FROM FACTORY TO FOOTWEAR

Inside the ✓Nike Supply Chain

Report Assigned By:

Sir Huzaifa Khalid

NIKE SCM 1

NIKE SUPPLY CHAIN MANAGEMENT PROCESS

How does Nike process its whole Supply Chain and why?

BY: ISRA IQBAL, AISHA HAROON, TANZILA SHAKIL & FATIMA UROOJ

SUPPLY CHAIN MANAGEMENT

KARACHI UNIVERSITY BUSINESS SCHOOL

BBA-V

DATE: August 15, 2020

NIKE SCM 2

ACKNOWLEDGEMENT

All praises are for ALLAH ALMIGHTY, that by His Grace we have completed our project

report on “Nike Supply Chain Management” that will provide readers with a deep insight of

Nike’s Supply Chain Process. This Project is like a bridge between theoretical and practical

working. Our especial appreciation and gratitude are extended to our most respectable course

instructor Sir Huzaifa Khalid, who assigned us this task that gave us the opportunity to learn

more about the business practices and workforce handling of this multinational corporation and

no.1 athletic shoemaker ✓NIKE, and whose able guidance and encouraging attitude throughout

has been a source of inspiration for us.

Furthermore, we would also like to express our sincere gratitude to all those who directly or

indirectly helped us in accomplishing this task.

NIKE SCM 3

ABSTRACT

This project report is entitled to “a study on NIKE Supply Chain Management”. The main

objective of the study is to analyze the connection between Strategy and Process done inside

✓NIKE. It is the process of identifying the strengths and weaknesses of the firm by finding the

relationship between the approaches and practices of SCM done in ✓NIKE. The details

regarding the introduction and background of ✓NIKE were collected via internet after a

comprehensive research. In this report, we have done a thorough evaluation Supply Chain

Department or Process of ✓NIKE. Nike, Inc. is known for being the largest seller of athletic

footwear and apparel in the world. The company is headquartered in Beaverton, Oregon, US. It

is an American multinational corporation that is engaged in the design, development,

manufacturing, and worldwide marketing and sales of footwear, apparel, equipment, accessories,

and services. ✓NIKE mission is “to bring inspiration and innovation to every athlete in the

world.” ✓NIKE is known for great product quality, innovative product designs, and a unique

marketing style. The brand has maintained a strong supply chain network. Nike follows

vertically integrated model for the manufacture of its footwear. There is a global procurement

team at ✓NIKE to obtain raw materials. ✓NIKE has five primary distribution centers in the US

located in Memphis, Tennessee, three of which operate on a leased basis. In its distribution

channels, ✓NIKE focuses on direct selling to the consumer with Nike Direct. Nike’s focus on

digital distribution is paying off. In fiscal 2019, the company’s digital sales increased 35% year-

over-year. ✓NIKE has always been at the leading edge of innovation, technology development

and cutting-edge marketing campaigns that help them surpass all the other footwear brands in the

world in terms of popularity and sales. 

NIKE SCM 4

Table of Contents
Introduction to NIKE 5-6
NIKE’s Mission and Vision 6
NIKE’s Demand Management 6-7
NIKE’s Suppliers and Distributers around the World 7-8
No. of retail stores worldwide9
NIKE’s Global Sales Revenue by Region and Products 9-10
Importance of Supply Chain Management in NIKE...................................................................................11

Production Process of NIKE..................................................................................................................12-13

Procurement Process in NIKE...............................................................................................................13-14

NIKE’s Inventory Management.............................................................................................................14-15

NIKE’s Distribution Centers........................................................................................................................16

NIKE’s Huge European Warehouse.......................................................................................................16-17

Distribution Channels and Strategies...................................................................................................18-20

NIKE’s Distribution Channel...................................................................................................................18

NIKE’s Direct and Distribution Strategy............................................................................................18-19

NIKE’s Brick and Motor Distribution Channel...................................................................................19-20

NIKE’s Growth Strategy........................................................................................................................20-21

NIKE’s Online Distribution Strategy...........................................................................................................21

Supply Chain Information System........................................................................................................21-23

NKE’s Push-Pull Strategy.......................................................................................................................24-25

Conclusion.............................................................................................................................................26-28

Supply Chain Failures of NIKE............................................................................................................26-27

