The Need of IT. What was Proposed? What Happened?

Nike operates in more than 160 countries and its products include sports equipment,
athletic shoes, fitness equipment, etc. It provides its products and services in countries of
Latin America, Europe, Africa, Asia, and Australia. Since early 1970s Nike has benefitted by
availing low-cost manufacturing by outsourcing production to countries of Asia and Africa.
To produce the products at appropriate rates, the retailers were required to place their
orders 6 months in advance of the delivery date. This ensured that 90% of the order will be
delivered at the required time and at an appropriate rate. These orders were then sent to
the manufacturing units across the world.

To avoid the problem of projecting the demand and supply gap and managing the customer
data, Nike decided to incorporate a New Supply Chain Management and Customer
Relationship Management Project. Nike decided to implement the first part of the supply
chain strategy in 1999. The strategy involved creation of a forecasting demand and supply
application from I2 Technology. I2 Tech was a software company based in Dallas. The
implementation costed $ 40 million to the company.

The objectives of the organization were:

1. Understanding in advance the market requirements.

2. Smoothening of the production process and making it more customer centric
3. Reducing the time for planned production.

The new system was integrated with the blackened system. The information generated from
the project was supposed to help in reducing the raw material like canvas, rubber, etc.
which were needed to produce footwear.

In 2001, Phil Knight, Co-founder and CEO of Nike announced that the profits of the company
will reduce by 24% of the expected profits. The failure of the implementation of the Supply
Chain software by I2 Technology was considered to be the reason for the fall of profits. The
software was not able to fully control the demand and supply gap leading to production of
less popular products and small number of popular products. This led to a $ 400 million loss
to the company.

This also led to the fall in the market share of the company. The market share of Nike
reduced by 20%. Also, the company took five years to make the software run properly.
Why Did it Fail?
The implementation of the new system by I2 Technology could have been beneficial for Nike
had the organization taken proper measures. It would have helped save the holding cost to
the company.

The system failed as it was small and lacked functions to meet the market requirements.
There was lack of coordination amongst the teams responsible for the implementation of
the system. Realistic goals had not been set up for the deployment of the system. The
implementors and the designers were not able to find the flaws in the system.

Proper training and services were not provided to the employees regarding making the
product more customer friendly. The flow and the design of the system was not according
to the needs of the end users. The needs of the end users were not considered while making
the product.

The planning team could not interpret the demand of the market which added to the
problems of the ERP system.

Due to these reasons, Nike had to lose a lot of money as well as reputation in the market.