variety of technologies to streamline its supply chain operations, such as RFID tags and automated picking and packing systems. Nike also has a strong focus on continuous improvement, and it is constantly looking for ways to improve the efficiency of its supply chain.
• Flexibility:  Nike’s supply chain is designed to be flexible and adaptable. Nike has a number of suppliers and contract manufacturers that it can work with, and it is able to quickly shift production to different locations as needed. Nike also has a strong focus on product development, and it is able to quickly bring new products to market.
• Sustainability:  Nike is working to make its supply chain more sustainable in a number of ways. For example, Nike is working to reduce its environmental impact by using more sustainable materials and by reducing its energy consumption. Nike is also working to improve the working conditions of its suppliers’ workers by implementing a code of conduct and by conducting audits of its suppliers’ factories.
• Transparency:  Nike is working to make its supply chain more transparent by publishing a number of reports on its supply chain and by allowing third-party auditors to inspect its suppliers’ factories. Nike is also a member of a number of industry initiatives that are working to improve the sustainability and transparency of the global apparel supply chain.

Nike Quotes from Advertisements

• “Yesterday you said tomorrow. JUST DO IT.”
• “Greatness is not born, it is made.”
• “Run the day. Don’t let it run you.”
• “Be legendary.”
• “With each step comes the decision to take another. You’re on your way now. But this is not the time to dwell on how far you’ve come.”
• “Don’t believe you have to be like anybody to be somebody.”
• “If people say your dreams are crazy, if they laugh at what you think you can do, good. Stay that way. Because what the non-believers fail to understand is that calling a dream crazy is not an insult. It’s a compliment.”
• “You’re in a fight with an opponent you can’t see but you can feel among your heels. Feel them breathing down your neck. You know what that is? That’s you. Your fears, your doubts, and insecurities all lined up like a firing squad ready to shoot you out of the sky. But don’t lose heart. While they’re not easily defeated, they’re far from invincible.”
• “What you do is up to you. Just do it.”

Expand Your Supply Chain Knowledge

• How Amazon’s Supply Chain Management Strategy Works?
• SCM Resources by Topic
• Supply Chain Quotes: Take it to the next level.

Apple – The House that Tim Cook Built Documentary.

Target Supply Chain Strategy to Beat Amazon and Walmart’s Fast Delivery.

How is Nike changing the supply chain game? MBA Case Study.

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Nike's Strategy to Improve Conditions in its Global Supply Chain – A Case Study

Nike’s approach to managing supplier responsibility has greatly evolved since the 1990s, when the media uncovered claims of child labor, underpaid workers, and poor working conditions in several Asian countries. This report explores how Nike’s approach to improving social and environmental conditions in its global supply chain has evolved through integrated management of sustainability and innovation, increased supplier incentives, and systems innovations intended to prevent problems before they arise.

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An Insight Into Nike’s Supply Chain Strategy

Nike is an American multinational and is undoubtedly the most important player in the modern textile business as it is one of the most recognized sports brands in the world. Nike sells hundreds of millions of shoes and other products annually, and a tremendously intricate supply chain lies behind them. DFreight is a digital freight…

Nike is an American multinational and is undoubtedly the most important player in the modern textile business as it is one of the most recognized sports brands in the world. Nike sells hundreds of millions of shoes and other products annually, and a tremendously intricate supply chain lies behind them.

DFreight is a digital freight forwarder that brings you comprehensive information about Nike’s supply chain strategy in this blog post.

Table of Contents

An Overview

The design, development, production, marketing, and sales of footwear, clothing, equipment, accessories, and services are all activities of Nike, Inc. , an American multinational corporation. The business’s main office is in the Portland metro region, close to Beaverton, Oregon. It is a significant producer of sports equipment in addition to being among the biggest providers of athletic footwear and apparel worldwide.

Nike benefits from a powerful brand, efficient distribution methods, and an alluring product lineup. Supply chain excellence has been boosted in recent years and is now seen as a competitive weapon due to new market entrants with superior service and lead times, as well as fashion brands, entering their market sector.

How Does Nike’s Supply Chain Work ?

The biggest sportswear and running shoe manufacturer in the world is Nike. The American multinational is undoubtedly the most important player in the contemporary textile business because it is one of the most well-known brands in the world. Nike sells hundreds of millions of shoes and other products annually, and a tremendously intricate supply chain lies behind them. Nike’s proactive approach to supply chain management has been regarded by many as a fundamental factor to its amazing success, even though there are obviously considerable problems involved in managing this complexity.

In the previous blogs, we looked into the supply chains of famous and leading companies, which you can read about each of them in the section below.

How Is Nike Changing the Supply Chain Game ?

Here are four things about how Nike is changing the supply chain game:

New Regional Service Centers

By constructing new regional service centers, Nike is making an effort to increase capability, speed, and precision more sustainably. Nike will be able to deliver goods to customers more quickly and accurately thanks to the change, which will also lessen its environmental effect. The Netherlands , China , and the United States will be the locations of the new service centers. They will be driven by Nike’s in-house digital platform , which enables the business to communicate with its worldwide supply chain more rapidly and effectively.

Implement Automation and Technology

Nike is one of the most recognized brands in the world and is also a leader in automation and supply chain technology. In the past, Nike’s supply chain was largely manual and heavily reliant on manpower. Nike’s supply chain is now almost fully automated, allowing them to drastically cut costs and increase efficiency. Nike’s journey to an automated supply chain began in the early 2000s when they began investing in new technologies.

Keep, Package, Ship, and Refurbish Products

Nike is changing the supply chain game by making it easier for customers to keep, package , ship and refurbish their products. The company is working with UPS to make it easier for customers to return Nike products that they have purchased online. Customers can now drop off their Nike products at UPS locations and have them shipped back to Nike for free. Nike is also working with Best Buy to make it easier for customers to recycle their old Nike products. Customers can now drop off their old Nike products at Best Buy locations and have them recycled for free.

Empowering the People Who Power Nike

Nike is on a mission to change the way the world looks at supply chains. The company has long been an industry leader when it comes to sustainability and social responsibility, but it is now taking its commitment to a new level with its Powering the People Who Power Nike initiative. The initiative is focused on ensuring that the workers in Nike’s supply chain are treated fairly and paid a livable wage. To do this, Nike is working with its suppliers to implement a new business model that puts workers at the center. Under the new model, suppliers will be required to provide workers with a livable wage, health benefits, and access to education and training.