Current Position of NIKE in Global Market.............................................................................................27

Challenges Faced by NIKE’s SCM.......................................................................................................27-28

References..................................................................................................................................................29
NIKE SCM 5

INTRODUCTION TO NIKE

Nike, Inc. is an American multinational

corporation that is engaged in the design,

development, manufacturing, and worldwide

marketing and sales of footwear, apparel,

equipment, accessories, and services. The

company is headquartered

near Beaverton, Oregon, in the Portland

metropolitan area. It is the world's largest supplier of athletic shoes and apparel and a major

manufacturer of sports equipment, with revenue in excess of US$24.1 billion in its fiscal year

2012 (ending May 31, 2012). As of 2012, it employed more than 44,000 people worldwide. In

2014 the brand alone was valued at $19 billion, making it the most valuable brand among sports

businesses. As of 2017, the Nike brand is valued at $29.6 billion. Nike ranked No. 89 in the

2018 Fortune 500 list of the largest United States corporations by total revenue.

The company was founded on January 25, 1964, as Blue-Ribbon Sports, by Bill

Bowerman and Phil Knight, and officially became Nike, Inc. on May 30, 1971. The company

takes its name from Nike, the Greek goddess of victory. Nike markets its products under its own

brand, as well as Nike Golf, Nike Pro, Nike+, Air Jordan, Nike Blazers, Air Force 1, Nike

Dunk, Air Max, Foamposite, Nike Skateboarding, Nike CR7, and subsidiaries including Brand

Jordan, and Converse. Nike also owned Bauer Hockey (later renamed Nike Bauer) from 1995 to

2008, and previously owned Cole Haan Umbro, and Hurley International. Nike has

NIKE SCM 6

acquired 10 companies, including 4 in the last 5 years. A total of 1 acquisition came from private

equity firms. It has also divested 5 assets.

Nike’s largest acquisition to date was in 2007, when it acquired Umbro for $439M. Its largest

disclosed sale occurred in 2012, when it sold Cole Haan to Apex Partners for $570M. Nike has

acquired in 7 different US states, and 3 countries. The Company’s most targeted sectors

include apparel/textiles (50%) and software (20%). In addition to manufacturing sportswear and

equipment, the company operates retail stores under the Nike town name. Nike sponsors many

high-profile athletes and sports teams around the world, with the highly recognized trademarks

of "Just Do It" and the Swoosh ✓ logo.

Nike’s Mission and Vision Statement

Nike mission statement is “to bring inspiration and innovation to every athlete in the world.”

This statement focusses on the influence that Nike has in the sports sector. It specially resounds

the ability of this company to stimulate and turn athletes into their best versions. 

Nike’s vision statement is “do everything possible to expand human potential.” Although

precisely crafted, this statement shows that the company does not limit itself to certain strategies

in ensuring it gives its customers the best there is in the world of sports.

NIKE’S DEMAND MANAGEMENT

Nike manages demands for its products by use of futures program that require retailers who

stock Nike’s product to order 80% of their inventory six months in advance in order to be

guaranteed delivery.
NIKE SCM 7

According to the future ordering system (innovation) permits Nike to lower level of inventory

held, time spent in fulfilling retailers’ orders as well as the non-delivery risk.

NIKE SUPPLIERS AND DISTRIBUTERS AROUND THE WORLD

Nike is the largest seller of athletic footwear and apparel in the world. Its business is focused on

product design and development, marketing and sales. Key product categories are running,

basketball, the Jordan Brand, soccer, training and sportswear. Nike has more than 1,150 retail

stores in the United States and internationally, and employs approximately 76,700 workers

worldwide. For the 2019 financial year, it reported $39.11 billion in revenue, up from $36.4

billion the year before.

Nike is supplied by 112 footwear factories located in 12 countries. Vietnam accounts for 49% of

contracted footwear production, China 23% and Indonesia 21%. The company contracts apparel

manufacturing to 334 factories operating in 36 countries. China is its largest source of apparel at

27%, followed by Vietnam with 22% and Thailand at 10%.

Nike also relies on technology companies, equipment suppliers, professional services firms, and

other suppliers to carry out its operations. Here are a handful of key Nike suppliers operating in

countries around the world.

