Nike Brief

1.
Situation: 2018-2019
- Amanda Tucker: Nike’s Global VP of Sourcing
- Manages Global network: 500+ supplier factories producing company’s footwear, apparel, sports equipment
- Focusing on 3 challenges of SC:
+ Sourcing from suppliers that meet compliance standards: working conditions and environmental impacts
+ Encouraging suppliers to improve capabilities: by building management and production capabilities;
improving sustainability performance and product quality
+ Being responsive to customer demand across the world: considering adding supplier capacity closer to N/A
markets.
2. Nike
- The world largest sportwear brand (2018 sales: $36 billion; employees: 73,100)
- Product segments:
+ footwear: 64% sales
+ apparel: 31%
+ equipment: 4%
- Sales geographically:
+ N/A: 43%
+ EU, M/A, Africa: 27%
+ China: 14%
+ Asia Pacific + Latin America: 15%
- Competition:
+ Shares of US sneaker market: 44% in 2017; Adidas: 11%
+ Adidas – the biggest one
+ Under Armor: the growing athleisure market
- 2017: launched CDO to establish more direct relationships with customers, fueled by the Triple Double
Strategy:
+ double the cadence and impact of product innovation
+ double direct connections with customer by leading with Nike Direct and membership programs
+ cut product creation cycle timelines in half to speed up customers connection
3. Changes in Nike’s supply chain management

3.1. Country Risk Index - 2008
- Country track record on:
+ political stability
+ treatment of women
+ corruption
 Labor compliance risk
- Country-level conditions:
+ trade agreements
+ political risk
- Country risk index:
+ labor + property
+ environmental + business
+ individual safety + economy
+ cargo + corruption
3.2. Project Rewire
- Considered a long-term view of business performance, identifying the upstream factors that influenced
factory compliance
+ collect data to make a financial case
+ focus on the tangible assets by demonstrating the loss of real dollars and cents in terms of
profitability and turnover when labor compliance failed
- 2009 – Project Rewire
+ create a profitability SC in which social and environmental metrics were considered
alongside with financial metrics
+ make sourcing decisions balancing the 3 criteria: cost, quality, delivery speed
+ Corporate Responsibility Dept monitored supplier compliance with its code of conduct
+ called for an internal restructuring the Sustainable Manufacturing & Sourcing – SM&S
department -> oversee factory compliance and capability building
3.3. The manufacturing Index – 2012
- A Sourcing tool that rates suppliers on their performance in 4 areas: cost, quality, delivery,
and sustainability
- To demonstrate the brand’s commitment to a holistic approach to sourcing, and align
suppliers’ incentives with its own
- Rate each factory and each supplier group along each of the 4 criteria: 1-100 scale
- Informed and directed purchasing decisions -> prioritize supplier factories with the highest
ratings
3.4. Reorganizing Global Sourcing and Manufacturing – 2017
- Created a new role within Global Sourcing & Manufacturing: VP of Sourcing
- Amanda Tucker, responsibilities:
+ ensure Nike had enough contracted capacity to satisfy production needs
+ decide where to place orders and at what quantities
+ challenging for the new Sourcing group to create a strategy that worked for all product
segments: footwear: balancing order volume across supplier factories (exclusively served
Nike); apparel suppliers: had other customers
4. Global Sourcing at Nike in 2018:

- Expected to ship 1.3 billion units of product in 2018
+ worked with 500+ suppliers in 41 countries, employed 1 mil + people, 80% of whom:
women
+ Apparel: 328 factories, half of the volume: China, Vietnam, and Thailand, 34+ countries
+ Footwear: 124 factories, 94% of the volume: China, Vietnam, Indonesia, 10+ countries
- A reduction in the number of suppliers by time, but an increased commitment to a long-term
relationship with suppliers
 Selecting the optimal countries to source from, improving internal executive and
operational governance mechanisms, prioritizing suppliers that invest in capability
building, and increasing Nike’s proximity to market
- Engage collaboratively at the supplier headquarters level
+ 2014: building mechanisms to engage suppliers HQ in Nike’s strategies and plans,
increasing the transparency in planning process
+ involved Manufacturing Index to increase the salience of supplier level accountability and
sustainability: individual grade impacts on the whole group grade
- Release products during 4 seasons
+ planning for a new season began 2 years in advance
+ Categories and Product dept: develop the plans for a product line and set a target for
manufacturing costs
+ Global Sourcing and Manufacturing: determined what factories would produce what
products for what seasons; secured the production capacity across the source base to ensure it
could accommodate the demand for that product
+ Categories dept: placed purchase order, starting the production process
+ Products were shipped to Nike’s DCs, in 3 weeks
 It took 6-18 months to bring a new apparel or footwear style to market
- Nike wants to add production capacity near-shore but margin targets often conflicted with
doing so
- Shifted out of low-price and short-term model, focusing on innovation, service, and consumer
experience -> the role of suppliers?
5. Challenges of the model shift

5.2. Promoting supplier compliance
- Factories were audited once every 12 months by Nike and 3rd party auditors: employment,
occupational health and safety, environmental management practices
 Factories’ sustainability scores on the Manufacturing Index
- For noncompliant factories:
+ correction action
+ remediation verification
+ review meetings in quarterly base
- Tools
+ Sanctions: slowing a supplier growth plan, withholding orders of models, removing the
strategic supplier group title -> drive the factories focus on correction
+ Footwear Factory: increasing demand with decreased capacity
+ Specialty Supplier: challenging to trade-off between not putting a factory into sanctions and
increasing demand which required capacity
5.3. Building supplier capability
- Shift the approach with the aim to encourage factories to take ownerships for their own
training and invest in their own capabilities
- Tools:
+ Lean manufacturing and work engagement techniques: opened training centers, pilot in
different factories
 Improved worker conditions and business performance
+ Scaling: modernization and environment; Nike paid for piloting and demonstration of
positive business cases, but suppliers invest their own resources to deploy the initiatives at
scale within factory level; increased sharing among factories
Challenges: training and the level of philosophy adoption from suppliers
5.4. Geographic diversity
- 2018: to serve consumers faster and more personally, with deeper connections across
enhanced digital and retail experiences
- Problems of far decision-making:
+ Excessive inventory with some products and the prospect of not being able to meet higher-
than-anticipated demand with others
+ Retailers discount products -> premium pricing strategy and postpone purchasing intention
- Nike use consumer behavior as its demand signal rather than retailers’ orders
+ reduce lead time by adding new production capacity closer to markets
+ improve transportation
6. Looking ahead
- Nike did not have all the answers about trying to improve sustainability through greater
collaboration between suppliers and Nike
- Would suppliers be motivated to take greater ownership of strengthening their production and
management capabilities?
- Would they see the benefits of improved quality, productivity, and ability to collaborate with
Nike in innovation?
- How should the brand integrate its existing sourcing tools with a need to source a product
closer to marker?

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1.

3. Changes in Nike’s supply chain management

4. Global Sourcing at Nike in 2018:

5. Challenges of the model shift

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