In addition, Nike will work with suppliers to ensure that workers have a voice in the decision-making process and that their rights are respected. This new initiative is an important step in Nike’s journey to create a more sustainable and responsible supply chain. It is also a reflection of the company’s commitment to its employees and to the communities where it does business.

Nike’s Supply Chain Transformation

Several overarching principles of Nike’s supply chain transformation include:

• Focus on the vital few prioritize: Linked investments with business strategy and profit
• Simplify end-to-end: Eliminate waste and complexity from the process before enabling
• Avoid customization: Standardize solutions to enhance workflows
• Copy-paste companywide: Duplicate successful strategies across brands, regions, and business units.
• Lead the change: Make an investment in project and transition management
• Accelerate the pace: Adapt fast to unique business requirements
• Deliver business results: finish what we start through business benefits achievement

Challenges to Managing a Global Supply Chain

Nike is a global company with a vast supply chain that includes suppliers from around the world. Managing this supply chain is a complex and challenging task. There are a number of potential risks and challenges that Nike must manage in order to keep its supply chain running smoothly.

One of the biggest challenges is managing supplier relationships. Nike works with thousands of suppliers, many of whom are located in countries with different legal systems and cultural norms. Nike must ensure that its suppliers adhere to its standards and that they are treated fairly. This can be a challenge when dealing with suppliers in countries with different legal systems and cultural norms.

Another challenge is managing the flow of goods across borders. Nike’s products are sold in markets all over the world. This means that Nike must manage the flow of goods across many different borders. This can be a challenge due to different customs regulations and procedures in different countries.

Nike must also manage the risk of disruptions to its supply chain. This can include things like natural disasters, political instability, and supplier bankruptcies.

Nike must have plans in place to deal with disruptions when they occur. Finally, Nike must continuously adapt its supply chain to changing market conditions. 

What Makes Nike’s Supply Chain Unique and Effective?

The key principles behind Nike’s supply chain are outsourcing and diversification. Nike contracts 100% of its manufacturing for footwear and apparel out to independent suppliers. It was one of the earliest multinationals to adopt this approach. Thanks to effective management, Nike’s supply chain team quickly learned to manage the additional logistical complexity involved in this outsourcing and has seen significant cost savings over the years as a result. Outsourcing is inherently a risky approach, but by extensively diversifying its supplier base, Nike successfully mitigated this risk from the beginning.

Nike’s supply chain functions around three core organizational principles:

• Outsourcing: to save costs
• Diversification: to minimize risk
• Corporate social responsibility: to manage its impact on the world it works in

Under focused and experienced management, its supply chain has grown from these principles into one of the most effective and responsible large international supply chains.

Supply chain management is critical for businesses to be successful. An efficient and effective supply chain can make a big difference in a company’s bottom line. Good supply chain management can help businesses to keep their costs down, improve their customer service, and increase their profits.

If you are looking for a digital freight forwarder that can help you streamline your supply chain and make it more efficient, look no further than DFreight. We are a leading provider of digital freight forwarding services and can help you manage your supply chain more effectively. We offer a range of services that can help you improve your supply chain management, including online tracking , real-time visibility, and automated documentation. We also have a team of experts who can help you with any questions or concerns you may have about your supply chain. Contact us today to learn more about how we can help you streamline your supply chain and make it more efficient.

What is a successful supply chain strategy?

A successful supply chain strategy should be able to provide a company with a competitive advantage by achieving the following objectives: – Cost reduction – Increased efficiencies – Improved customer service 

What are some of the key components of a successful supply chain strategy?

There are a few key components of a successful supply chain strategy, which include: – Defining the company’s value proposition – Understanding customer needs and requirements – Designing and implementing an efficient supply chain network – Managing and measuring performance

How can I create a supply chain strategy?

There are a few steps you can take to create a supply chain strategy. First, you need to understand your business goals. Next, you need to assess your current supply chain. Finally, you need to develop a plan to improve your supply chain. 

What are some common supply chain problems?

There are a few common supply chain problems. One problem is that the supply chain can be very complex. This can make it difficult to manage and optimize. Another problem is that the different parts of the supply chain may not be integrated. This can lead to inefficiencies and waste. 

How can I optimize my supply chain?

There are a few ways you can optimize your supply chain. One way is to streamline your processes. Another way is to use technology to automate and improve your supply chain. Finally, you can outsource your supply chain to a third-party provider .

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Global Sourcing at Nike

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Striding forward: Nike’s quest to reinvent its supply chain

Can Nike succeed in its mission to mass-produce customized shoes?

Why does Nike care about supply chain digitalization?

Consumer expectations have shifted dramatically. Ten years ago, Nike dictated its own product cycles, with retailers placing 94% of their wholesale orders at least six months in advance. [1] Today, consumers have adopted the “buy now, wear now” mentality. With the internet, consumers have access to whatever they want whenever they want it, making the traditional retail calendar obsolete. Social media has also accelerated the fashion cycle, as consumers are constantly searching for the next “hot” item. [2] Not only do consumers want new products faster, but they also want to be able to customize them. 70% of consumers say that they would be “more loyal” to brands that gave them the ability to customize products. [3]

Nike’s established supply chain, with long product lead times and large batch production, is no longer able to meet consumer demands. As a result, Nike needs to transform its capabilities with technology. This will enable the Company to 1) shorten product cycles, 2) reduce labor and material costs via automation, and 3) efficiently produce customized footwear. A digitized supply chain is table stakes for Nike – it’s main competitor, Adidas, has already invested in a “speedfactory,” where robots are producing customized designs.

