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The Supply Chain Management Of Nike Marketing Essay

Info: 2351 words (9 pages) Essay
Published: 1st Jan 2015 in Marketing

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Nike is an innovation company, designing and planning for the sustainable economy of tomorrow, not just today. Climate change, and reducing Nike’s environmental footprint, is something the company has been focused on for well over a decade, in conjunction with broader sustainability work.

 By setting strong targets greenhouse gas emissions from owned operations and business travel were reduced by 18 percent from 1998 to 2005, despite an increase in the square footage of Nike’s operations.

 The majority of Nike’s climate change impact derives from the operations of the more than 700 contract factories producing Nike-branded product. 

Given that the transport operations which move Nike product from the point of manufacturing to the distribution centers account for about 25 percent of Nike’s CO2 emissions, the company has set a target to reduce the inbound logistics footprint by 30 percent.

Supply Chain Management which Nike have in its Considered Design

becomes a di¬€ erentiator for brands and a source of competitive advantage, company think it is crucial that the consumer has accurate, complete information on not just the delivery of ‘green’ products, but the extent to which the company is committed to greening its entire supply chain.”

As early as 2003, Nike developed a baseline of its supply chain general environmental footprint, including inbound logistics and subcontracted manufacturing.As part of the company’s Climate Savers agreement, Nike partnered with the University of Delaware to develop a model for measuring inbound emissions of product transportation from factory to ¬rst distribution facility. Nike is working to expand that model to measure outbound shipments from distribution facility to retail. Footwear contract manufacturing, a majority of which is in Vietnam and China, is another major challenge for Nike. The company has began with audits of key factories to identify energy-intensive processes and potential areas of savings.

Nike’s US supply chain team has set goals to reduce its overall carbon footprint and is working closely with third-party logistics providers to ¬nd opportunities to optimize fuel consumption and accelerate the use of alternative fuels. Nike also assessed its packaging footprint as part of a company-wide waste mapping exercise in making excellence in all aspects.

The Challenge

Finding a business solution that allows this leading apparel and footwear maker to align its demand and supply in a way that minimizes inventory and improve customer service levels. Business users were not satisfied with existing implementation of the demand planning system.

The Solution

Bristlecone developed and deployed planner DA and SC Policy Manager, composite pre-configured applications that allowed Nike to enforce higher level supply chain policies without having to deal with voluminous SKU Level demand and supply information. The composite apps bridged the gaps between Nike’s existing ERP and SCM systems. 

Business Impact

     > Better ROI from existing ERP and SCM solutions 

     > Improved visibility into supply and demand 

     > Planners empowered to better align supply with demand 

NIKE, Inc. recognizes the need for a well-coordinated and efficient supply chain for its business and the industry. Because the supply chain spans multiple jurisdictions from raw materials to production to shipping to retail and, ultimately, to consumers, a consistent and mature public policy position is needed.

Nike support policies that deliver efficient, cost-effective delivery of NIKE Inc. products in a responsible manner. Our efforts concentrate on ensuring efficient transport, security and safety of NIKE, Inc. products throughout the supply chain. In addition, we advocate for policies that help to ensure that NIKE, Inc.’s supply chain – from factory to consumer – operates in a manner that considers both people and the environment at each step of the way. We work with a number of bodies to advocate for these policies. These include national governments, industry associations and NGOs.

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Nike see two major changes in their supply chain management system. The first involves the apparel side of our business. With the elimination of quotas,they have changed their sourcing strategy to enter into many more strategic partnerships than they did in the past. Not all of apparel will necessarily be made in China. But going forward,they see many more apparel companies focusing on partnerships, and that should help in injecting more speed and agility into the supply chain management of Nike.

1) The second major change hinges on the need to be more demand-driven. Point-of-sale [POS] technology has progressed significantly in recent years, and POS information is more readily available – and also a lot cleaner – than it was in the past. At this point, it is up to company to figure out how to use that information to become much more responsive to the needs of our customers and deliver the products at a best suitable procedure and creates the value for time.

2) RFID will no doubt help Nike in a number of ways for continous improvement of supply chain management .RFID is being used to identify inbound and outbound product. RFID is being used in the warehouse to locate product. It is being used in manufacturing and processing industries to track and locate WIP (Work in Progress) and finished goods. RFID is being used to monitor and track product in transit, and RFID is being used to ensure store shelves are replenished.GAO RFID understands that the Supply Chain requires more than one type of RFID technology to satisfy all these different requirements and has developed different solutions for tracking as well locating.But they believe that it has the potential to help us build more demand responsiveness into our supply chain.

 Nike has played a leadership role, along with other businesses and multilateral development organizations, in supporting infrastructure development in Vietnam and encouraging supply chain management of nike inc. The first component of the program involved having key Vietnamese government officials visit a Nike footwear factory in Vietnam and subsequently physically follow the movement of finished products from the factory to the port. The group traveled to southern China, an area well known for its development of physical infrastructure. They also visited Singapore to see world-class port facilities and operations and learn about infrastructure planning and financing.

