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  1. 1. Nike shoesIntroduction Nike was established in the year 1962 as Blue Ribbon Sports by the actualCEO Phil Knight and the late Bill Bower man. Both started the company byselling athletic shoes at track meets out of the back of their truck. In the year1972, the company was named Nike (name derived after the Greek goddessof victory). The company began to be known in the 1972 Olympics, when severalwinning distance runners wore Nike shoes. In 1974, Bill Bower man invented theand less weight. Nike’s success started and today Nike is the premiere seller ofathletic footwear and apparel in the world.Note:The report will be based on Nike’s strategies to compete on the local and Global market, withits tactics to enhance its supply chain, through an efficient implementation of anIT infrastructure, and strategies that supports the outsourcing of non critical activities toachieve significant cost leverage in the industry. The rise of competition in the late 1990, has forced NIKE Company to makecrucial decisions to overcome barriers, so as to stay in pace with its competitors.Purpose of enhancing the Supply ChainIn the walk towards staying competitive, Nike Company adopted several strategiesin its Supply Chain Management. They came with a Project known as the NIKESupply Chain (NSC) Project, their plans was toCreate an IT Supply Chain Management solution, which objectives were to:Respond efficiently to changes in its Foot wear and Clothing IndustryImprove its Supply Chain to stay competitiveLowering costs of InventorySources of software’s
  2. 2. They used a grouping of different leading software’s companies, like:Rent axSiebelGlobalLogistics Village These were incorporated into foundation software from SAP, andafterwards the solution was integrated into Nike’s existing ERP and systems.F irst outcomesDespite negative results in May 2001, due to difficulties in its supply chain, wheresales were down to $100 millions, the company realized a profit of $261 million in2004, due to the efforts of the NSC project.Strategy in the supply chainThe company pursued their tactics to achieve their corporate goals and to obtainthe best level of investment in technology that will results in maximizing their ROI(Return of Investment) by:Incorporating IT in its Supply chainRestructuring and implementing a virtual integration modelReorganizing its supply chain, from Suppliers, Manufacturers to the endconsumersProject ManagementIn spite of having a well organized IT department, the company relied on outsidesoftware consultants to help in them, more precisely, the consultants from thesoftware’s company, where Nike purchased the software. For example, consultantsfrom SAP solution brought significant contribution to implement the solution; theyhelp Nike with training, and customization of theirReduce risksDeliver a richer customers¶ experience
  3. 3. Improving process, information and product qualityProvides a well-organized global supply chain with local implementation .Theimplementation of the project was associated with some risks, due to the size andcomplexity of the supply chain, and also to the inexperience of software’s vendors.To counter these issues, they used several specialized teams of consultants fromdifferent software companies.The NSC Project phaseThe project was divided into logically geographical segmentsCanada was used as a µTest Ground¶ for every where products to fit thecompany’s needs .The Company worked with consultants¶ teams from differentspecialized software manufactures ,to support their internal team, likeSAPSiebelRentrakThe NSC team devised a good methodology of operation, in implementing thesolution across the supply chain; they broke the project into the following logicalgeographical components :Canada, United States, Europe, Global Operations,Japan, Malaysia, Philippines, Singapore, and Thailand. The solution was firstimplemented in Canada, which was used as a test case for all their operationsaround the world. It was evident that each geographical area had its ownspecialized software product.Nikes IT infrastructure Nike’s foundation software is SAP¶s Apparel and Footwear Solution, it isobviously the backbone of the solution, where all software are built upon orincorporated into. It allows users to obtain financial information, view orders, andall logical data in the company’s supplyChain .It will obviously; meet the objectives of the company, as it was designed forthe unique needs of its Apparel and footwear
  4. 4. The NSC solution comprises the following software: FoundationSoftware from SAP, CRM Software from Siebel, Software from i2,Online Order Tracking from Global Logistics Village, and Product FlowAnalysis from Rentrak .The Nike Supply Chain implemented solution toassist the overall business, for example, they used Siebel customerrelationship management software, to support managers in delivering aneffective customer service to their 38,000 retailers across the world,where the Nikes products are distributed .The solution enables accountsmanagers in forecasting better sales volumes, reducing out of stocks, andimproving forecast accuracy, and also facilitates them to trackperformance with customers and in the marketing programs6The NSC solution comprises the following software: Foundation Software fromSAP, CRM Software from Siebel, Software from i2, Online Order Tracking fromGlobal Logistics Village ,and Product Flow Analysis from Rentrak. Nike SupplyChain implemented solution to assist the overall business, for example, they usedSiebel customer relationship management software, to support managers indelivering an effective customer service to their 38,000 retailers across the world,where the Nikes products are distributed. The solution enables accounts managersin forecasting better sales volumes, reducing out of stocks, and improving forecastaccuracy, and also facilitates them to track performance with customers and in themarketing programs.he strategy of Nike using i2 software was to perform an effective businessplanning, it enable them to detect and resolve any problems effectively, andhelping them in activities like long-range and short range demand and supplyplanning. The i2 software provides visibility across the whole supply chain,which includes the following activities:ProcurementManufacturingDistributionWarehousing The GlobalLogistics Village software for online tracking of order shipments enables Niketoknow whenever their orders fall behind schedule. They will be able to track
