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ASSIGNMENT

Course : MGT-330
Section : 06
Submitted To : Dr. Muhommad Azizur Rahman
Submitted By : “Thrill Enigma”

Name ID
Sarwar Hossain 2020904
Ahad Hasan 1910123
Anika Ansari 2010039
Mehjabeen Rahman 2020894
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Table of Contents

Letter of Transmittal 3

Executive Summary 4

Introduction 5

Case Study 6-10

Analysis and Findings 11-13

Conclusion 14

References 15
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Letter of Transmittal

August 4th, 2022

Dr. Muhommad Azizur Rahman
School of Business Independent University, Bangladesh

Subject: Submission of a report on Supply Chain Management of Nike

Dear Sir,

With due respect, it is our pleasure and honor to be your students and have this opportunity to

present the Supply Chain Management of Nike. While preparing the analysis and findings for

this case study, we have given our all to best focus thoroughly on the topic regarding this

ecosystem. We have provided an accurate depiction of information regarding this business, and

we hope that our plan will provide a clear conception about their level of Supply Chain

Management.

We all have given our best to accumulate needed information and we will be more than happy to

answer any question and clarify it fully to your understanding. Thank you for all your help and

support which helped us significantly in preparing this analysis.

Yours Sincerely,

Members of the Group

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Executive Summary

Supply Chain Management (SCM) is the management of the flow of material, information, and
money from vendors of raw materials to final customers. It ensures the right product/service
reaches the right place at the right time and in the right quantity. The ultimate goal of effective
supply chain management is higher profits through improved customer satisfaction and a lower
cost of doing business. Profits are healthier when costs are controlled and reduced wherever
possible. Operating costs go down when the costs of raw materials and production go down.
There are some functions available in Supply Chain Management such as: Acquiring, Purchasing
is the first role in supply chain management. After that business operations, transportation and
logistics, management of resources and workflow of information come step by step. A company
needs to play a very vital rule to operate all these things. Because a company cannot meet its
goal without fulfilling these criteria successfully.

Hence, this report provides an access to identify operational issues related to Nike Company and
analyze those operational issues describing its theoretical background. The report then
elaborates what should be the appropriate recommendations to overcome these issues depending
on proper applications.
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Introduction

Two decades ago, the company was under major fire for abusive labor practices after
outsourcing labor overseas because it was cheaper. One of the biggest threats to a retailer’s
reputation is an allegation of involvement in slavery, human trafficking, or child labor.
Customers staged embarrassing public protests at the Olympics and at Nike stores. People began
boycotting the brand. By 1998, Nike had to lay off staff amid declining sales. That's when then
CEO Phil Knight started to make changes aggressively and publicly within the company.
The demands and the level of risk at play is enhanced by the fact that shoppers, particularly of
the millennial type, are actively calling on fashion brands and retailers to be transparent in terms
of how and where their products are made. But even more than consumer-driven calls for clarity
and principled activity, in many jurisdictions, the law requires it.
The key to Nike's turnaround was being honest and transparent about the labor issues it faced. In
many ways. Nike has become even more transparent than its competitors about its labor
practices, publishing a 108-page report revealing conditions and pay in its factories and
acknowledging widespread issues, as well as a complete list of factories it contracted with.
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Case Study