Not only the operation of nike in many countries today than they did 10-to-15 years ago, but the regulations in these countries are always changing. For example, back in 1990, the average tariff in India was about 58% for products coming in, and now it’s about 20% or so. Similarly, the average tariff in China used to be 30%, and today it’s about 6%. As a result, Nike operates differently today in the global marketplace – even in countries where they had a presence for years.

Formerly, because of the high tariffs, Nike tended to do mostly local sourcing. But now that tariff rates have fallen and subsequently increasingly starting to do much more deployment of global sourcing space, and that’s changing the whole Nike’s supply chain network

Nike also overhauled its supply-chain system, which often left retailers either desperatel. The old jerry-built compilation strung together 27 different computer systems worldwide, most of which couldn’t talk with the others. Under Denson’s direction, Nike has spent $500 million to build a new system. Almost complete, it is already contributing to quicker design and manufacturing times, and fatter gross margins — 42.9% last year.

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That still-modest portfolio of different brands helps to lessen the company’s dependence on hit shoes and could help Nike turn in a more consistent performance. That’s why Nike is eager to snap up complementary brands as they become available. In mid-August it paid $43 million for Official Starter Properties, licensors of sneakers and athletic apparel whose brands include the budget-level Shaq label. “What we’re trying to do is move toward more of a consumer, noncyclical model,” says Blair. “The key is trying to find the right balance of discipline, innovation, creativity, and structure.”

Nike’s Supply Value Chain

In 1984, Nike owned just 16% of the athletic-shoe market, and for much of the 1980s it was running neck-and-neck with Reebok (Wilson 1).   Now, with somewhere between 43-47% of that market, Nike is the undisputed leader. However, things are not perfect with the company.   In the late 1990’s, Nike began to see the results of many unresolved issues concerning competitive forces exterior to the company and a value chain, unrepresentative of its marketplace and enormous growth, interior to the company.   Both issues affected its bottom line negatively.   One significant issue was simply a function of poor inventory management and demand forecasting, coupled with the ongoing and dramatic slump in Asian sales. Nike had anticipated a doubling of Asian revenues, but saw instead a decline .  Nike also had recurring problems managing the flow of goods from manufacturers to retailers.   Finally, Nike’s competitors, most notably Rebox, New Balance, Adidas and Fila, were copying much of the look of Nike’s advertising campaigns, making its image projection much less effective.  

Nike faced many challenges that they face in building, managing, and expanding global supply chains. Following are some of the nuggets gleaned from their remarks:

Ocean freight between Asia and North America routinely takes

45 days – or even as long as 60 days, in the event of missed sailing schedules or other problems.

When an order is delayed, it has to be expedited through the manufacturing process, and the burden falls on transportation to offset the delays. But trying to make up for lost time by air freighting containers has a ruinous effect on freight budgets.

Cross-country cost comparisons for sourcing product should be calculated on an all-in basis, including the costs of ownership along with all other costs incurred across the supply chain.

Global supply chains daily involve such vexing problems as complex import-export processes, inadequate logistics infrastructures, and a gauntlet of regulations and trade agreements that are forever changing.

When network optimization studies are prepared, they must identify and include the infrastructure-related challenges that are commonplace in emerging markets.

Owing to escalating product proliferation, a key challenge is to build more speed, responsiveness, and adaptability into supply chains while still meeting the diverse needs of consumers in different markets.

Customers are becoming more sophisticated and demanding, insisting on shorter lead times and faster inventory-turns. To be competitive, suppliers must accommodate these requirements without inflating their cost structures.

Looking ahead, freight transport looms as a major source of concern – including rising costs, capacity bottlenecks, and homeland security.

The relative costs of manufacturing onshore versus offshore are shifting, and the balance could tip in favor of manufacturing beginning to migrate back to the U.S. from offshore locations.

Worldwide, Nike faces a huge amount of product proliferation, and their challenge is to build more speed, responsiveness, and adaptability into our supply chains while still meeting the diverse needs of consumers in different markets.They started to create more partnerships with suppliers and carriers and implementing lean manufacturing programs – everything and anything that can help us get more flexibility into their supply chain


At Nike — which has $16 billion in revenues today with the goal of getting to $23 billion by 2011 — process excellence is a key component of the company’s supply chain strategy. Nike’s three businesses — footwear, apparel and equipment — have some similarities since most of the products are made in Asia and sold to similar customers worldwide. Their production processes, though, are completely different. Much of this has to do with the fact that from the time Nike began in 1964, it has never owned a factory but has chosen to work through contract manufacturing. “They are trying to build our strength in process excellence through standardization and also doing this through the concept of lean manufacturing, which Toyota has made popular.”

Nike is also working towards what it calls “delivery precision.” Nike conceives its products in the form of collections. A collection could consist of a top apparel, a bottom apparel, shoes, bag, cap, etc. This is how customers typically like to buy products. While Nike designs these products as part of one collection, each category of items is made in different locations. As a result, if supply chain execution goes awry, these products are not available as complete collections, and that leads to loss of sales. “Getting this streamlined is extremely challenging because it involves changing the way contract manufacturers work.

“Nike supply chains need to support our different businesses and different business models,” “One of our key challenges is to design supply chains that can leverage what is common and use common platforms and, at the same time, customize parts of the supply chain wherever necessary to meet the end needs of the markets specially in countries like india.


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