 Nike is the largest seller of athletic apparel and footwear, generating nearly $40 billion in

sales.

 Most of its products are sourced from China, Vietnam, Indonesia and Thailand. 

 Major suppliers include Pou Chen, PT Pan Brothers, Fulgent Sun International, Delta

Galil and Eagle Nice.

NIKE SCM 8

 These major suppliers also do business with other shoe and apparel brands such as

Adidas, Under Armour and The North Face.

Nike has about 554 factories spread over 42 countries supplying it with footwear, apparel and

equipment.

Nike has 8% of all its production based in the US. These production facilities predominantly

produce apparel and some equipment, but no footwear is produced in the US whatsoever.

Chinese manufacturers supply 23% of all Nike’s production. The types of products these

factories make is more evenly split between the three product categories, with a slight weighting

given to apparel.

Factories in Vietnam contribute 16% of Nike’s total production, predominantly creating apparel

and footwear with a small amount of equipment.

NIKE SCM 9

TOTAL NUMBER OF NIKE RETAIL STORES WORLWIDE FROM 2009 TO 2020

This timeline shows the total number of Nike retail stores worldwide from 2009 to 2020. As of

May 31, 2020, Nike operated a total of 1,096 retail stores throughout the entire world. Nike

operated 338 retail stores in the United States that year.

NIKE’S GLOBAL SALES REVENUE BY REGION AND PRODUCT

This timeline shows Nike’s revenue worldwide from 2017 to 2020, by region. In 2020, Nike’s

North American revenue amounted to about 14.48 billion U.S. dollars.

NIKE SCM 10
NIKE SCM 11

IMPORTANCE OF SUPPLY CHAIN MANAGEMENT IN NIKE

The importance of innovative supply chain management has been highlighted by scholars and

researchers for successful management of businesses in the 21st century. Most of the successful

businesses worldwide have improved their growth rates only by adopting innovative supply

chain management practices. Whether it is a retail giant, a fashion brand or an electronics

company, careful management of the supply chain has become imperative to making great

quality products and for better business performance. Nike is the largest maker of athletic

footwear and apparel. Its successful global business model is based on successful supply chain

management. Nike is known for great product quality, innovative product designs, and a unique

marketing style. The brand has maintained a strong supply chain network. The main support for

its global business empire is the supply chain network. Its supply chain model has evolved a lot

in this decade. The brand has grown more cautious about its environmental footprint, quality of

products and customer service. Its supply chain plays an important role in all the three areas.

Overall, Nike has managed a smart, efficient and agile supply chain.

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 and focuses on outsourcing

production.

 Uses a large range of in developing countries where low wages and child labor conditions

are being adopted.

NIKE SCM 12

PRODUCTION PROCESS OF NIKE

Nike follows vertically integrated model for the manufacture of its footwear. The process takes

place in two stages.

1st Stage

In the primary stage, the various inputs for the production process of Nike shoes such as organic

cotton, recycled polyester, leather, environmentally preferred rubber, PVC and phthalates are

extracted and sourced from various places that are close to factories.

2nd Stage

The second stage involves the transformation process in which the extracted raw materials are

sent to factories for manufacturing. The transformation process of Nike shoe is listed below,

 The Machine tramples and cuts the shoe shapes just like cookie cutters.

 The mid-portion of the shoe and inside hold of the shoe is developed with the help of

cutting machine and it is attached to the lower part of the shoe.

 Mid-sole and the lower portion of the shoe is attached with the upper insole and again

heated in a plastic mould.

 The output of the Manufacturing process will be the finished goods, recyclable wastes

and non-recyclable waste. Nike retreats all reusable waste from the production process

and uses it in the next production cycle.

The company is headquartered in Beaverton, Oregon, US. Nike never has a practice of

manufacturing its products but it outsources the manufacturing process to the suppliers, who are
NIKE SCM 13

called the “contractors”. These products are manufactured in 600 contract factories with a

workforce of more than 800,000 employees all over the world in 46 countries. Bulk of the total

production is represented by the Asian developing countries like China, Indonesia and Vietnam.

The main product lines of Nike include footwear, apparel and equipment.