Management’s short-term and medium-term initiatives

Today, customers can choose one of ~10 shoe models on NIKEiD and customize the color and fabric. Nike’s current manufacturing processes are set up to produce large runs, but their goal is to have complete production flexibility (i.e., use the same amount of time to produce 1 SKU 20,000 times and 20,000 different SKUs). [4]

Pathways to Just Digital Future

In the near-term, management wants to increase automation of the entire manufacturing chain, including pre-production, material preparation, stitching, and assembly. In addition to reducing operating costs, these innovations will help deliver NIKEiD products 5-10x faster (in a matter of days vs. several weeks) [5] Specifically, Nike has partnered with Flextronics to develop and roll out the following technologies:

• Laser-cutters: Lasers follow a “digital recipe” and can easily switch between cutting different SKUs without additional set-up time.
• Roboticized bolt holders: Each shoe model requires different fabrics to be moved and handled. A roboticized bolt holder automatically feeds the line based on the shoe’s fabric requirements. [6]

In the medium-term, Nike’s goal is to provide consumers with custom-fit, 3D-printed shoes in a scalable manner. Nike and Adidas are in a race to mass-produce 3D printed shoes. Nike has established a partnership with HP but has not revealed any public targets; Adidas has announced a goal of selling 100,000 pairs of shoes by 2018. [7, 8] The two main challenges with 3D printing are:

• Inability to scale due to high costs: soles take ~10 hours to print and machines are expensive.
• Unappealing aesthetics: 3D printers have more much limited colors and textures compared to traditional manufacturing. [9]

My recommendations

Almost all of the press around Nike focused on its technological innovations (i.e., laser cutters, bolt holders, 3D-printing), but I believe that in the near-term, increasing supply chain transparency is equally as important. In order to achieve faster fashion cycles, Nike needs to understand what products retailers are selling. To the extent it can, Nike should integrate into retailers’ data systems and run predictive analytics. This will help Nike 1) forecast demand and replenish products in a shorter timeframe and 2) provide immediate feedback to the product development team.

In a similar vein, Nike should partner with retailers who can handle faster fashion cycles (i.e., retailers who are willing to hold more styles for shorter time periods and can market them effectively).

In the medium-term, 3D-printed shoes will require just-in-time production. To limit inventory costs, Nike should integrate with suppliers, so that the suppliers can see what orders are received in real-time and arrange for just-in-time delivery of materials.

3-D printing will also cause a shift towards the direct-to-consumer (D2C) channel and fundamentally change Nike’s business model. I believe that growth in the D2C channel will benefit Nike, as D2C 1) allows Nike to own the relationship with the customer and 2) has higher margins vs. traditional retail. That said, management should carefully evaluate what resources will be needed to scale D2C (i.e., customer service and logistics).

Open Questions

• How much of Nike’s supply chain needs to be transformed? Digitalization makes sense for producing customized shoes, but is the investment worth it for products that Nike has produced consistently over the past decade?
• Producing customized shoes (both NIKEiD and 3D-printed) requires significant upfront investment in R&D, IT and machinery. Is this a market that only large, well-capitalized incumbents like Nike and Adidas can win, or can start-ups like Feetz break in?

(780 words)

• Nike, Inc., May 31, 2007 Form 10-K (filed July 27, 2007), via Capital IQ, accessed November 2017.
• CPP-Luxury, “Millennial Consumers are Keen to ‘See Now, Buy Now, Wear Now,’” http://www.cpp-luxury.com/millennial-consumers-are-keen-to-see-now-buy-now-wear-now/, accessed November 2017.
• Cotton Incorporated Lifestyle Monitor, “Keeping the Supply Chain Running Smoothly,” http://lifestylemonitor.cottoninc.com/mining-the-data/, accessed November 2017.
• Morgan Stanley, “The Need for Speed Hits Athletic Wear,” June 6, 2017.
• Flextronics, “Nike Case Study”, https://flex.com/insights/case-studies/nike, accessed November 2017.
• Flextronics, “Recoding the Run,” https://flex.com/intelligence/manufacturing/recoding-run, accessed November 2017.
• Nike, “At Nike the Future is Faster, and it’s 3D,” https://news.nike.com/news/nike-hp-3d-printing, accessed November 2017.
• TechCrunch, “Adidas’ Latest 3D-Printed Shoe Puts Mass Production Within Sight,” https://techcrunch.com/2017/04/07/adidas-latest-3d-printed-shoe-puts-mass-production-within-sight/, accessed November 2017.
• “3 Reasons You Won’t See Mass Produced 3D Printed Running Shoes – For Now,” https://www.solereview.com/3-reasons-you-wont-see-mass-produced-3d-printed-running-shoes/, accessed November 2017.

Student comments on Striding forward: Nike’s quest to reinvent its supply chain

As my essay was about the effect of Nike’s strategy on Dick’s Sporting Goods, I’m curious to hear more about how you recommend Nike partner with retailers even as they pursue going directly to consumers. I think it will complicated for Nike to arrange good in-store positioning and marketing from retailers who feel they are actively being squeezed out. One idea is to actually differentiate the shoes that go DTC from the shoes that go through retailers, meaning that each type of product has its own channel and conflict is minimized. A recent Bloomberg News article talks about how apparel companies like Nike use various retail channels to hit different price points. To your point, Nike could likely use the DTC model and high-end, fashion boutiques to carry customized shoes and limited edition models. They could still use mass retailers like Dick’s to supply the more standard fixtures like Air Jordans, at a lower price point. Another idea could be Nike partnering with Dick’s and offering a “Nike Lab” as an in-store experience. Consumers could try on shoes for the right fit, and then combine various colors and designs on an interactive screen. If the supply chain is enhanced as anticipated, Nike and Dick’s could promise next-day, free delivery on the customized order. This approach would allow Nike to benefit from a physical retail presence, particularly useful when considering kids and families who are going to the retailer to make multiple, simultaneous sporting good purchases and wouldn’t otherwise consider a customized Nike shoe to be affordable or accessible.

While I agree that Nike must digitize its supply chain and increase transparency in order to keep up with market trends and consumer demand, I want to challenge the assumption that NIKEiD and customization are the drivers here. As athletic footwear gains casual traction via the “athleisure” movement, it’s far more important for shoe and apparel companies to iterate quickly and change their designs to keep up with consumer behavior than it is to offer customizable products. The colors and materials of a shoe are important, but the key driver is the baseline shape and style. These shoe designs are what drive consumer purchases, and often the most highly sought after shoes are designed by the shoe company or via collaboration as opposed to individual customer customization. Adidas is a great example of this, given the recent success of their Ultra Boost technology and partnership with Kanye West.