CHAZEN SOCIETY FELLOW INTEREST PAPER: THE RISE OF THE CORPORATE CITIZEN:
NIKE’S EVOLVING SUPPLY CHAIN

CLELIA PETERS MBA ’09

These days, your new sneakers are far more likely to have spent more time traveling than you
have. Every day, each of us comes in contact with a multitude of products that have been
produced outside the United States. In fact, in marked contrast to the U.S. business landscape as
recently as 30 years ago, it would be hard to identify a major corporation today that does not rely
heavily on overseas labor for some aspect of its production.
Producing goods cheaply overseas has become a strategic necessity for many producers in a wide
variety of industries. But the growth of the global supply chain has also created a new class of
ethical questions, particularly for those in management roles in global companies. Like so many
ethical issues, those related to labor conditions tend to be seen as black-and-white. Working
conditions in overseas factories are perceived by many to be inherently exploitative, a perception
fueled by a series of extremely effective popular campaigns aimed at motivating change in
corporate behavior in this area. In several high-profile instances, these campaigns documented
the physically taxing work, the long hours and the exposure to potentially unhealthy conditions
facing many overseas factory workers.
On the other hand, proponents of the global labor market argue that overseas factory labor fuels
the growth of the global economy and often provides a way out of dire poverty for many people.
In fact, proponents argue that in many parts of the developing world conditions in existing
occupational options, such as subsistence farming and other forms of hard labor, may be even
more unhealthy and exploitative than factory labor. The enthusiasm that local people often have
for factory work can arguably be seen as a confirmation of this suggestion.
Globally, these issues are particularly complex, since there is no universally accepted set of
regulations that determines minimum standards for labor conditions. This lack of global
regulation raises some complex questions: What kind of relationship exists between suppliers
and the companies who purchase their goods? In turn, what kind of responsibility falls on the
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shoulders of consumers? Whose job is it to ensure that conditions for workers who are supplying
goods internationally fall in line with standards that are acceptable to the end users?
The combination of the black-and-white attitudes highlighted earlier with the complexity of the
questions that exist in this area initially led to a stalemate, with nongovernmental organizations
and many consumers on the one hand claiming that corporations were in the wrong, and
corporations on the other hand claiming either that they were not responsible for overseas
workforces or that they were simply responding to consumer demand.
Over time, however, multinational corporations have begun to accept that, as employers of
hundreds of thousands of direct employees and contractors, they may—through their corporate
policies and the standards they set for their suppliers—have an impact that rivals, or even
surpasses, the standards and laws created by the countries where they manufacture their goods.
This has been more than an evolution in policies, though changing policy has been an important
component of the transition. At heart, the change in attitude marks a significant transition in the
role and identity of large multinational corporations, moving them from a role as impersonal
suppliers of goods to actors on the world stage and requiring them to think both holistically and
humanistic ally about the complex web of relationships and actions that go into producing their
products.
A great deal about this transition toward corporate citizenship can be learned by looking at the
companies that have been attempting to navigate it. The changes that Nike has made to its supply
chain constitute one of the most compelling stories of supply-chain evolution in the past half-
century. Few companies have received more public attention for the challenges and mistakes in
the human aspect of their supply chain than Nike, but in turn, few companies seem to have
ultimately taken as many steps as possible to respond to these criticisms and to rethink their very
manufacturing process.
In many ways, the history of Nike parallels the growth of the overseas labor market. At the
company’s inception in 1964, when it was known as Blue Ribbon Sports, Nike’s basic business
model focused on a competitive advantage achieved by sourcing athletic footwear in Japan at a
time when most major athletic apparel companies were still producing their athletic footwear in
Western countries. In 1972, the company unveiled the Nike brand for its line of custom-designed
shoes produced in Japan; it changed the company’s name to Nike six years later. As the costs of
Japanese labor increased during the 1970s, Nike sought alternatives to maintain its low-cost,
premium- product model, including opening factories in the United States to serve domestic
demand.
In the early 1980s, however, Nike transferred all of its production to developing Asian countries,
in particular to Taiwan and Korea, where government incentives had encouraged rapid growth in
the production of footwear. Later in the 1980s, increasingly higher wages in Taiwan and Korea
resulting from increased prosperity in those two countries forced Nike to seek new locations for
its factories to maintain the company’s low-cost-labor business model. Nike worked with many
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of its existing suppliers to open factories in Indonesia, Vietnam and China. While Nike closed
many of its factories in Taiwan and Korea, it often continued to work with the management
teams from those factories to manage its factories in developing economies.
While Nike was originally known as a sneaker company, the company expanded its product lines
over the years to include a broad variety of footwear and clothing. As of 2006, the Nike line
included 50,000 distinct styles of footwear and clothing. This expansion also necessitated an
increasing number of factory sources, since factories often specialized in producing certain types
of products. Nike’s huge labor force in 2006 included almost 800,000 contract employees
working in more than 700 contract factories in 52 countries, with Nike estimating that 80 percent
of these workers were women between the ages of 18 and 24.
The complexity of this supply web also created significant distance between Nike management
and the day-to-day realities in the factories themselves. Nike designers and managers in the
United States often had little or no interaction with their overseas factories, which generally were
managed by local vendors or by the management teams from Nike’s existing suppliers in Taiwan
and Korea. Both the local vendors and Nike’s existing suppliers had factory-management
standards very different from Nike’s in some cases and were often trying to squeeze as much
value as they could out of their marginal cut, keeping factory costs low by whatever means
possible.
In the early 1990s, a series of scandals forced Nike management to confront the often distressing
