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Group-8 NIKE INS3021-02 PDF
Group-8 NIKE INS3021-02 PDF
Group 8
1. Do Thi Thu Phuong - 19071471
2. Luong Thi Khanh Huyen - 19071379
3. Trinh Duc Trung - 19071544
4. Nguyen Khanh Linh - 21070817
HANOI, 2022
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TABLE OF CONTENTS
1. Products ................................................................................................................. 5
2. Customers .............................................................................................................. 5
3. Competitors ........................................................................................................... 5
1. Winner ................................................................................................................... 5
1.1. Innovation....................................................................................................... 5
2. Qualifier ................................................................................................................. 7
2.1. Cost................................................................................................................. 7
3.2. Distribution................................................................................................... 10
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I. REPORT INTRODUCTION
This report aims to evaluate Nike's global supply chain management practices and makes
some recommendations for improvement based on direct observations and research by
the team. To accomplish this aim, this report employs Nike's competitive priorities, and
supply chain management practices. Nike will be able to identify their supply chain
management issues with the use of these analytics. They can then determine appropriate
remedies to such issues. The paper concludes with several suggestions for enhancing
supply chain effectiveness.
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Skateboarding, Nike CR7, and other brands Subsidiaries include Brand Jordan, Hurley
International, and Converse. In addition to manufacturing sportswear and equipment, the
company also operates retail stores under the Niketown name. (Nike, Inc. – Wikipedia,
n.d.).
1. Products
- Shoes: Running, Basketball, Soccer, Children’s shoes, Sport inspire Urban shoes.
- Miscellaneous: Bags, Bats, Socks, Gloves, Sports balls, Eyewear.
2. Customers
Nike's target audience is mainly in the 15-45 age group. Nike focuses on three main types
of customers: women, young athletes, and people who love to run. Customers of Nike
have mainly been characterized by a lack of confidence in themselves. Therefore, Nike
has focused on inspiring and encouraging customers to believe more in themselves, in
their inner strength. They have built an emotional brand associated with confidence,
persistence, and never giving up
3. Competitors
Adidas is one of the topmost Nike Competitors. One of the key advantages of Adidas is
that it operates via both – the Adidas brand and also has a strong subsidiary in Reebok.
The combination of both gives a strong valuation to Adidas as a top competitor of Nike.
Not only does Adidas compete with Nike on the basis of footwear, it also competes on
the basis of clothing and accessories. Puma, Fila, New Balance are also competitors of
Nike.
To compete with other competitors in the industry, Nike has set out three strategic
priorities for themselves. They are innovation, quality, cost and time
1. Winner
1.1. Innovation
Technology has been the foundation of the business strategy of Nike. The firm has
invested intensively in R&D, which has made it renowned for some trademark
innovations and revolutions. Some core technologies and innovations by Nike include the
auto-lacing shoe, i-pod pace and distance tracking tech, and the tech where airbags replace
the foam. Innovation is one of Nike’s success factors. It has ensured that the firm remains
ahead of the curve when it comes to new products.
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1.2. Quality
To ensure the quality of the output of the entire chain - the quality of the final product,
Nike applies a multitude of technologies to smoothly operate and manage the supply
chain. Like Electronic Data Interchange (EDI), Value Added Network (VAN), Enterprise
Resource Planning (ERP)
Nike products are known for their high quality as they successfully meet the demands of
consumers from all around the globe. Nike recognizes that the quality characteristics of
products and services can be defined in terms of their functionality, appearance,
reliability, durability, recovery and contact. To meet the quality standards Nike focuses
on various strategies like TQM (Total Quality Management). Nike Focuses on quality
during the manufacturing process to meet the customers’ demand and maintain high
standards of quality.
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2. Qualifier
2.1. Cost
This is another key business strategy of Nike. Although the firm currently does not give
much emphasis to the strategy, it was particularly critical during its earlier days. Some of
the cost leadership strategies employed by the company include Economies of scale,
Outsourcing, and Effective negotiation with suppliers.
Investments in technology make Nike products priced higher than the average. However,
Nike still implements value-based pricing and premium pricing strategies, given current
market conditions. High-end or exclusive products will be priced significantly higher than
the market. In a value-based pricing strategy, Nike considers consumers' perceptions of a
product's value, and this value is used to determine the maximum price a consumer is
willing to pay for that product.