The planning process of any company starts generally by establishing objectives. The objective

of Nike is “To bring inspiration and innovation to every athlete in the world”. The next step is to

determine an activity that helps in achieving the objective of the firm. Nike’s main objective

focuses on providing quality sportswear and equipment to people around different part of the

world. In order to achieve this, they have to effectively co-ordinate and control the

manufacturing and marketing process.

PROCUREMENT PROCESS IN NIKE

Procurement is the process of finding and agreeing to terms, and acquiring goods, services, or

works from an external source, often via a tendering or competitive bidding process.

Procurement generally involves making buying decisions under conditions of scarcity. If sound

data is available, it is good practice to make use of economic analysis methods such as cost-

benefit analysis or cost-utility analysis.

Procurement is used to ensure the buyer receives goods, services, or works at the best possible

price when aspects such as quality, quantity, time, and location are compared.

Nike Inc.., one of the giants in the world about Athletic footwear apparel, is certainly highly

aware of seeking innovations in the procurement strategies. However, as time changes together

with economy fluctuation and technology change, the company is facing not only opportunities
NIKE SCM 14

but also challenges. Although, Nike has encountered with some problems in procurement

system, is still regarded as being successful for its ongoing supply chain operations through years

in its efforts or sustainability. In fact, the company only outsourced its production to its suppliers

in overseas countries to lower wages and cheaper inputs. Company focuses on its procurement

strategy that how to improve the working condition and how to manage the sustainability of

suppliers effectively and efficiently.

There is a global procurement team at Nike to obtain raw materials. It takes care of the entire

procurement process from selecting to contracting with the right suppliers for the right goods and

services. Its strategic sourcing initiatives have also helped the brand reduce its carbon footprint.

Nike has committed itself to purchasing sustainable raw materials.

Nike Procurement Process Problem

 Outsourcing labor and human violation

 New supply chain challenges

 Lack of evaluating multi-tier suppliers

NIKE’S INVENTORY MANAGEMENT

Inventory management refers to the process of ordering, storing and using a company's

inventory. This includes the management of raw materials, components and finished products, as

well as warehousing and processing such items.

In the early 2000s, Nike had some major inventory management problems. The company lost

around $100 million in sales due to these issues. It may be difficult to imagine that such a well-

established corporation could have a massive operational failure like this, but they did. As they

learned from this experience, inventory control can be difficult for a business of any size.
NIKE SCM 15

Fortunately, following this failure, Nike developed an improved inventory management solution

to solve their problems rapidly. Here’s what happened to Nike and how the company recovered:

In 2001, Nike implemented an updated version of their inventory management software. The

idea of this newly implemented inventory control software was to help predict which products

they would sell the most, and thus prepare the right amount of supply to meet the demand. First,

they would produce a demand forecast and based on that forecast, they would prepare a

manufacturing plan. That’s how most big corporations (and some small businesses) make their

operational business decisions. Here is the process in a nutshell –

Based on historical sales data of different products, and based on some market growth estimates,

Nike would first prepare a demand forecast for different families of products. This demand

forecast is then used to determine optimal inventory levels, reorder points, material lead times

etc. And the entire manufacturing plan for months is determined using these numbers produced

by the inventory management software.

In Nike’s situation, however, they ran into some serious software implementation issues – bugs,

and data errors – which resulted in incorrect demand forecast.  The predictions the software

made were totally off, so Nike didn’t produce enough of certain products that consumers were

interested in buying.  Conversely, they overproduced other skus. This erroneous manufacturing

plan eventually resulted in lost sales worth millions of dollars.

NIKE SCM 16

NIKE’S DISTRIBUTION CENTERS

NIKE has five primary distribution centers in the US located in Memphis, Tennessee, three of

which operate on a leased basis. The company had 16 distribution centers outside the US at the

end of fiscal year 2014. NIKE brand apparel and equipment products are also shipped from its

distribution center in Foothill Ranch, California. Converse and Hurley products are shipped

primarily from Ontario, California.

NIKE'S HUGE EUROPEAN WAREHOUSE:

Nike's European Logistics Campus covers 150,000 sq. m (1.6 million sq. ft) and allows the

sportswear behemoth to serve its online, retail and wholesale customers across 38 countries from

a single location. It also makes the firm more efficient, more responsive and more sustainable,

thanks to some clever innovations.