So, then, the question becomes whether or not digitization is important for the traditional shoe supply chain. I think the answer is unequivocally yes. All of the things this post mentions around efficiency, scalability and transparency are becoming ever more important for the core offering of shoe companies. Digitization, in this case, is a necessity.

I think there are two separate issues at play in this article that may be not be as related as you have stated. 1) is how to efficiently produce custom shoes and 2) is how to better predict demand in this fast fashion age. I think 1) is more of a manufacturing problem whereas 2) is makes for a better digitization case. If Nike is indeed able to achieve complete production flexibility by investing heavily in new manufacturing technologies, the need to forecast is less important (and also less effective for the case of custom shoes). If you are able to achieve JIT delivery due to your manufacturing technologies, at least the manufacturing schedule would not require accurate forecasting (although yes, this would still benefit you in terms of inventory planning). If Nike instead values 2) more, than I would argue that they should stray away from customizable shoes. The increased variations make accurate demand predicting difficult even with 100% transparency and digitization of the supply chain. So I’m with Michael – digitization is a must because fast fashion is the future. But perhaps less customization is a tradeoff that Nike needs to make to fully capitalize on the benefits of a fully digitalized supply chain.

I strongly agree with Michael above that there is not a strong market demand for increased design customization in sneakers. Sneaker customization has been offered by Nike and its competitors since I was in elementary school, when I designed both running shoes and basketball shoes with my name and number on them. While it’s true that Nike could invest in expensive new 3D printing technology to accommodate customization at scale, I don’t think it would be addressing any customer pain point at scale; rather, I cultish sneaker-heads and design buffs are still niche.

Secondly, while I agree with you that it would be ideal for Nike to be integrated with their customers’ IT systems in order to analyze sales data in real-time, I question the viability of this plan. Nielsen and IRI are two data companies that already provide robust and fairly reliable retail sales data (on sell-through rates and distribution, for example), and they publish updated data every few weeks; One Click Retail offers the same data services for the online retail world. I believe it would be a tall ask for Nike to demand that their retail customers integrate their IT systems for data sharing, given that (a) other manufacturers do not do so and (b) good alternatives like Nielsen, IRI and One Click exist.

As traditional retailers continue to struggle and the clothing industry becomes saturated with smaller pure e-commerce players, it will become even more critical for brands to provide unique offerings to consumers to differentiate themselves from the competitive set. Nike is no exception to this. Furthermore, as retailers move away from the traditional fashion cycle to meet consumer demand for instant gratification (“see now, buy now” mentality), I predict that consumers will play a larger role in the actual design of the products. This is where mobile e-commerce and 3D printing come into play.

Platforms such as NikeID allow consumers to have a completely different retail experience and provides the differentiation they are seeking a. However, currently NikeID custom orders take several weeks longer to deliver than standardized products. As 3D printing matures and becomes more cost effective and accessible, consumers will be able to have their custom orders delivered instantaneously. Both large established retailers as well as start-ups are already exploring this and as the technology improves, more power will be in the hands of the consumer.

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Nike - an omnichannel inventory management cautionary tale

In the early stages of the pandemic, sportswear manufacturer and retailer Nike deployed radio frequency identification (RFID) technology to track products flowing through outsourced manufacturing operations.

It also used predictive-demand analytics to minimise the impact of store closures across China. By rerouting inventory from in-store to digital-sales channels – and acting early to minimise excess inventory buildup across its network – the company was able to limit sales decline in the region to just 5%. 

But fast-forward two years, and Nike is in the midst of a global fire sale as it bids to clear an epic inventory glut that the company blames on late deliveries over the past two seasons, compounded by earlier ordering by retailers and faster-than-usual deliveries.

The company has admitted that, despite strong demand, it will follow a policy of “aggressive markdowns” to clear inventories, though this will likely impact margins this fiscal year.

Nike CFO Matt Friend said on the company’s quarterly call that inventory was up 44% company-wide, driven largely by a 65% hike in North America, its largest market. Friend said Nike plans to “tighten buys in the second half of the financial year and liquidate excess inventory more aggressively beginning in the current quarter”, in the hope it better balances inventory in 2023.

Many clothes retailers are experiencing something similar, watching inventory pile up  as inflation-hit consumers reign-in their spending. 

“I hesitate to call it a bloodbath, but it’s going to be ugly in terms of the amount of discounting and markdowns,” Urban Outfitters CEO Richard Hayne said during a Q3 earnings. 

In a post on LinkedIn, Brandon Rael – Business Transformation Leader with Capgemini Invent – said of the Nike situation: “It’s continuing its aggressive push with its direct-to-consumer (DTC) strategies, and, at the same time, is in an over-inventoried situation where it has to review its wholesale partnership model. 

“Nike is re-evaluating its wholesale partnership model while growing its DTC retail space. Its partnerships with Foot Locker, JD Sports, and others offer Nike an opportunity to manage its inventory challenges while extending its reach to customers, via well-established retail and wholesale models. 

“Foot Locker and others have done an outstanding job of adding value to the Nike brand by providing a shop-within-a-shop customer experience.” 

This ‘tale of two Nikes’ shows just how perilously difficult it is for businesses to manage inventory in a world in which market chaos is … groan … the ‘new normal’. 

While the digitalisation of inventory management can be seen as a salve to such problems, it is no panacea. Here, Supply Chain Digital speaks to Will Lovatt, General Manager and Vice President Europe with Deposco , an inventory visibility platform whose customer profiles range from rapidly growing small ecommerce operators through to global consumer packaged goods brands and leading-edge 3PL fulfilment operators. 

Lovatt shares insights into the inventory management challenges facing today’s businesses and how some of these challenges can be met.

Nike was drowning in inventory. Could digitalisation help?

Our proposition enables organisations to use inventory to satisfy customer demand, no matter where that inventory is located. The net effect is that, for the same inventory investment, we are able to extend the reach and responsiveness of the network. 

Nike’s consumer-facing ecommerce operations send stock via retail partners to satisfy its end customers. Digital solutions such as ours help organisations match customer demand to available inventory across the business, minimising overstocking.  

How has inventory management changed since COVID-19?

When the bricks-and-mortar retail world initially closed for Covid, online sales grew explosively, so having an omnichannel fulfilment capability became a necessity for every retailer, consumer brand, or marketplace operation. 