2.2. Time
The goal is to please customers through accurate information and the delivery of products.
Nike uses the DIFOT (Delivery in Full-on Time) and Time to Provide Resolution to
Customer Queries metrics to quantify precision. According to customer orders, the goods
are manufactured in factories, aggregated, and then shipped through air, water, or land to
Nike Customer Service Centers. Nike plans to install at least 1,200 new automated
machines at its suppliers' factories in Asia, to speed up cutting, gluing, shoe assembly and
sole creation. The Nike boss, who succeeds founder Phil Knight, has outlined an "Express
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Lane" strategy to optimize Nike's time to market. The system Nike uses allows them to
cut down to weeks, rather than months, the time from designing a product to when it's on
the shelves.
About network organization: Despite changes in the market environments, Nike has stuck
to its decentralized and networked organization structure. Each business center of the
company focuses on their operation like research, marketing, or production. The company
has subcontracted its most crucial operation, which is manufacturing itself. Besides this,
Nike had also outsourced several back office and non-executive jobs.
About IT: For distributors, Nike created Nike.net, taking an innovative approach, geared
towards providing better service to retailers. For customers, Nike using Nike ID online
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design tool, design according to customer's wishes. Allows buyers to create their own
custom shoe design on the website and receive the product in person. With the use of data
exchange technology in the distribution channel system, Nike gradually proved the
effectiveness of its ordering policy, Nike planning.
Nike's manufacturing process is as follows: Nike researches and designs the product, and
then Nike's outsourcing facilities around the world are the place to order raw materials
and complete the product. The product is then shipped to the Nike company for
distribution to customers. Besides, Nike's manufacturing included 3 steps: First of all,
Nike sends designs to component suppliers. Next, the supplier sends the components to
the outsourcing company. Finally, products are shipped to distributors worldwide.
Thus, it is seen that Nike is not directly involved in the production process, instead making
the most of outsourcing activities from low-cost countries such as Asian countries. A
supply chain that completely outsources production helps Nike reduce direct labor
costs, infrastructure construction costs, and administrative costs. Nike can best focus
on that instead into core strength activities such as product design, marketing and
planning, procurement, and management.
3.1. Outsourcing
suppliers are located in 10 countries: Vietnam, Indonesia, China, Thailand, India, Turkey,
Morocco, Mexico, Honduras and Brazil. The entire product production process is located
in these factories and is under the control of a team of employees from the Nike company
(They will monitor the progress of product production and product quality). Nike only
participates in the process of researching, prototyping products and promoting and
distributing products to consumers.
Due to outsourcing, Nike can create its products more efficiently and at a lower cost,
allowing it to price its items more competitively. As a result, Nike can compete on
pricing with other companies that sell similar products.
3.2. Distribution
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In which, the two largest places are located in Tomisato city, Japan and in Laakdal city,
Belgium.
Distribution centers act as logistics hubs and more. In addition to receiving and
managing orders provided by Nike, distribution centers either take on the role of
Logistics or associate with large logistics and transportation companies such as UPS,
FedEx Maersk. Since then, Nike products have been distributed to every corner of the
world.
3.3. Retailing
As of May 31, 2021, Nike operated a total of 1,048 retail stores throughout the entire
world, a slight decline from 1,096 in 2020. The number of Nike stores in the U.S.
amounted to over 300 in that year. Nike has offices located in 45 countries outside the
United States. Moreover, The Digital Retail Experience of Nike is such a good
experience, aware of how today's consumers are utilizing both the digital and physical
worlds; Nike sought to create a new 'digital' retail experience. An experience which
combines retail store, ecommerce and mobile customer journeys – seamlessly
Nike is supplied by 122 footwear factories located in 12 countries. The company also
contracts with 329 garment manufacturers operating in 38 countries. China is the largest
source of apparel with 28%, followed by Vietnam with 23% and Thailand with 12%
(Carpenter, 2021).
Nike also relies on technology companies, equipment suppliers, professional services
firms, and other suppliers to conduct its operations. Here are 5 main Nike suppliers
operating in countries around the world: Pou Chen Corporation, PT Pan Brothers, Fulgent
Sun Group, Delta Galil Industries, Eagle Nice International Holdings.
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is concerned with regulating the flows between and across the phases of the chain in order
to optimize overall chain profits.