The company describes the facility as a "state-of-the-art centralized distribution network" and

says it is aimed at accelerating Nike's drive toward what it believes is "the supply chain of the

future." Located 50 km (31 mi) outside of Antwerp in Belgium, it provides a central point from

which to serve other European markets.

Nike says the distribution centre is built according to Leadership in Energy and Environmental

Design (LEED) standards, although it stops short of providing a LEED rating. LEED provides a

framework in which for buildings to be planned, constructed, maintained and operated in an

environmentally-friendly manner, and typically reduces the amount of water, energy, emissions

and waste produced by a building.

NIKE SCM 17

The building is also said to be energy-neutral, powered as it is by 100 percent renewable energy.

This is sourced in part from local wind, solar, geothermal, hydroelectric and biomass sources, but

there are also six 150-m-high (492-ft) wind turbines on-site that produce enough electricity to

power 5,000 households, and solar panels covering an area the size of three soccer fields.

A network of canals, railways and highways provides access to the facility, but Nike says that 99

percent of inbound containers reach the local container park by water. This, it estimates, takes

around 14,000 truck journeys off the roads each year. To move goods around, the company uses

an army of high-speed hybrid robot cranes that regenerate energy like hybrid cars.

The warehouse itself is a rack-supported structure, meaning it is literally supported by the racks

upon which stock is stored. This method of construction uses fewer materials and produces less

waste that a typical steel and concrete-built structure. As for the waste produced in site, more

than 95 percent is recycled, and the surrounding pathways are made from recycled footwear

material.

Inside, lots of windows and a daylight capture system are used to fill the building with as much

natural light as possible. Smart, automated LED lighting is used to illuminate the place when

required.

Outside, closed water loops help with efficient water use by way of storm and discharge water

buffering, infiltration and recycling, while green roofs insulate the building. To aid biodiversity

around the facility and in the local area, there are beehives that help with flower pollination.

Finally, sheep, rather than lawnmowers, are used to cut the grass.
NIKE SCM 18

DISTRIBUTION CHANNEL & STRATEGIES:

Nike’s distribution channels can be primarily divided into two categories.

 Selling products to wholesalers in the US and international markets. This is Nike’s

biggest distribution channel.

 Direct-to-consumer (or DTC) sales, which include inline and factory retail outlets and e-

commerce sales through its website. Nike also distributes its products through e-

commerce companies like Amazon. Online sales through Nike Direct is the company’s

fastest-growing distribution channel.

Nike’s distribution channels:

Speaking of Nike’s (NKE) distribution channels, the company also creates category-specific

retail destinations by partnering with footwear retailers such as Foot Locker (FL), JD Sports, and

Intersport.

Sales to wholesalers are Nike’s largest revenue category. However, this category’s contribution

to the sales mix contracted from 83% in fiscal 2012 to 68% of revenues in fiscal 2019.

Nike’s fiscal year ends on May 31 but DTC sales increased from 16% to 32% during the same

period. This is significantly lower than the ratio of DTC revenues for Nike’s rivals in this space.

Meanwhile, both Wholesale and DTC are important distribution channels for Nike.

Nike Direct and distribution strategy:

In its distribution channels, Nike focuses on direct selling to the consumer with Nike Direct.

Comparing Nike’s distribution channels, direct sales to the consumer provide higher margins
NIKE SCM 19

than do sales to wholesalers. Nike’s DTC sales have increased considerably, as has its

contribution to its overall sales mix.

On a constant-currency basis, Nike’s sales to wholesale customers increased by 6% in fiscal

2019 compared to fiscal 2018. The company’s sales through Nike Direct expanded 13% over this

period. The company’s DTC sales rose to $11.7 billion in fiscal 2019, up from $5.3 billion in

fiscal 2014. That’s a CAGR (compound annual growth rate) of 17.2%.

Nike brick-and-mortar distribution channel:

Nike’s DTC approach is two-pronged—the Nike-owned retail stores, which are the brick-and-

mortar stores, and its digital platform. Nike’s factory stores provide a premium product to

consumers shopping for value. Due to the value proposition involved, they tend to attract higher

shopper volumes.

At the end of fiscal 2019, Nike operated 384 retail stores in the United States. Of these, 217 were

Nike brand factory stores, while 29 were Nike brand inline stores. Among the remaining stores

were 109 Converse and 29 Hurley stores. Nike had six major distribution channels across the

United States at the end of fiscal 2019.

