Supply Chain Management

Corina Botnarevschi, Ehab Etani, Akbar

Khan, Amir Garranah
 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 worlds 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

 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 Equipment 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

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 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
 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
 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

 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.
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.
 Nike manages demand for its products by use of futures
program that requires retailers who stock Nikes 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
- 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.
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.
The principles of lean are aligned with sustainability best practices such as

Reducing resource use and waste

Valuing the workforce, and reducing downtime
All managed under a continuous improvement system

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

Example
Nike Manufacturing Map
At the end of 2011, 80% of footwear, 57% of apparel and 11%
of equipment was made at Nikes contract factories using
processes meeting Nikes 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.
 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 its 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 societys/customers expectations and
standard. In an aim to heighten CSR.

In some products cases there are some expensive technical

components and their implementations
 Nikes 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, Nikes 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,
Nikes advancement in technology has allowed them to fully
enhance their supply chain to create trail from the consumers,
address purchasing shoes on the Nike home page to the
suppliers 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.