- Reducing the percentage of production without receiving purchase confirmation
from retailers (pre-building) reduces inventory from 30 % down to 3%.
- Shorten the time from receiving orders to delivering goods to consumers (global
product lead time) from 9 months to 6 months.
- Develop a "business continuity" program to manage risks from "outsourcing"
activities as well as identify risks at each link of the supply chain.
- Manage returns well.
- Build relationships and close cooperation with supply partners
b. Practices
Nike attempts to address this problem by instructing its suppliers to make up to 55% of
the expected quantity of items before any demand information is available, and often up
to four months before receiving any orders (Supply Chain Management Process at Nike,
2021). When the "futures" knowledge becomes accessible, they add to production. This
is the reason why Nike reduce the percentage of production without receiving purchase
confirmation from retailers (pre-building) reduces inventory from 30 % down to 3%
(Nike's Supply Chain Model and Management | ALS, 2021)
2. Outsourcing management
a. Issue
Nike Inc. has strategically outsourced 100% of its shoe production and manufactures only
a few of its technical components. They only concentrated on their major competence
which is research and development (pre production phase) and marketing, distribution
and sales (post production phase). However, it can lead to Nike not being able to control
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the quality, work progress of their products because they hire a lot of factories and
outsourcing companies, which means they have to manage the quality of the raw material
suppliers for these facilities.
b. Practices
Nike will transmit a shoe model to a facility for trial manufacturing after it has been
created. Nike will execute a contract with the facility for mass manufacturing if the
sample product passes the specifications. Nike employs partial buy and sale outsourcing,
which implies that the plant will order manufacturing supplies on its own. However, Nike
must have control over the list of factories that supply supplies. This enables Nike to
determine the cost and quality of the materials. Nike will pay the cost of manufacturing
plus processing costs after the deal is fulfilled. Products will be transported to the Nike
corporation, from which Nike will distribute and sell the products
3. Inventory management
a. Issue
Inventories at Nike include finished shoes, clothing, accessories, and even raw materials.
In Nike's case, they ran into some serious software implementation issues - bugs and data
errors - that resulted in inaccurate demand forecasts. Due to difficulties in synchronizing
information between SAP and I2 systems, Nike had to settle inventory at unprofitable
prices. This has a huge impact on profits.
b. Practices
After the inventory crunch: Nike has identified, built, and evolved its supply chain into a
competitive advantage. First of all, Nike invested in and rebuilt new information systems
to support inventory management. Secondly, Nike distributes merchandise to reduce
inventory: Previously, Nike set up independent distribution centers in each country.
Autonomous centers in the purchasing and distribution of products. Finally, Nike uses
retail stores to settle inventory: At Nike, there are several types of retail stores such as:
the Factory Outlet Store - this is a medium-sized store, the purpose is to handle large
inventories or sell outdated products
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b. Practices
Nike has contributed to a lean and green supply chain by selecting partners with technical
innovation capabilities, convenient locations, building supplier management and support
programs, and developing long-term relationships. long. Save time and effort to find raw
materials, streamline production, take advantage of cheap labor, produce anywhere with
the lowest cost, and move production locations to reduce costs if prices are high. increase
that the place of production at a cheaper price still ensures the quality of the product
within the same specification
5. Quality management
a. Issue
Nike's problem is that more and more customers are not satisfied with the release and
quality of Nike shoes. Shoe models with similar designs, no innovation and poor quality
have caused many famous collaborators to leave Nike for other shoe brands. Nike has
degraded their shoe quality due to its growing consumer base and is losing its strong and
near-monopoly position in the industry to other players in the athletic shoe community.
In that regard, Nike is working to improve product quality and design quality.
b. Practices
Nike focuses on quality in the manufacturing process to meet customer needs and
maintain high quality standards. Nike's manufacturing process is more about TQM (Total
Quality Management). Nike strives to manage costs and improve quality and complexity
in the design phase and in the supply chain (Nike, Inc., 2019). In manufacturing processes,
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once quality has been defined and measured, the processes will need to conform to design
standards, assuring the customer that the best quality products will be produced.