Looking at Nike’s international distribution channels, the company operated 768 stores outside

the United States at the end of fiscal 2019. Of these, 648 were Nike factory stores, while 57 were

Nike brand inline stores. The remaining 63 stores were Converse stores. Meanwhile, online sales

have emerged as a key distribution channel for Nike, as well as other companies in the space.
NIKE SCM 20

Good distribution strategies and general visionary leaders have seen the company continuously

record growth and profits. Table below shows how Nike compares with other major competitors

in the industry

Item Nike Puma Reebok

Market share 47% 6% 16%

Sales 53% 8% 15%

Market capitalization 63% 12% 7%

NIKE’S GROWTH STRATEGY:

Incorporated in 1968, Nike has built a brand that has strengthened over the decades. The

company is positioned for further growth. Nike’s revenues increased from $27.8 billion in fiscal

2014 to $39.2 billion in fiscal 2019. This translates into a CAGR of 7.1%.

The company is targeting annual revenue growth in the high single digits until 2023. Let’s

examine the key growth drivers that the company is banking on.

An effective distribution strategy would be key for Nike. Although sales to wholesalers

accounted for about 68% of Nike’s global revenues in fiscal 2019, the company has gradually

worked to tilt its sales mix toward direct-to-customer sales, which have comparatively higher

margins.
NIKE SCM 21

DTC sales include sales through company-owned retail outlets and e-commerce sales.

Meanwhile, Nike expects to expand its online distribution channel further and expects 30% of its

sales to come from online sales by 2023.

NIKE’S ONLINE DISTRIBUTION STRATEGY:

Nike’s focus on digital distribution is paying off. In fiscal 2019, the company’s digital sales

increased 35% year-over-year. In comparison, the company’s consolidated revenues increased by

only about 7%.

Nike’s focus has always been on providing customers with well-constructed, uniquely designed

products. Most Nike products are leaders in their individual categories. The company invests

extensively in R&D (research and development) for new technologies and their applications for

existing product lines, depending on consumer preferences.

Nike’s product portfolio features premium products that command higher prices. This allows the

company to differentiate its products in the marketplace and charge higher prices than the

competition. Nike is also focused on providing a personalized customer experience.

SUPPLY CHAIN INFORMATION SYSTEM:

I2 Technologies, a supply chain management software and service company, founded by Sanjiv

Sidhu and Ken Sharma in 1988. As one of the company’s software, i2 System was installed by

Nike in 2000 and pulled out $400 million from Nike’s pocket. Nike faced a decreasing profit by

50% due to the inefficient management of supply chain. Under this circumstance, Nike expected

i2 System to improve its inventory management, production, shipping, and sales

NIKE SCM 22

forecasting. Both companies expected a win-win situation that Nike generated more revenue

based on the new system and i2 stayed at the top of supply chain management software.

However, reality waked up their dream and two companies even pointed fingers at each other to

end this cooperation. Nike’s revenue turned out to be $49.4 million lower than the earlier

forecast in 2001. Also, overestimating unpopular shoes’ demand and underestimating popular

shoes’ demand pushed Nike into a situation of decreasing customers satisfaction, losing market

share, and destroying company’s reputation. As supply chain perspective, a perfect software

should deliver accurate forecasting, efficient inventory managing tool and clear picture of

company’s overall supply chain in order to reduce inventory surplus, overproduction cost and

improve customers satisfaction. The reasons behind Nike’s failure are choosing the wrong

software and applied inappropriately. One of the main reasons that i2 system failed is lack of

patience. Nike is such a large international company with variety of products and a huge

database. Nike should invest sufficient time on testing new systems, fixing bugs and also training

employees to use i2 system correctly. Nike actually expected too much in this system and

dreamed the system start working as soon as paid. Therefore, we can see so miscommunication

between Nike and i2. The gap between what Nike wants and i2 can bring is too big to be fixed in

that short period of time. Nevertheless, the fiasco did not just hurt Nike, it brought Nike

experience of applying new system in the future. Eventually, Nike abandoned i2 system and both

companies took long time to heal from failure.