With omnichannel, brands are largely helpless. They lack a way to receive orders from whichever channels and locations orders are placed and then proactively identify the best inventory across the network to satisfy that demand, 

As the pandemic grew, many businesses were left with excess pockets of inventory originally intended to serve now-closed retail operations, as well as customer orders left unsatisfied in channels where no inventory was available.  

How do you make an omnichannel supply chain work?

For an omnichannel supply network to operate effectively, it needs to fulfil three key requirements.

First, it must be sufficiently flexible to evolve as new channels open and sources dry up. Plus, new selling platforms – marketplaces and ecommerce front-ends, for example – need to be integrated and served.

Second, it has to be connected in real-time to all viable sources of inventory – something that can only be achieved with the help of web-based IT services.

Finally, the company’s supply network must have deep knowledge of both the product and the sources of supply, so that the most suitable option is offered to customers based on location, timing, and local legislative requirements.

How can businesses best meet these challenges?

Primarily, organisations need to break away from the constraints of traditional retail-serving supply chains to accommodate supply networks. They can do so through dynamic, customer-focused, demand-satisfaction solutions; these need to deliver a real-time interface that embraces every commerce touchpoint while also considering all inventory sources.

Is legacy software in omnichannel fulfilment a problem?

Yes, it’s a major issue. Batch updates and overnight refreshes between domains may have been adequate for a supply chain where customer interaction was limited to retail locations only. But the dynamic world of omnichannel fulfilment has to execute in sub-seconds across all customer-serving locations. Mismatches can lead either to heavy overstocking or the risk of double selling.

Can dark store and in-store inventory warehousing help?

Our solutions were born on the web and are architected to work in mixed omnichannel IT environments to serve our rapidly growing ecommerce direct-to-consumer customers. 

We offer visibility across the inventory landscape, including traditional warehousing, retail stores, and various forms of fulfilment centres. Our customers also have the real-time ability to match source with demand. 

It’s all about working at scale and complexity but delivering simplicity and rapid time-to-value. 

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Case Study | Inside Nike’s Radical Direct-to-Consumer Strategy

• Chantal Fernandez

In October 2020, in the middle of a global pandemic that had infected 188 countries, causing record sales damage across the retail sector, Nike’s share price hit an all-time high.

Like other retailers, Nike had been forced to close most of its network of more than 900 stores across the world, as had its key wholesale partners like Nordstrom and Foot Locker.

But the American sportswear giant’s performance during the pandemic, when its online sales spiked, signalled to many that Nike had the competency to prosper long term, in a future that will be increasingly defined by e-commerce and digital brand connections.

It was a validation of a strategy that Nike prioritised three years ago, dubbing it “Consumer Direct Offense,” but the seeds of the approach go back almost a decade.

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Above all, Nike is a marketing company. It doesn’t just sell sneakers; it sells the brand aspiration that imbues those sneakers with meaning. But to achieve the reach required to scale its business, Nike’s distribution strategy had long-relied on third-party retailers to sell its products, even if the consumer experience offered by those partners diluted its brand.

But in a future increasingly defined by e-commerce, fast-moving trends and, above all, the rising power of branding to drive consumer preference when competitors are just a click away, Nike realised that in order to thrive, it needed to take control of its distribution to better manage its brand and deepen its connection with consumers.

It was definitely architecting a new retail, and a bold, retail vision for Nike.

Such an evolution is easier said than done, especially for a business as large as Nike in a category as competitive as sportswear. But by radically cutting back on its wholesale distribution and raising the bar for brand experience with the third-party partners that remained; expanding its focus on content, community and customisation to keep customers close; investing in its data analytics and logistics capabilities; and rethinking the role of the store as a brand stage, Nike drove a veritable direct-to-consumer revolution.

When the pandemic hit, these shifts went into overdrive.

“It was definitely architecting a new retail, and a bold, retail vision for Nike,” said Heidi O’Neill, Nike’s president of consumer and marketplace, and one of the most prominent executives leading the brand’s new strategy in recent years. “But it started with our consumer, and we knew that consumers wanted a more direct relationship with us today.”

In this case study, BoF breaks down Nike’s pioneering direct-to consumer strategy and how it has worked to the brand’s advantage, propelling its share price to new heights during the global crisis of 2020.

Click below to read the case study now.

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Nike Inc. Operations Management: 10 Decisions, Productivity

Nike Inc. is a leading global manufacturer and seller of sports shoes, apparel, and equipment. This market position is partly a result of effective and efficient operations management (OM). To ensure success, Nike’s managers must continually examine and improve strategies and approaches used in the 10 strategic decision areas of operations management. These areas pertain to the main decisions in managing streamlined operations and productivity that effectively address business goals and objectives. Nike’s operations management considers talent management, product development, and total quality management as some of the most important variables in these 10 strategic decision areas.

The 10 strategic decisions of operations management (OM) at Nike Inc. cover a wide variety of issues, considering the company’s global market for sports shoes, apparel, and equipment. Nike effectively addresses these decision areas through standards consistently applied in operations management throughout the global organization.

Nike’s Operations Management, 10 Decision Areas

1. Design of Goods and Services . This strategic decision area deals with the design of Nike’s athletic footwear and other products. The operations management objective is to ensure that product design aligns with organizational capabilities and business goals. In this case, Nike Inc. focuses on designs based on advanced technology and current market preferences. Also, the company’s products are designed with consideration for the factors of innovation and brand distinction, which are emphasized in Nike’s mission statement and vision statement . Through successful product innovation, operations management supports the company’s goals for its business positioning in the sporting goods industry.

2. Quality Management . Nike emphasizes quality in its processes and products. The objective in this strategic decision area is to satisfy consumers’ expectations about product quality. The company’s operations management addresses this concern through high quality standards and the application of total quality management (TQM) in the production of sports shoes, equipment, and apparel. Process quality supports innovative capacity, which is one of the strengths noted in the SWOT analysis of Nike . Thus, effective quality management contributes to the competitiveness of the sporting goods business.

3. Process and Capacity Design . This strategic decision area requires that Nike’s operations management must prioritize streamlining and efficiency of production. The objective is to ensure adequate, effective, and efficient production. At Nike, operations managers apply continuous improvement strategies to support the company’s production goals and needs based on market dynamics.

