Supply Chain Management Corina Botnarevschi, Ehab Etani, Akbar Khan, Amir Garranah

Nike, Inc is a Growth Company

It started with a handshake. Two visionaries, Bill Bowerman and his University of Oregon runner Phil

Knight, thought they could do a better job of designing and selling shoes to runners. They were

right. Today NIKE, Inc. is the world’s leading innovator in

athletic footwear, apparel, equipment and accessories.

World largest seller of footwear, sportswear, clothing and sports equipment supplier

Headquarters – Oregon, USA

Sponsors many high-profile athletes and sports teams around the world.

Nike has extremely strong supply chain relations

Nike Manufacturing Vision• Elevating product excellence and innovation at the factory

level.

• Helping to lead industry efforts to integrate sustainability into product creation and manufacturing.

• Managing sourcing through a balanced approach, taking into account environmental, social, quality and cost impacts.

• Developing and testing new models of manufacturing that

serve to improve worker compensation, skills and livelihood.

• Consulting with, coaching and building capacity with contract factories to optimize labor and environmental capabilities.

Profile of NIKE, Inc. Contracted Factories Globally by Product Engine, Region and Fiscal Year

Region Total     Apparel  Equipmen

t   Footwear  

  FY09 FY10 FY11 FY09 FY10 FY11 FY09 FY10 FY11 FY09 FY10 FY11

Americas 161 202 189 118 135 117 24 26 25 19 41 47

EMEA* 115 99 78 70 67 53 33 26 18 12 6 7

N. Asia 517 508 471 268 244 217 170 172 156 79 92 98

S. Asia 241 203 192 175 149 142 35 30 29 31 24 21

Total 1,034 1,012 930 631 595 529 262 254 228 141 163 173

* Europe, Middle East and Africa

Globally, Nike have moved toward establishing long-term relationships with fewer factories as trusted partners, rather than having short-term transactional relationships with a larger number of factories.

Nike Supply Chain

SUPPLIER DIVERSITY

drives innovation. And if done effectively, managing diversity and working together can lead to a competitive advantage

Favorable impacts on our business by:• Creating more competition in the supply chain

• Maintaining a connection to the consumer base

• Providing economic stimulus to the community

• Contributing to the enhancement of our brand

Nike`s goal is to offer suppliers real procurement opportunities as they arise, and all purchasing is done in a competitive

marketplace. 

Nike Outsourcing • Nike has a reputation for designing not manufacturing their

products, the manufactures are outsourced

• Nike hired subcontractors (are individuals who performs a specific task as part of the overall project and is normally paid for services provided to the project by the originating general contractor)  in China, Indonesia, Vietnam and Thailand

Why? to reduce costs or to mitigate (Reduce) project risks

• As well as independent factories in Argentina, Brazil, India and South Africa to manufacture their products

Nike Outsourcing

• The reason for outsourcing is lower wages and lower costs of production than its in the United States

• This strategy resulted in cash savings generating more profit

• In the these countries employees put 40 to 50 hours of overtime per month

• It is widely reported that workers earned below the minimum wage of 45$ per month

Nike Outsourcing

• Labor costs in the US are much higher

• The cost of production for labor manufacturing is lower than in the US.

• Cost of Shipping goods has dropped, because of the improved efficiencies in shipping technologies.

• Free Trade agreements between north America and other international countries.

• Reduced costs for consumers

Nike Outsourcing

• Overhead reduction, which is what every profit making company will look to achieve

• Efficiency, Nike became more efficient through outsourcing to cheaper countries.

• According to Thomas Business News, the estimates for Nike firm in key outsourcing areas can be as high as 75%

• This permits firms to lower prices and become more competitive

• The main advantage of outsourcing is that organizations are able to concentrate their efforts in their core competencies like marketing, designing and new product development thus creating competitive advantage.

Nike Vertical relations

Vertical integration – Nike's operations are vertically integrated with a presence in every segment of the value chain from manufacturing down to sales.

- Vertical integration that exists in the supply chain is between the suppliers, manufacturers, distributors and retailers.

Nike makes sure that all the firms are in a close working relationship.

Nike occasionally sends Research and Development staff to various production factories in order to ensure that there is smooth production

of the products thus avoiding any miscommunications that might threaten relationships when they arise.

Demand Management

• Nike manages demand for its products by use of futures program that requires retailers who stock Nike’s products to order 80% of their inventory six months in advance in order to be guaranteed delivery.

• According to the futures ordering system (Innovation) permits Nike to lower levels of inventory held, time spent in fulfilling retailers’ orders as well as the non delivery risk

Lean Manufacturing- is a business system and continuous improvement

philosophy that aims to deliver the highest-quality product while eliminating waste, including lost time and material.

- Nike Delegated processes that allowed for high dynamic and fluid markets and flexible production system that is demand driven and allows for transfer of production from one country to another in less time.

• Nike introduced a new supply chain that used the just in time approach to facilitate faster shipment of products to customers in Europe and America.

Integrating Sustainability with Supply Chain Management

Nike changed its organizational structure to better integrate sustainability within traditional corporate functions.

The company uses a matrix organizational structure • in which managers report to multiple departments.

Based on business unit goals, employees develop strategies and plans detailing their multidisciplinary responsibilities.

• Internal scorecards are used to report progress towards the goal.

Lean Sustainability

The principles of lean are aligned with sustainability best practices such as

Reducing resource use and wasteValuing the workforce, and reducing downtimeAll managed under a continuous improvement system

• This can lead to both increased worker satisfaction and gains in business performance.

Transparency & Collaboration

• Transparency enables collaboration. And collaboration is essential to building sustainable and self sustaining supply

chains.

• Our aim is to build business partnerships characterized by long-term, trust-based, transparent interactions.

• Nike remain Committed to sharing Data About their suppliers.

• ExampleNike Manufacturing Map

At the end of 2011, 80% of footwear, 57% of apparel and 11% of equipment was made at Nike’s contract factories using processes meeting Nike’s

minimum baseline definition of lean.In addition to their phenomenal sales, Nike has marketed itself so thoroughly that it has literally

become a household name.

Disadvantages to the Nike Supply Chain

• The company has no control of the inventory since it has too many suppliers.

• The company does not own any manufacturing

plants & focuses on outsourcing production

• Uses a large range of In developing countries where low wages and child labour conditions are being adopted

• Over the years Nike has taken it’s toll of criticism over these issues

• In response they have set out a new code of conduct

• All suppliers have to comply with code with the help of training from Nike adhering to society’s/customer’s expectations and standard. In an aim to heighten CSR.

• In some products cases there are some expensive technical components and their implementations

Supply Chain for Online Purchases?

• Nike’s supply chain technology consists of Electronic Data Interchange (EDI) which transmits the data between different companies using networks, such as VAN or the Internet; Value Added Network (VAN)

• To run their supply chain, Nike’s uses HP servers, this technology helps Nike review its supply chain past performance, monitor current performance and predict when and how much of certain products need to be produced.

• Besides monitoring current and past performance activities, Nike’s advancement in technology has allowed them to fully enhance their supply chain to create trail from the consumer’s, address purchasing shoes on the Nike home page to the supplier’s required to bring together the components of the customized shoe.

• The information trail from IT allows planning, tracking and estimating lead times based on real data which is accessible in the system where managers analyze, plan activities and make decisions based on information from the entire supply chain.