As the best footwear and athletic appeal company in the world, a failure will never stop Nike

coming back stronger. Christopher Koch, executive editor from CIO Magazine, said “i2 failure

turned out to be just a speed bump.” Nike abandoned i2 planner from short and medium range
NIKE SCM 23

sneaker planning but switched it to appeal business. Nike did not stop to apply a better supply

chain with more effective software, SAP AFS (Appeal and Footwear Solution) software. SAP

AFS was designed for appeal and foot ware industry specifically. SAP focuses on demand

planning, supply network planning and sales forecasting. Comparing to previous software Nike

applied, SAP brings Nike a more flexible system that allow Nike to centralize planning,

production and deliver process based on Single Instance Strategy “With the SAP solution, we

have implemented a sophisticated IT system that will allow us to improve our manufacturing

lead times, increase the performance of our supply chain, and present a more consistent face to

our retail customers.” said by Roland Wolfram, vice president of Nike.

Nike benefits from SAP AFS by their unique feature and strong database support on appeal and

footwear industry. SAP AFS provides Nike a system that has a complete enterprise management

system, consisted of financial capabilities, order fulfilment and logistics. Meanwhile, Siebel

system emphasizes on managing customers relationship through managing information on order

handling, product availability, and customer accounts. In such a competitive and cruel business

world, the potential value delivers to costumers is as important as tangible product. If we look at

the big picture of Nike’s supply chain success, the technology in this business empire, these

systems Nike used provide a strong support for Nike to reduce lead time, improve supply chain

efficiency and deliver innovative and high-quality products satisfied customers demand at right

time.
NIKE SCM 24

NIKE’S PUSH-PULL STRATEGY

Nike’s marketing is full of push and pull techniques that are used on consumers.

Nike’s Pull Strategy

The pull strategy is probably the most important strategy used by Nike to establish a connection

between the brand and potential customers. The pull strategy is intended to influence the

customer. The aim of this strategy is to attract people and let them come to you. One of Nike’s

best pull strategy methods is the logo known as “swoosh”. When people see the “swoosh,” they

recognize the brand at first sight. It is an advantage when a company is so popular so that, the

company do not even need to have their name shown in every campaign. It just needs the logo of

the company.

Another pull strategy of Nike is that Nike uses on its website is the ability to sign-up to receive

email about the company and its latest products. Nike’s website also includes links on the bottom

of its website to several of its social media accounts to Nike’s Twitter, Facebook, YouTube and

Instagram accounts.

Nike also has pull techniques they use off its website including several mobile apps that can be

downloaded for iPhones and androids. Some of these apps include Nike Soccer, Nike SB, Nike+

Running, Nike+ Training Club, Nike+ Fuel band and Nike+ Move. Apps allow consumers to

further explore a brand, see what else they have to offer and once again find out more

information about Nike.

NIKE SCM 25

Another pull method that Nike uses is including hash tags or listing its website at the end of

commercials. After a commercial end, this allows the consumer the opportunity to follow up

with it, explore the brand more and find out more information.

Nike’s Push Strategy

Nike’s push marketing also includes commercials, as well as print advertisements and selling its

products in other retail stores. Nike can use the combination of those three among several others

to reach a larger audience.

Another push method that Nike uses on its consumers is selling its products in different retail

stores. Nike shoes and other sports apparel is commonly found in stores that specialize in athletic

products, shoes or active wear. This helps Nike get its product to be more visible to consumers

and puts its brand out there in more places.

NIKE SCM 26

CONCLUSION

Supply Chain Failures of Nike

During the 1970s, retailers would need to put orders with Nike 9 months ahead of time before the

conveyance date. The organization had the option to figure out how to convey their items on

schedule. In any case, during the 1980s and 1990s, Nike's business extended quickly, prompting

the unpredictability of its flexibly chain. In 1999, its benefits diminished by half on account of

difficulties in dealing with the gracefully chain.

Nike chose to receive a flexibly chain the executives’ framework from i2, a significant rival in

the field of ERP frameworks. By 2001, Nike had introduced the framework, with the expense of

$400 million. Notwithstanding, the framework fizzled. Request estimating was probably the

greatest issue. Interest for various items and areas was either overestimated or thought little of.

The organization announced lost $100 million in deals in the third quarter of 2001 because of

this issue.

So, what was wrong?