4. Location Strategy . Physical location is the typical concern in this strategic decision area of operations management. The objective is to optimize costs and efficiency through proximity to employees, suppliers, and the target market. In the case of Nike Inc., the operations managers apply a corporate strategy that chooses production facility locations based on costs and nearness to the most significant markets. For example, Nike Inc. has sports shoe suppliers in Southeast Asia because of the cost advantage based on cheaper labor in the region.

5. Layout Design and Strategy . Nike’s operations management deals with the layout design of its facilities. The objective in this strategic decision area is to optimize workflow based on human resources, capacity requirements, technology, and inventory requirements. Nike’s operations managers apply corporate layout design and strategy to company-owned facilities only. For example, the firm uses office layouts where employees can move easily. The factories that manufacture Nike’s products are not under the company’s control in terms of layout design and strategy.

6. Job Design and Human Resources . Human resource adequacy and maintenance are the objectives in this strategic decision area of operations management. Nike Inc. satisfies this concern through internal leadership development, along with coaching and mentoring. The company also has regular evaluations of job assignments to ensure person-job fit.

7. Supply Chain Management . Nike has excellent supply chain management, which facilitates efficient production to support the global sports shoes, apparel, and equipment business. The objective in this strategic decision area of operations management is to align the supply chain with the company’s overall strategic aims. Nike Inc. satisfies this objective through supply chain automation and optimization of transport distances among suppliers, production facilities, distributors, and retailers.

8. Inventory Management . The objective in this strategic decision area is to maintain operations management that minimizes inventory costs while maximizing its effectiveness and efficiency. Nike’s operations managers apply the perpetual method of inventory management, which involves continuous monitoring and movement of inventory from the supply chain to the distributors and retailers.

9. Scheduling . Nike’s scheduling approach is primarily concerned with corporate operations and the coordination of the supply chain with distribution and retail operations. In this strategic decision area of operations management, the aim is to maximize resource utilization. Nike Inc. managers satisfy this aim through automation. Corporate office schedules are standardized, while supply chain schedules are adjusted according to the conditions of the market. Nike applies changes to the supply chain based on market demand for its athletic footwear, equipment, and apparel.

10. Maintenance . Nike’s maintenance strategy considers adequacy of all resources. Adequacy of human resources, facilities and capacity is the objective in this strategic decision area. Nike’s operations management implements continuous recruitment programs to support HR needs, as well as reward programs and career development strategies for maximum retention of employees. For facilities, the company has dedicated teams to regularly evaluate facility and equipment integrity and requirements. The companies that manufacture Nike shoes, apparel and equipment are responsible for their own maintenance.

Productivity at Nike Inc.

Nike Inc. operations management supports maximum productivity of corporate offices, the supply chain, distribution network, and company-owned retail facilities. There are a variety of measures applied to determine actual productivity levels. In this case, Nike uses the following criteria to measure productivity in some business areas:

• Revenue per square foot (Productivity of Nike’s retail stores)
• Pair of shoes per hour (Productivity of Nike suppliers)
• Items per day (Productivity of inventory personnel)
• Documents per day (Productivity of Nike’s corporate offices)
• About Nike .
• Chen, X., Deng, T., Shen, Z. J. M., & Yu, Y. (2023). Mind the gap between research and practice in operations management. IISE Transactions, 55 (1), 32-42.
• Nike, Inc. – Form 10-K .
• Nike, Inc. – Responsible Sourcing .
• Sahoo, S., Kumar, S., Abedin, M. Z., Lim, W. M., & Jakhar, S. K. (2023). Deep learning applications in manufacturing operations: A review of trends and ways forward. Journal of Enterprise Information Management, 36 (1), 221-251.
• Venkatesh, V., Raman, R., & Cruz-Jesus, F. (2023). AI and emerging technology adoption: A research agenda for operations management. International Journal of Production Research , 1-11.
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Lessons Learned From the Nike Supply Chain Management (SCM) Failure

by Bill Baumann | Jan 27, 2022

A supply chain management system is supposed to help a company streamline and centrally manage its flow of goods and services. It isn’t supposed to result in excess inventory or lead to extensive order delays. 

Yet, that’s exactly what happened when Nike implemented an SCM system back in 2001. Performed in partnership with i2 Technologies, the project started off promising but quickly veered off-track. As a result, the mega-brand’s supply chain malfunctioned at several critical junctures, leading to a significant dip in profits. 

Today, we’re taking a closer look at the Nike SCM failure in this inventory management case study . We’ll share what happened, the lessons learned, and how you can avoid a similar fate in your own implementation. 

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The Nike SCM Failure: What Happened?

At its core, SCM software is designed to help companies reduce their operating costs by enabling more accurate and timely forecasts. With the right platform, users can better anticipate their suppliers’ purchasing requirements, as well as upcoming customer orders. 

Nike began installing the i2 SCM software in 2001. The goal was to automate certain parts of the supply chain for its footwear division, including inventory and order management. 

When the system went live, however, it was unable to match Nike product inventories with customer demand. As a result, the company experienced both excesses and shortages — both of which cut into their bottom line.

In fact, Nike announced  that as a result of its failed SCM project, it would be unable to meet its third-quarter projections.

According to one analyst, the financial implications were even greater. Specifically, the SCM breakdown with i2 was only one part of a larger technical failure that ultimately cost Nike $400 million over the course of the year.

The failure also caused i2 stock to  drop 22% , and led to a public dispute between Nike and i2.

Let’s look at the phases leading up to this SCM failure and discuss how it could have been avoided. 

4 Lessons Learned From The Nike SCM Failure

Are you planning an SCM implementation at your organization? When all the right steps are in place, these platforms have the potential to transform your supply chain operations for the better. 

Yet, as evidenced by Nike, the wrong moves can have the opposite effect.

Here are a few key lessons learned:

1. Keep Industry Complexity in Mind

One challenge that Nike faced was an inventory that was both vast and varied.

This is the case with most retail establishments. Trying to organize everything into an SCM system is a complex and time-consuming endeavor. Not only are there different products, but there are also different color options and sizes to consider.

It’s important to make sure you have the time and resources in place to input all this data before going live. This includes allocating the right personnel to the effort.

In this case, Nike hired the i2 consulting team to oversee the transformation, but there were still insufficient protocols to protect against critical software issues.