  5. 5. down any problemsthat may arise, resolve them or communicate it to Nike¶scustomers, thus improving customer service.The Rentrax solution allows NikeCompany to analyze its product flow from start to the end, andhelps to managedata used in business operations like invoicing products, securing materials,andtracking orders. It was easy to customized and meet the business needs.Thesolutions have helped the company to establish a global purchase ordering for allits manufacturers, which resulted in remarkable changes at the speed in which thecompany operates. The strategies bear the expected fruits, as stated by Nike’sChief Financial Officer Donald Blair, that in spite of some minor problem in theimplementation of the project, the Company had are mark able improvement in theinventory level and they realized a profit of $ 261 million, in September 2003.( Nike annual Report 2004) Virtual supply chainThe ability of Phil Knight, CEO of Nike Company in building a virtual supplychain, making productive use of its resources, has helped them to achieve thedesired results. The characteristics of the solution applied by the NSC Project teamareIts Web-based architecture, IT SCM solutionThe ProductDevelopment Stage, joining up collaborative input from partners¶ at pre productionstage, enabling its suppliers to provide input into design for manufacturability, thusreducing costs at an early phase in the Supply Chain.Sourcing stage: Efforts to minimize costs from suppliers, and ensuring thatmaterials meet quality and specificationsThe Production Stage: The ability to help reducing stock of raw material and workin process inventoryCompany’s Supply ChainThe Company is located in Beaverton, Oregon, but almost all of their production iscarried out abroad. The sales growths outside the Unites States exceed its domesticsales, (according to its Annual report in 2003).Outsourcing
  6. 6. Nike Company is also involved on design, development and marketing worldwide,they strategically make use of contract manufacturers, externally, to make theirproducts. Its Apparel and equipment manufacturing are produced locally andabroad, but virtually all shoes are manufactured outside the country.Materials used in its productionThe Company takes most of its materials from local suppliers, based in themanufacturing locations, but other specialized materials which are not availablelocally, are imported. Nike Shoes:Leather, Rubber, Plastic compounds, Foam, Cushion materials, Nylon,Polyurethane films and Canvas Threads, Metal Hardware, specialized performancefabrics and, natural and synthetic fabrics materialsDistributions processNIKE¶s finishing products are sent to allDistributions centers worldwide. The locations ofDistribution centers in the US are:MemphisWilsonvilleOregonTennesseeNew HampshireGreenlandCosta MesstCaliforniaOverseas Distribution centers:The company controls 24
  7. 7. Distribution Centers across the Globe, in Europe, Australia, Africa, Asia, Canadaand the Latin America. Apart from these Distribution Centers, the Company dealsthrough independent Distributors and licensees, they also have branches outsidethe country The company’s supply chain takes more or less 6 months process, from thestarting point to the end. The product shelf-life is on average around three months,and there a risk of shortage of product supply, replenishment usually takes longtime, before the product comes out of style.(Ref: Nike spokeswoman Joana Kilos) The Company reaches about 18,000 retailers in the domestic market, and about30,000 retailers worldwide, whilst focusing on the different retailers needs, dueto various cultures.R isk/Business strategyLike many other businesses, Nike Company faces strong competition from othercompetitors¶ brands, driven by continuous changes in technology, new design andstyles of clothing and footwear. Nike Company has the capability to counter theseissues, with the NSC, which is specifically designed to bring changes andimplement new design and styles of products, and also speed the time of productsto market. There also risks associated with improper inventory control, in 2003,the inventory costs at this level was more than $ 1.5 billion, shrinkage from theftand fierce competitions are linked with the costs. This lead to the decision for Niketo review its strategy, to have a more effective visibility all along its supply chain.The NSC provides the corporate level with reliable information, about thefunctioning of the Supply Chain, which enables them to take appropriate decisionsfor any improvements in the chain. The implementation of the NSC solution wasalso intended to trim down the quantity of materials required to produce Nikeshoes, and its objective was to increase the company’s profitabilityComplexity of the projectThe implementation of the project to meet the corporate goal, was confronted withlots of obstacles, the team faced difficulties due to the complexity of the supplychain and the size of the company. The size and complexity of Nike Companyrequired more attention, to implement the solutions across the supply chain. Thenature of the industry renders their job more difficult, as it was a matter of colors,styles and its extensive sizes, which required specialized software. It was vital tolocate expert software manufacturers, and link them into the supply chain, as NikeCompany deals with several products, such as:
  8. 8. * The Bauer Skates* Cole Han dress shoes* Hurley skateboarding clothing* Sunglasses* Bags* Electronic equipment* Sports equipment etcSubcontractAs mentioned earlier, the Company turned towards the subcontracting of mostNike’s manufacturing business.Costs/Packaging Strategy Nike contributed in reducing the CO2 emissions, whilst directing its objectivestowards reducing its costs; they strategically installed new roofing systems on threedistribution centers, thus reducing 15% in energy consumption and costs. Nikelaunched a new product design philosophy, known as the µConsideredDesign ’s, that incorporate principles of environmental sustainability, the productinnovation team has educated designers on the new guidelinesFrom manufacturing to transportation, the company emphasized onenvironmental issues, it was like a tool that contributed to reduce costs, withparticular focus related with Packaging, and these were associated across a rangeof materials used