Nike requested i2 to modify the standard software in a rush. The company wanted to forecast

demand by style, color and size, etc. This led to the fact that thousands of forecasts needed to be

made very quickly to respond to consumer preferences and the market. Nike needed the

customization of the software to be done soon, so the reprogramming was done in a hurry. The

system was able to run but with bugs, causing errors.

Nike used both “pilot approach” and “plunge approach” in the adoption of the system. One the

one hand, the company wanted to adopt an i2’s product, instead of using existing SAP solutions,
NIKE SCM 27

to see if i2 was better. On the other hand, Nike plunge the whole business operation into the new

system, instead of step-by-step and part-by part integration. This mixed approach was part of the

failure.

Current position Of Nike Company in Global Market

Nike’s market share stands at about 27.4% in 2019, ahead of its industry rivals Adidas and

ASICS, making Nike the world’s largest company in the global footwear market., Nike is

expected to continue to hold the largest market share in the global footwear market over the next

five years.

Nike recently announced its financial results for Q3 2019, which reported revenue of USD 9.6

billion in Q3 2019, representing a 7% increasing from USD 9 billion in the year-ago period.

With annual footwear sales of about USD 23 billion, Nike is still the world’s largest footwear

manufacturer, and its leading position in the global footwear market is expected to continue

through 2022.

Nike has always been at the leading edge of innovation, technology development and cutting-

edge marketing campaigns that help them surpass all the other footwear brands in the world in

terms of popularity and sales.  Nike’s latest digital products SNKRS (sneakers) app and Nike Fit

app have proved to be beneficial for the company this year as it helped grow their online sales of

footwear products across the world.

Challenges Faced by Nike Supply Chain

Nike has run into a number of different challenges in its attempts to continue its global

manufacturing strategy. One of the major problems was achieving a level of cooperation with
NIKE SCM 28

foreign manufacturers. An obvious reason for this is the language barrier between Nike officials

and foreign workers. However, some issues were more complex than this. At times, there were

significant initial costs relating to updating the technology in the manufacturing facilities.

Traveling costs by Nike officials to these foreign locations began to add up while many countries

lacked the infrastructure and accounting capabilities to control costs.

Nike has a far more diversified set of product lines and a far more complex web of global supply

and manufacturing relationships than ever before. A common challenge in the Global developing

market is that their infrastructure is under developed which makes it difficult to implement

supply chain strategy. For this Nike uses 3PL to run smoothly their logistics, as they are aware of

the market needs and how to fulfill them.

Another of Nike's challenges is truly fundamental to the general global sourcing equation:

balancing cost and flexibility. This is especially true when comparing the cost of local versus

global sourcing. In this regard, according to the Nike executive, the company found that it "can

pay as much as 13% more in price from local sourcing and still be as well-off as we would be if

we sourced from offshore manufacturers." It's one thing to produce and sell a basketball, a pair

of athletic sneakers or a t-shirt where costs and cost models are relatively transparent and

straightforward. But when it comes to more complicated goods and items with complex bills of

material and where multi-tier supplier management is critical (and in some cases, where multi-

tier sourcing is also essential to reduce and manage costs), I'd argue the 13% figure that Nike

cites could very well climb above 20% or more.

NIKE SCM 29

REFERENCE

https://en.wikipedia.org/wiki/Nike,_Inc.

https://mission-statement.com/nike/

https://www.investopedia.com/articles/markets/051416/nike-stock-analyzing-5-key-suppliers-

nke.asp

https://www.ig.com/en-ch/news-and-trade-ideas/shares-news/the-battle-for-sporting-goods-

supremacy--nike-vs-adidas-180329

https://finance.yahoo.com/news/overview-nike-supply-chain-manufacturing-130048337.html

https://www.statista.com/statistics/250287/total-number-of-nike-retail-stores-worldwide/

https://www.statista.com/statistics/241692/nikes-sales-by-region-since-2007/

https://mergr.com/nike-acquisitions

https://notesmatic.com/2018/02/nike-supply-chain-management/

https://spendmatters.com/2010/12/02/what-supply-chain-challenges-keep-nike-awake-at-night/

https://adambailey505.wordpress.com/2015/02/02/nike-just-pushing-and-pulling/

http://cmuscm.blogspot.com/2014/03/nikes-failure-in-adopting-supply-chain.html