Considering that this was meant to be a multi-year systems upgrade that would eventually lead to global deployment, project leaders should have built a project plan that accounted for industry-specific challenges. 

2. Software Customizations Can Strain a Project

Many times, organizations will choose to customize some functions of their SCM, CRM, or ERP system . While these changes can help the software work for an organization’s unique needs, they can also heap additional cost and risk onto a project. 

With the Nike project, representatives acknowledged that standard methodology wasn’t in place during the implementation. While the i2 software came equipped with an apparel industry template, Nike chose not to use it.

Instead, they pursued a custom approach and rushed the migration process, settling for data that insufficiently represented their company. This strained the software beyond its built-in capabilities and led to issues with data transfer.

3. Tests and Pilot Runs are Key

One of the most glaring issues with the Nike SCM implementation was that the system, which affected the brand’s global supply chain, wasn’t tested even once before it went live. 

Testing is an essential stage in any enterprise software project. It gives the IT team a chance to identify and remediate any bugs or problems. This ensures fewer headaches when it’s finally time to go live. 

At the same time, it’s equally important to conduct system pilot runs. This ensures the software, data, and processes all work together seamlessly.

Going live without adequate testing or conference room pilots not only leaves the system ripe for failure but can also decrease user morale. A platform that malfunctions does little to increase confidence in new workflows, which can lead to organizational change management  challenges.

4. The Right Talent Makes a Difference

The people at the helm of an SCM project can greatly influence its success. Both Nike and i2 admitted shortcomings in this regard.

This was a major project that required top-tier talent. Both sides should have been equally invested in the outcome by building a strong project team.

Unfortunately, Nike’s IT staff was already stretched thin at the time of the implementation because employees were focusing on two other projects involving ERP and CRM software . 

Optimize Your SCM Implementation

The challenges involved in the Nike SCM failure don’t have to deter you from pursuing a similar project at your own company. As long as the right plans are in place,  SCM software or ERP implementation can help you improve the efficiency of your supply chain management processes.

Contact our enterprise software consultants below for a free consultation.

About the author

Bill Baumann

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Global supply chain Management - case study Nike

Nike has evolved from an organization that manufactures for professional athletes to a company that is manufacturing for all ages, demographics and fashion inclined too through technological innovations. Nike is an Ideology based on pursuit of excellence, its not about shoes or clothes, it’s a way of life, its about selling sports.

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This report is all about to show a Marketing plan for Nike’s products; with reference to older offerings the report shows the plan that how can Nike offer new products in the market. With respect to this the report contains comprehensive marketing plan components including company analysis (Nike’s current and future status), situation or market analysis and competitors analysis; the report shows the Nike’s objectives and marketing strategies in terms of its 4ps that is it is shown that Nike can offer and increase its product range by offering other related products as aerobic products to its customers and set value-based pricing strategy accordingly, and for new offerings it can increase its other media other than commercials that is it can focus more on social media to promote its new products and it may expand its business in other countries as China, Middle-East etc. Beside this, the financial budget of this marketing plan has been discussed which is been forecasted by reviewing Nike’s previous years revenue and marketing expenses figures. Also execution plan as well as contingency plan has been shown which is thoroughly depends upon Nike’s senior management and team work which would make its objectives possible new offerings.

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Strategy is about the most crucial and key issues for the future of organizations. Strategy is also important to explore several strategic options, investigating each one carefully before making strategic choices. The study incorporates a rigorous and systematic effort to uncover the strategies and its impact on the company's performance by analysing case studies, articles and the annual report of Nike Inc. and Adidas Inc. The study attempts to find out the relevance of the strategies adopted by these companies, which are globally successful athletic apparel companies in the context of Bahrain. The findings of the study highlight Nike's strategies which focus on innovation and emphasis on its research and development department, provision of premium pricing for its customers, broad differentiation strategy, market Segmentation Strategy and Closed-Loop strategy. The Adidas strategies focus on the broad differentiation, innovation, trying to produce new products, services and processes in order to cope up with the competition. It embraces a multi-brand strategy, emphasis on expanding activities in the emerging markets, continuously improving infrastructure, processes and systems, foster a culture of challenging convention and embracing change, foster a corporate culture of performance, passion, integrity and diversity. These strategies coupled with its resources and unique capabilities form the basis of sustainable competitive advantage for both the companies. INTRODUCTION: The strategy is a path towards achieving the optimum goals of individuals, groups and organizations. In addition, it leads to a best use of companies' available resources and it also guides the company to stay in a business successfully and continuous improvements for its processes. The definition of strategy could be differ from one author to another, but the most common definition is that the strategy is long term plans and approaches towards the intended visions and objectives. It is a general framework that specified the organizations' plans, policies and approaches to meets its objectives, goals and end results. The way an organization used to shape its strategies could be differentiate from other organizations in order to make its products unique and remarkable. Globally, companies formulate their strategies based on their visions and reaching the satisfaction of customer's needs, requirements and expectations. Subsequently, they use those strategies as a baseline to compare their actual performance with planned ones, to evaluate the end results and ensuring the continuing organizational excellence. There are many kinds of strategies that are pursued by the companies; Such as cost leadership, differentiation and the focus strategies (Porter, 1985), services strategies, growth strategies. Based on the goals, the companies form those strategies and they rank them upon the priorities. It is more than important for any organization to put strategies and not any strategies; the correct strategies which are formulated after a long time of studying and after numerous number of brainstorming among the top management members. Therefore, those strategies then to be implemented by converting the organization's plans and policies into real actions through the best use of available resources such as: human resources, budgets and technological advance; in order to enhance the organization's performance, productivity and sustainability.

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Supply Chain Management of Nike : Case Study

Added on   2020-01-23

About This Document

This project is based on the case study of Nike and an analysis of the supply chain management approaches of this cited company. By using AAA model, evaluation is done on the performance of the business in its efforts for sustainability. Different measures are taken to reduce waste and increase recycle ability in supply chain. Analyzing of Nike approaches to setting up supply chain and their structure and the strategies to achieve competitive advantages are covered in this project.

