Nike implemented various enterprise systems like SAP ERP, i2 planning and Siebel CRM to overhaul its global supply chain management. In 1999, Nike implemented i2 planning software to improve demand forecasting but the project failed due to excessive customization and lack of integration. This resulted in $90 million of unsold inventory. Nike then learned from this failure and successfully implemented SAP Apparel and Footwear solution across its regions. The new system provided benefits like reduced inventory, improved margins and profits, and a more responsive supply chain.

2. Introduction

3. Nike supply chain
 Founded in 1957 by Philip Knight (Knight), Nike manufactures high quality athletic shoes for a variety of
sports including baseball, athletics, golf, tennis, volleyball and wrestling.
 All product development factory contracting and marketing activities were carried out at the company's
headquarters in Beaverton, Oregon in the US.
 Nike's global operations were broadly divided into five geographic regions – United States; Europe, Middle
East and Africa (EMEA); Asia Pacific and Americas (includes Canada, Mexico and other Latin American
countries of Chile, Brazil and Argentina).
 Since the mid-1970s, Nike has outsourced its manufacturing activities. The company's products were
manufactured in factories owned and operated by its business partners commonly known as contractors
around the globe.
 In 1975, Nike introduced the Futures program to manage the market for its footwear products. Under this
program, Nike's retailers placed orders with the company six months before the required delivery date with
the guarantee that 90 percent of their orders would be delivered within a set time period at a fixed price.
 In 1975 Nike decided to optimize its global supply chain and overhaul its business process.
 In 1998, Nike’s profits dropped by 50% from $795million to $399 million, despite a revenue increase 4%,
as compared to the previous year.
 In a bid to cut costs, the company laid off around 1600 employees.
 Nike figured out that its inventory forecasting along with the existing supply chain management system
problems had contributed to the decline in profits.

4. Enterprise application implementation at Nike
Company Solution
SAP ERP
i2 Planning
Siebel CRM
PeopleSoft Human capital management(HR systems)
PTC Products data management, Product life cycle management
See beyond Application integration
Nike supply chain Initiative: Implementation strategy
Strategy Implementation
Discovery Gain a clear understanding of current business issues
Design • Focus on customer needs
• Improve cash flow through reduced inventory
• Integrate supply chain management into existing enterprise system.
Direction Develop Projects scope and Implementation Plans
Delivery •Program management
•Project management
•Transition management

5. The i2 Debacle
 In March 1999, Nike decided to implement the first part of its supply chain strategy; the demand and supply
chain planning application software from i2 technologies
 It helps the company to match its supply with demand by mapping out the manufacturing of specific
products.
 he i2 project replaced an earlier implementation by Manugistics . The project was supposed to reduce the
amount of rubber; canvas and other materials that Nike needed to produce for its wide range of footwear
products with a variety of sizes and styles.
 Nike also wanted to make sure that it built more shoes that fulfilled customers demand. The cost of the i2
project was estimated to be around $40 million.
 Nike went ahead with the deployment using its legacy systems rather than implementing it as part of its
SAP ERP project. The company had 1,20,000 different varieties of products (SKUs) and a wide variety of
information sources.
 Nike felt that the standard supply chain software of i2 did not offer all the required functionalities and
therefore in insisted on a high level of customization.
 In June2000 the forecast planning software system had become operational but it failed to communicate
with the existing system and could not analyze large amounts of product information accurately.
 They can’t able to fixed the problem by November 2000 and meanwhile the damage had already been
done.
 Order ended up $90 million worth of shoes like air garnett 2 not sold well and the sales were also below
expectation of the famous model air force one by $80-100 million.
 The company had sold these model at bargain basement and bring the good selling ones by air shipment
costing around $6 as compared with the usual cost of 75 cents a pair on delivery by sea shipment.

6. Was it avoidable?
 IT experts were surprised by the fact that Nike did not hire a third-party integrator since the company was
replacing an already troublesome older application with a new supply chain planning application.
 The company claimed that i2 software had failed to deliver on the promised functionality as it delivered
erroneous forecasts.
 officials at i2 denied this allegation and charged Nike of a faulty implementation, which ignored i2
recommendations of minimizing customization to 10-15% of the software and stage-wise deployment.
 According to Rob mcClellan senior project manager(Adidas) said “Nike’s problem was that they drilled
down to an extraordinary level of detail for the forecasting model by requesting too much history and trying
to forecast too far out head”.
 Also kevin omarah analyst at AMR research commented “ many projects go wrong when vendor and client
fail to recognize what is achievable and what is too ambitious.
 Another analyst Brent thill credit suisse first boston commented “ if you don’t fuel i2 with the right
information, its not going to have the right information for you”
 The NSC project had become more complicated as Nike was installing both ERP and CRM software along
with the i2 installation.

7. The lessons learned
 After the debacle, Nike realized that implementing supply-chain management software cannot be taken
lightly. The company felt that a third-party perspective from an integrator's point of view could have
exposed the flaws in the implementation.
 Experts felt that Nike and i2 should have set realistic goals since SCM deployments had yet to be proved
across all verticals.
 Nike learned important lessons after the i2 debacle and suddenly they start using the SAP ERP software.
 They understand the main failure cause like improper integration, insufficient training and inadequate
testing may fall any projects.
 After they stopped using i2 debacle and moved to used the SAP ERP 2001 which is completely based on
orders and invoices not for forecasting.
 While implementing SAP ERP package at the Nike , they first started to trained the customer service
representatives and didn’t allow them to access the system till they underwent the 180 hours mandatory
training.

8. Implementing SAP apparel and Footwear
solution (AFS)
 Nike had decided to implement the SAP AFS solution which was a variant of the SAP R/3 software
developed specifically for the apparel and footwear industry.
 They used the SAP AFS application across all geographies, and also chose to implement other SAP
applications including Supply Chain management (SCM) and Business Information Warehouse (B/W).
 The company expected that Single Instance Strategy would result in better integration and provide a
competitive edge by enabling holistic view of its business.
 The new version of SAP AFS was chosen as the foundation system for the NSC Project.
 The SAP modules implemented at Nike were Financial and control, sales and distribution, Material
management and production planning.
 They adopted the big bang approach for ERP Software deployment by installing all SAP components(
planning, order entry, financials, treasury, procurement).
 In 2000 Nike Canada became the logical candidate for implementing SAP AFS along with i2 applications
and siebel’s CRM.
 After successful in Canada the company deployed SAP AFS in the northern America in 2002.

9. Benefits
 Nike spent six years and $500 million on the NSC project. By 2004, the project was 80% complete. The
company reaped several benefits from the project.
 While inventory levels witnessed a declining trend, the project also made design and manufacturing quicker
and resulted in increased gross margins of 42.9% in 2004, up from 39.9% five years ago.
 Earlier, Nike purchased products from manufacturers about 9 to 10 months in advance while Nike's retailers
ordered only six months in advance.
 They claimed that as a result of greater information and better collaboration with factories in the far east.
There is fall in the percentage from 30% to just 3%.
 Direct benefits of the project were better financial management, improved revenue forecasting.
 In 2004 ROI rise to 20% and the revenue went up to $12.3 billion from $10 billion in 2003 and also the net
earnings increased by 27% from $474 million to $945.6 million.
 Retailers are no more preferred to order products six moth in advance as the fashions were changing rapidly.