6. Lean production
a. Issue
Short product cycles and high levels of variability in purchases characterize the fashion
industry. Because of these characteristics, fast delivery times and flexible supply
networks are required. On the other hand, manual outsourcing requires a high level of
skill, takes a long time, leads to low output and efficiency.
b. Practices
Nike is implementing lean manufacturing to increase business efficiency. They reduce
waste, innovate products, focus on new production methods and modernize production
processes, thereby increasing output, and disseminate and train individuals who are able
to apply using new, complex techniques. Starting from empowering workers and
production teams, both to solve the above problems, to minimize time and input materials
while ensuring the quality of products. To date, 85% of Nike's footwear brands and 76%
of Nike's apparel brands have implemented lean production.
VI. RECOMMENDATIONS
Due to outsourcing, Nike has given the entire production line of its products to its
partners. Means that NIKE has least control of the inventory since it has so many
suppliers. This issue is a consequence of the miscommunication between NIKE and its
suppliers. NIKE inventory for the quarter ending May 31, 2022 was $8.420B, a 22.85%
increase from 2021. NIKE inventory for 2021 was $6.854B, a 6.96% decline from 2020.
NIKE's latest twelve months inventory turnover is 3.3x. NIKE's inventory turnover for
fiscal years ending May 2018 to 2022 averaged 3.6x. NIKE operated at a median
inventory turnover of 3.5x from fiscal years ending May 2018 to 2022.
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As a result, production can be brought to a standstill which will in turn have a negative
impact on the company's operations. Not only inventory, but also the quality of raw
materials, which was imported for production may not be fully managed by NIKE. As
discussed, the fact that NIKE has plenty of suppliers lays a huge burden on its Supply
Chain management department. If the quality of those NIKE’s products does not meet the
given standard, then it will directly affect the company’s reputation and lower customers’
trust.
The fact that Nike does not own any factory where manufacturing takes place and instead
strategizes on outsourcing production to suppliers in least developed countries, this
strategy usually encourages low wages and sweatshop conditions as suppliers compete
on costs charged. As a result, the company's image is public as it is later faced with issues
of human rights violations and child labor among others. Nike Supply chain has been
heavily criticized throughout the years for having the products made in inhumane working
conditions where the workers are also underpaid. In addition, Nike has also been criticized
for using child labor in production of its merchandise.
Most accuracy demand forecasting shall lead to a reduction of spare inventory and
material. NIKE could install a data collector software to statistics which type of product
are currently purchased most, or instead cooperate with data analytics companies. These
solutions help Nike crunch data from their apps and from IoT devices like Fitbits and use
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that data to understand customer habits and predict purchasing behavior. For instance,
Nike now incorporates Zodiac’s marketing data into its app to serve up personalized
content and make product recommendations.
2. Inventory management
At the point of manufacture, many Nike products are tagged with a RAIN RFID tag chip,
allowing them to be tracked through the rest of their journey, from factory to warehouse
to shipment to store. These tag chips make NIKE capable of controlling the quantity of
shoes produced.
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transport products to the location where the customer needs it, and issue invoices for
shipments by the methods specified in the plan contract.
VII. CONCLUSION
Nike has established four strategic targets for themselves in order to compete with other
businesses in the sector. They are innovation, quality, cost and time. In accordance with
its strategic aims, Nike has created a productive supply chain that quickly attends to
consumer demands. Overall, Nike has built and operated the supply chain well. By
choosing trustworthy partners and suppliers, a solid supply chain was created. All of them
have helped Nike's supply chain succeed. Ultimately, Nike has been able to hold onto
their place in the market despite the severe competition because it can provide high-
quality goods to its customers on time for such an affordable price.
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VIII. REFERENCES
1. New Idea (2022) Nike sweatshops: The truth about the nike factory scandal, New
Idea. Available at: https://www.newidea.com.au/nike-sweatshops-the-truth-about-
the-nike-factory-scandal (Accessed: December 19, 2022).
2. (no date) How does Nike manage inventory? Available at:
https://www.espeedpost.in/blog/how-does-nike-manage-inventory/ (Accessed:
December 20, 2022).
3. Nike Operations Management (2020) Skillsire. Available at:
https://www.skillsire.com/read-blog/240_nike-operations-management.html
(Accessed: December 27, 2022).
4. Person (2022) Rain RFID helps Nike 'just do it' despite supply chain challenges,
Impinj. Impinj. Available at: https://www.impinj.com/library/blog/rain-rfid-helps-
nike-just-do-it-despite-supply-chain-challenges (Accessed: December 27, 2022).