   Added on  2020-01-23

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Global logistics & supply chain of nike: scor model, lean manufacturing & sustainability lg ..., supply chain management for nike: processes, challenges, and recommendations lg ..., various supply chain processes lg ..., analysis of the supply chain of nike pdf lg ..., logistic management model pdf lg ....

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How supply chain helps an electronics manufacturer connect customers

A global electronics company diversifies its manufacturing locations to increase its supply chain resilience.

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The electronics industry is facing steep supply chain challenges, reaching all the way back to the raw materials that make up those tiny components keeping people connected in real time. 

A leading electronics supplier that provides mobile devices to consumers and public entities was experiencing shortfalls due to overreliance on materials and manufacturing in Asia. A perfect storm of factors, including the COVID-19 global pandemic and widespread geopolitical instability, has weakened the global supply chain, and cross-border labor is no longer guaranteed.  

Transportation delays, both in the air and on the water, are extending production lead times. Country-specific tax and trade regulations are also threatening shipping timelines and slowing product delivery dates for customers.   

“Corporate leaders at this electronic device company recognized that supply chain resilience has become an urgent business imperative for their organization,” said Jim Morton, Executive Director for the Ernst & Young LLP Business Consulting supply chain practice. “With most of their customer base in the US, they recognized that they needed to diversify their sourcing and production options as effectively as possible, which meant varying manufacturing locations to complement their global portfolio.” 

Leaders engaged an integrated EY team experienced in   supply chain modeling and optimization , tax and trade. The team developed a comprehensive plan that would diversify manufacturing and alleviate the organization’s long-term supply chain risk. 

EY teams’ extensive tax experience, deep understanding of global incentives and locations, and keen geopolitical business perspective showed the client how it can continue to help consumers access critical mobile devices and carve a sustainable new path forward for its business.

Diversified manufacturing locations reduce supply chain risk

An integrated digital model evaluates multiple operation sites to yield informed decisions.

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With its deepest manufacturing roots in Asia, the mobile device provider needed to diversify its production footprint. Supply chain disruptions, longer ocean transport times, region-specific trade restrictions and frequent unexpected delays were pushing leaders to consider adding manufacturing sites closer to the US – the location of their corporate headquarters and most of their customer base. 

Research from EY teams shows that 64% of companies have re-shored some elements to improve sustainability. In addition, 42% of companies said that ensuring sustainable and diverse sourcing was a priority. With data such as these in mind, the company turned to an EY cross-practice team for a strategy to augment core operations in more accessible and stable locations, reducing its overall supply chain risk while maintaining existing operations in Asia and elsewhere. Faced with a daunting and costly business decision, leaders needed assurance they could diversify their manufacturing and still procure the right materials, maintain quality standards, and deliver reliable products to meet urgent user needs.  

The EY team assessed and designed a more diverse supply chain network with the company’s global business in mind.

Supply chain optimization was done based on a computerized model to assess the global supply chain, mapping raw materials to flow of goods, to distribution centers and finally to customer locations. The model evaluated current networks against future state options, assessing millions of site variables rapidly to provide leadership with the informed perspective they needed. The EY digital model brought an integrated view of the tax considerations inherent in ramping up manufacturing in new sites and countries, including customs duties, direct and indirect tax implications and country-specific regulations. The EY Geostrategic Business Group provided clarity around government labor, trade policies and local laws to further optimize recommendations, blending speed and cost to enable on-demand inventory.

"With recent supply chain disruption, trade wars and geopolitical uncertainty, this global electronics leader needed an integrated supply chain model so they could successfully diversify their manufacturing portfolio, avoid production delays, and address country-specific issues,” said Morton. “The EY supply chain optimization model helped them make more informed decisions and select their new manufacturing site in North America.” 

End-to-end supply chain analysis was conducted by tracking the company’s highest-priority devices. Validated data inputs were primed and transitioned from a flow-constrained model to a demand-driven model. The analysis evaluated economic value added with the future state footprint, insourcing vs. outsourcing manufacturing operations, tax considerations, skilled labor availability, geopolitical factors, ESG and carbon footprint impact, and the reduction of supply chain complexity.

A supply chain scorecard was created by the EY team to help leaders evaluate manufacturing sites more critically, assessing six key supply chain factors:

Using the information gathered by the EY scorecard and digital assessment tools, the electronics company was able to ultimately select a new near shore location as its next manufacturing site. With this new location identified, EY teams will now work with the client to build out a roadmap to ramp up operations – including manufacturing providers, tax implications, geopolitical and regulatory guidance.  

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Supply chain optimization keeps customers connected around the world

The forward-thinking EY supply chain model diversifies production and minimizes risk.

For a leading electronics provider that serves millions of customers around the world, keeping the organization’s supply chain operating smoothly is of paramount importance. Comprehensive EY supply chain modeling and optimization for this organization was designed with a future state supply chain in mind, so that the organization could vary its manufacturing portfolio, maintain current production quotas, mitigate risk and reduce excess product inventory by 27%.

The EY digital supply chain optimization model helped the electronics leader assess site locations across countries, geopolitical factors, trade implications, trade risk and tax regulations. The manufacturing site scorecard helped the company narrow down possible manufacturing sites and identify specific locations within countries that will help the organization further reduce their carbon emissions by 15%. The supply chain solution will also increase the organization’s efficiency by reducing the length of haul from production site to customer by 50%, and by lowering labor costs.  

 “Our integrated supply chain model, which included extensive tax experience and deep geopolitical business perspective across locations, provided this electronics powerhouse a solution that would help them diversify and de-risk their supply chain, allowing important communication devices to continue to be readily available worldwide,” said Morton.  

As the company works to ramp up its newest manufacturing location in North America, EY teams will be on board to help it conduct continued geopolitical and tax analysis, develop end-to-end supply chain analysis, establish timing, and evaluate distribution footprint expansion.

• 50% reduction in the average length of haul from production to consumer
• 27% reduction of excess product inventory in the pipeline
• 15% reduction in future carbon emissions impact from transport 
• Lower duty costs on products imported from the near shore location
• Potential cost savings gained from business incentives provided by the near shore location

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Helping companies transform, create value and optimize business performance. Thirsty for knowledge. Ski enthusiast. Husband and father of two Michigan Wolverines.

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Years of experience in global operations transformation, price and revenue optimization, sourcing, integrated planning, supply chain synchronization and collaborative applications.

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