realities of the conditions in the factories the company was supporting. Nike’s labor practices
began to garner attention in 1992 when the Oregonian, Portland’s major daily newspaper,
published an article critiquing Nike’s factories in Indonesia. Subsequent stories on the issue
appeared in the Economist, the New York Times and Rolling Stone and on CBS’s 48 Hours.
Many of these stories focused on the very low wages being paid to Nike factory workers in
Indonesia, where the Korean managers of Nike’s factories had negotiated an exemption from the
country’s minimum-wage requirements. Initially, Nike responded to these criticisms by claiming
that the company was not responsible for the actions of its overseas contractors, but by 1999,
Nike instituted a policy of paying wages in Indonesia that exceeded the minimum wage.
Similarly, Nike faced international criticism when a 1996 Life magazine article featured a photo
of a 12-year-old boy hand stitching a Nike soccer ball. Through investigation by Life and other
media outlets, it was revealed that many of the Pakistani workers who were manufacturing Nike
soccer balls were children working out of their homes. According to Nike sources, the strength
of the public reaction to the image in Life definitively helped to illustrate how serious this issue
was for Nike and motivated the company to begin to rethink its supply-chain policies. The
company worked with international bodies to create regulations prohibiting the use of child labor
in Pakistan, and also provided palliative support for children who had worked for Nike.
Additionally, other news coverage throughout the 1990s questioned Nike’s commitment to its
health-and-safety precautions for the company’s workers, exposed more examples of sub-
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minimum-wage policies at certain factories and illustrated the ways that workers were forced—
or in some cases chose to—work for as many as 20 hours a day. By the end of the 1990s, it was
clear that issues related to global-supply-chain management were a real and quantifiable issue for
Nike, with the potential to undermine the value of the Nike brand.
In response to these threats, Nike took several steps to improve conditions in the factories where
the company sourced its products. It created a variety of new departments devoted to labor
practices in the company’s factories, ultimately bringing together these departments in the
company’s Corporate Social Responsibility and Compliance department in 2000. According to
Nike, as of December 2007, there were 120 Nike employees working exclusively on corporate
social responsibility.
In its fiscal year 2005–06 corporate social responsibility report, Nike identified three
chronological “generations” of actions that formed parts of its attempt at reform within its supply
chain. In Generation I, Nike created standards for its suppliers and factories, beginning with a
standard code of conduct in 1992. In Generation II, Nike attempted to create systems to monitor
these standards, including site visits and external audits. By 2004, however, both external
auditors and Nike staff came to believe that these efforts had fallen short of bringing about true
change: both written standards and monitoring visits were relatively easy to work around, and
neither provided effective means of enforcement along the distribution chain.
In 2004, Nike created its Generation III philosophy, which it called “responsible
competitiveness.” This philosophy aims to focus on the root causes of labor exploitation and to
bring about systemic change to prevent such abuses, rather than to monitor abuses after they
have occurred. Perhaps most significantly, Generation III marks an acknowledgement by Nike
that issues of labor compliance have to be built into the essence of its business strategy. In
particular, Nike posits that building long-term relationships with suppliers is a key component of
effecting systemic change, a reversal of the company’s historical practice of pursuing low prices
on an item by item basis, as opposed to creating lasting supplier relationships.
These longer-term relationships simultaneously enhance the company’s ability to monitor labor
issues and give Nike more leverage to encourage suppliers to change their perception of laborers
and to value laborers’ work more highly. By encouraging its suppliers to build longer- lasting,
more respectful relationships with their workers, Nike believes it will also help reduce factory-
employee-turnover costs.
In addition, Nike has begun to make its manufacturing systems more lean, a practice most
commonly used in automobile manufacturing. Historically, footwear and apparel were produced
using long assembly lines, with each factory worker trained in a single task, representing a
particular stop on the line. In contrast, lean manufacturing trains workers in teams, providing
them with a variety of skills and allowing each team the ability to troubleshoot and correct
problems with its production in real time. This approach aims to minimize waste—both physical
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waste and the cost of inefficiently used time—and further empowers workers. Nike currently
produces approximately a third of its footwear using lean assembly systems and aims to have
90 percent of its footwear produced this way by the end of fiscal year 2011.
As a sign of Nike’s commitment to its Generation III philosophy, the company publicly
disclosed the locations of its factories in 2004. Up until that time, it had generally been
considered a matter of competitive advantage to keep this kind of information confidential.
Nike’s choice to disclose this information was publicly lauded by human-rights advocates. The
company has also encouraged its competitors to release information about which factories they
are using to produce their goods in the hope that companies working in the same factories will be
able to standardize their labor practices and apply joint pressure to encourage reform. Nike is
also working to improve its monitoring and auditing procedures to more effectively identify and
respond to areas where worker’s rights are being abused or violated.
Nike’s changing relationship with its overseas suppliers serves as an interesting illustration of the
broader trends in global-supply-chain optimization and management. In response to public
pressure and an internal strategy shift, Nike evolved from a model focused on extracting as much
value as possible from factory workers toward whom the company felt little responsibility to a
strategy that includes maintaining market leadership by cultivating and protecting strong
relationships with its employees and optimizing effectiveness. Unlike historical models where
the company focused primarily on its relationship with the consumer, Nike is now attempting to
build a model where the needs and demands of the consumer are balanced against the needs and
demands of its suppliers and factory employees. While it will take time to fully evaluate Nike’s
success in reforming its supply chain, this shift in attitude serves as a powerful illustration of the
ways that global trade requires companies to think holistically about creating value and
ultimately remaining successful.
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Analysis and Findings

