Nike story

7/29/2019 Nike story

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G

ANAND M.A

DIVYA D

MALLIKARJUN

RITESH A.

SHILPA GIR

VENKATA SAI KRISHNA M


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Hi-Story of Nike:

In 1962- knight met- Onitsuka company- manufacturing- high

athletic shoes-TIGER-sold in US as BLUE RIBBON SHOES (B

In 1964- started a business with his coach in the basement ofhouse.

In 1965- hired 1st employee- Jeff Johnson (salesman in ADIDA

In 1966- 1st

exclusive store in California. In 1970- BRS- ended with 20 employees and started own line

shoes.

Carolyn Davidson- was paid with $35 for swoosh symbol.


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Contd.,

In 1972- entered into apparel business, printed T-shirts at pre-Olympic

followed make-to-order. 1st one to allow retailers to pre-order inventory

In mid-1970s- sales- 10mill to 270mill- waffle sole, air cushioned sole a

In 1978- BRS officially changed to Nike Inc.,

In early 1980s- different varieties of shoes for different games- ended u

models.

In 1980- 2 mill shares of common stock- R&D @ EXETER, new Hampshir

By 1981- manufactured in 11 countries- 3000 employees

In 1984- 58 Nike players got 65 medals- Immense publicity.


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Contd.,

In 1985- Michael Jordan NBA player- successful celebrity to endorse Nik

range of shoes- Air Jordan. In 1986- revenue- 1 billion

In 1987- new product- cross training shoes

In 1988- Punch Line- Just Do It

In 1991- worlds largest- revenues of 3 billion- Nike Town near Chicago.

In 1999- New SC System and applications for CRM.

In 2001- system experienced Teething troubles.

In 2003- Nike bounced back- revenues exceeded $10 billion.


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Nikes Profits Fall

In Feb 2001 Knight stated- companys profit in 3rd quarter wo

short by almost 24%.

Reason- failure of supply chain software implemented by i2 TInc. - Technical glitches

During a press meet Knight complained against i2. i2 claimed-haste in using incomplete system and its unwillingness to use systems.

Nike lost considerable market share to rivals New Balance and


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Contd.,

Nike manufactured high quality athletic shoes forvarious sports and fitness equipment, apparels aaccessory products sold in 140 countries.

Head quartered at Beaverton, in the state of Oreg

Production facilities scattered around the world ahad a complicated SC System


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Nike and i2

Partnership with i2 for building Supply chain managemeSoftware.

Software built to support Forecasting and Demand of thProducts

Reduces amount of Rubber, canvas and other materials

to manufacture

Total Cost of Project was $400 million.

Amount paid to i2 was $40 million.


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Cause for Failure

Nike refused to use the templates and methodologydeveloped by i2.

Introduction of third party integrator for implementationmissing.

Implementation before testing of the software

Depletion of Software to Distributors and Suppliers

i2s inexperience in the footwear industry coupled with demand of a high degree of customization created prob


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Results

Failed to communicate with the existing systems and cou

analyze large amounts of product information accurately Heavy customization slowed the software.

Huge number of products strained the system further ansoftware became vulnerable to crashes.

Overestimation of Demand for some Products and Undeof Demand for others.

Manufacturing of too many shoes of certain models andenough for others.

Decline in profit margin of 24% than estimated.


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Consequences of the Breakdown

Upset the supply chain management Nikes reputation suffered

Decline in profits

- Huge number of unpopular models manufactured had to be sold at

discounted price Additional Cost incurred especially shipping cost

Spoiled relation with retailer


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Lost considerable market share to rivals New Balance especially gained on Nike in market shar


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Operating Expenses increased by 11%

Net Income decline by 29% from 2002-03


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Conclusion

Negative Publicity and blame game affected both NIKE

even more adversely than monetary losses. However, NIKE continued to work with I2 on the five Ye

project.

In Sep 2003 ,Nike announced that the Investment was fpaying off.

By 2003 Nike had managed to reduce the inventory leveboosted the gross margins and profits.(43%)


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Conclusion cont.

According to BusinessWeek

About 30% of Nikes orders were based on speculatiobefore the implementation of ERP system

By 2003 when system was 75% complete the orders on speculations reduced to just 3%

The future orders increased by 10% over the previous ymid 2003


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Q1:Importance of SCM In trend based

Trends change very quickly in the market

Aim of supply chain management is to gain anadvantage in terms of customer service and cost ocompetitors.

Planning, purchasing, manufacturing, and deliveryimportant factors in SCM.

Demand for the products should be estimated quand informed to suppliers and distributors.

Integration of vendors & distributors on singleplatform.


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Q1:Benefits Nike expected from

Enhancing the companys ability to respond tochanging conditions

Reduce the amount of raw materials required forproduction.

Reducing inventory and capital investment risk

Improving service to meet customer needs Improving process, information and product quali

Providing an efficient global supply chain with locimplementation


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Q2: Reasons for failure & harm to N

Nike refused to use standard templates & Modified theapplications in an indiscriminating manner.

Absence of a third-party integrator.

The application was implemented in a hurry.

Testing of system was not done and was extended to supand distributors.

Nike implemented two major projects simultaneously

(Supply chain and CRM)

I2 was relatively inexperienced in Providing SCM for theapparel industry.


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Q2: Continued

Lost considerable market share to New balance &

Reebok. Lost valuable shelf space.

Lost reputation in the market.

Nike's stock dropped from over 48% to about 39%

Profits came down because of

Additional shipping cost (Nike had to Airfreight the sho

Heavy discount on slow moving inventory.


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LessonsLearned from Nike's i2 De Enterprise software implementations cant be rush

and they take time to demonstrate benefits.

Getting software up and running is not a goal;remaking the business is.

"Blank sheet" reengineering can lead to unrealisticbusiness process designs that cant be implementethrough enterprise software.


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Continued

Just do it over.

After the failure of SCM ,Nike redoubled its eff

those areas to avoid similar problems when it

rolling out its fully integrated ERP system


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Nike story

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