5. Lifestyle (2014). The decline of Nike in sneaker culture. [online] The Campanile.
Available at: https://thecampanile.org/2014/04/25/the-decline-of-nike-in-sneaker-
culture/
6. Kumar, E.-N. (2020). Nike Operations Management. [online] www.skillsire.com.
Available at: https://www.skillsire.com/read-blog/240_nike-operations-
management.html.
7. Logistics, E. (2022). Tìm hiểu mô hình Chuỗi cung ứng của Nike [online] Ego
Express. Available at: https://egoexpress.vn/tim-hieu-mo-hinh-chuoi-cung-ung-
cuanike/#Mot_so_nguyen_tac_luon_duoc_giu_vung_khi_van_hanh_chuoi_cung_un
g_cua_Nike
8. oodles, E.S. (2019). Improving Business Efficiency with Electronic Data Interchange.
[online] Medium. Available at: https://erpsolutionsoodles.medium.com/improving-
business-efficiency-with-electronic-data-interchange-6ad448f3e010.
9. MÔ Hình Chuỗi Cung ứng của Nike và Cách Quản Trị (no date) ALS. Available at:
https://als.com.vn/mo-hinh-chuoi-cung-ung-cua-nike (Accessed: December 27,
2022).
10. Jennifer O'Brien (CMO) 13 April, 2018 10:29 (no date) Why Nike sunk its teeth into
data analytics firm Zodiac, CMO Australia. Available at:
https://www.cmo.com.au/article/636119/why-nike-sunk-its-teeth-into-data-
analytics-firm-zodiac/ (Accessed: December 27, 2022).
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11. Nike Inventory 2010-2022: NKE (no date) Macrotrends. Available at:
https://www.macrotrends.net/stocks/charts/NKE/nike/inventory(Accessed:
December 27, 2022).
12. Tao, M. (2020). Nike integrates robots from Geek+ into its Japan warehouse.
[online] Robotics & Automation News. Available at:
https://roboticsandautomationnews.com/2020/02/05/nike-integrates-robots-from-
geek-into-its-japan-warehouse/29566/.
13. Ciliberti, F., de Groot, G., de Haan, J. and Pontrandolfo, P. (2009), "Codes to
coordinate supply chains: SMEs' experiences with SA8000", Supply Chain
Management, Vol. 14 No. 2, pp. 117-127. //doi:10.1108/13598540910941984
14. Camuffo, A., Stefano, F., Paolino, C. (2017) 'Safety Reloaded: Lean Operations and
High Involvement Work Practices for Sustainable Workplaces', Journal of Business
Ethics
15. https://blog.iodparts.com/jit_and_e_commerce/ IODPARTS (2016) JIT and E
Commerce [online]
16. als.com.vn. (n.d.). Mô hình Chuỗi cung ứng của Nike và cách quản trị | ALS. [online]
Available at: https://als.com.vn/mo-hinh-chuoi-cung-ung-cua-nike.
17. Wikipedia Contributors (2019). Nike, Inc. [online] Wikipedia. Available at:
https://en.wikipedia.org/wiki/NIKE.
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Student Contribution
Full name Tasks
ID level
FEEDBACK
What did you learn mainly from this activity, related to the topic covered as well as
the group activity itself?
We examine Nike's supply network to understand its operations and management
practices based on our theoretical understanding of global supply chain management.
Thanks to the useful research topic, we have also been able to apply theoretical knowledge
to the actual examination of each stage of a supply chain. The course study and summary
report helped Group 8 comprehend the importance of controlling supply chain phases for
firms. We can also better manage the business's operations and every supply chain
management procedure. We also improve our teamwork, presentation, and
communication skills in English.
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Members of the team take an active role in the project and read the entire report—not just
their own—to generate ideas for the final report's content. Particularly when working in
groups, we always support personal beliefs and arrange meetings to bring all the different
viewpoints together to provide the most comprehensive report.
How did you use team feedback to develop the team report?
Group 8 was able to identify the information that is missing and the content that has not
been thoroughly examined as a result of the lecturers' comments during the midterm
presentation, which made it possible for them to take their cooperation in implementing
the report's content more seriously. Our aim is to obtain the greatest outcomes and fully
satisfy the study topic's criteria at the end of the semester. The report's information comes
from reliable sources throughout and includes details from interactions with group
members directly.
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