There are many reasons why Nike has failed to fulfill their social responsibilities. They neglected
the main thing which is proper communication with their suppliers and vendors. Social
responsibility is an element of supply chain management, and Nike didn’t see it through. There
are so many factors and problems that are found while going through the case. They are
described briefly below.
Decision problems:
At first, Nike moves their factories to overseas to reduce the cost of production. They gave the
responsibility of those factories to the local vendors of those nations. Due to the general
complexity of this supply chain, there was a large gap between Nike management and the
realities of the factories. Nike's American designers and managers had little or no communication
with their overseas factories, which were mostly run by local vendors or management teams
from Nike's suppliers present in Taiwan and Korea. In certain situations, both local vendors and
Nike's old suppliers had factory-management standards that were considerably different from
Nike's, and they were often striving to extract as much value as they could out of their marginal
cut, keeping factory costs as low as possible. Which result Nike didn’t even try to know how
those factories run their production system. Nike had little bit or no communications with the
outside factories, which ended up being a big issue. Looking at the companies that have tried to
navigate through this shift to corporate citizenship can help us learn a lot more about it. One of
the most fascinating transformations is that of Nike's supply chain transformation in almost
through the entirety of the last half-century. A few firms have gotten public attention for their
supply chains manpower related issues as well as failures of Nike's. Among them only a few
have taken action to respond to these concerns and rethink their production process.
Worker’s safety problem:
Nike neglected the ethical issue regarding the factory workers. The labor conditions tend to be
black and white issues. The working environment was unhygienic and exploitive, which is
dangerous to the labors working there. The long hours of working in an unhealthy environment
led to many problems afterwards. There was also a problem with the labors job safety as well.
Later, Nike as overlooked all this issues and they come up with solutions to prevent this problem
to happen in Future. First, they ensured the health and safety of their workers while using
environment friendly materials in the production. The employees were given training,
interactions with customers and coworkers. Instructions, regulations, and guidance to be
followed. Making the workers motivated while giving them the facilities they deserve. While
Nike began as a sneaker company originally, throughout the years the corporation has now
expanded its product line to accommodate to a wide range of footwear and clothes.
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The footwear and clothing line of Nike has had over 50,000 different styles since 2006.
Attributed to factories generally specializing in creating specific sets of items, this expansion did
need an increase in the number of factory sources. In 2006, Nike employed around 800,000
contract workers in over 700 contract factories in 52 countries, with Nike estimating that 80
percent of these workers were women between the ages of 18 and 24.

Providing quality product:

In many aspects, Nike's history follows the expansion of the global labor market. When it was
known as Blue Ribbon Sports, was based on obtaining a competitive advantage by purchasing
sports footwear in Japan at a low cost. when many major athletic gear companies still made their
athletic footwear in Countries in Western Europe. For its line of custom-designed shoes, the
business launched the Nike brand in 1972. It was founded in Japan and changed its name to Nike
six years later. As the price of as the cost of labor in Japan rose in the 1970s, Nike looked for
other ways to keep the price at bay for its high-quality products. Opening factories in the United
States to service domestic markets is part of the premium-product concept.

Child Labor issue:

When a photo of a 12-year-old child hand stitching a Nike soccer ball was published in a 1996
Life magazine article, it drew universal criticism. Life and other media sites conducted
investigations and discovered that many of the Pakistani employees who were making Nike
soccer balls were made by children who worked from home. Nike sources claim that the public's
overwhelming support for the photograph in Life clearly demonstrated how serious the situation
was. For Nike, the problem prompted the corporation to reconsider its supply-chain strategies.
The corporation collaborated with international organizations to develop rules forbidding the use
of child labor in Pakistan, as well as providing palliative care for Nike employees' children.
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Solutions:
• Organizational policies and procedures must be followed. Employees should be able to
work in a friendly atmosphere.

• They should prioritize workers health and safety. Because working conditions should not
jeopardize employees' safety and well-being. A healthy employee can perform better.

• They must increase their efforts in corporate social responsibility. Because it contributes
to the enhancement of corporate performance and the growth of consumer and employee trust.

• Nike should also pay more attention towards their workers and how they are being treated
overseas.

• The communication between management and the factories must be strengthened in order
to have a smooth flow of supply chain between the producers till the distributors.
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Conclusion:
According to the assessment, Nike has organizational issues that must be addressed. Initially,
they had no idea how to act or what their organizational duties were. They were unaware that it
was a part of supply chain management. A corporation must analyze its organizational
responsibilities and seek methods to enhance them in order to compete and profit more
effectively so as for supply chain management to develop. They are both organizationally and
ethically competent. As a worldwide company, they are responsible for respecting human rights.
They must also create a suitable working environment and establish mutual trust. They are
required to continue carrying out their organizational tasks. Companies should pay more
attention to the mental health of their workers as well as to their physical health.
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References:
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Columbia Business School. Columbia Business School. (2022). Retrieved 3 August 2022, from
https://home.gsb.columbia.edu/.
Clean Clothes Campaign. “Nike’s Track Record 1988–2000.” http://www.cleanclothes.org/
companies/niketrack.htm (accessed March 19, 2008).
Educating for Justice. “Stop Nike Sweatshops.” http://www.educatingforjustice.org/
stopnikesweatshops.htm (accessed March 17, 2008).
Locke, Richard. “The Promise and Perils of Globalization: The Case of Nike.” In Management:
Inventing and Delivering Its Future, edited by Thomas A. Kochan and Richard Schmalensee.
Cambridge, Mass.: MIT Press, 2003. Also available online at http://www.caseplace.org/ d.asp?
d=627.
Nike. Corporate Responsibility Report: FY04. http://www.nike.com/nikebiz/gc/r/fy04/docs/
FY04_Nike_CR_report_full.pdf (accessed March 17, 2008).
Nike. Innovate for a Better World: Nike FY05–06 Corporate Social Responsibility Report.
http://www.socialfunds.com/csr/reports/Nike_FY05-06_Corporate_Responsibility_Report.pdf
(accessed March 17, 2008).
Nike. “Nike CR Report” (Nike corporate social responsibility site).
http://www.nikeresponsibility. com/#home/ (accessed March 17, 2008).