Nikes Adventure with ERP

INTRODUCTION: NIKE

Founded in 1957 by Philip Knight.

Manufacture: Sports equipment Sports wear Apparels Accessory

products

Products sold in over 140 countries.

NEED FOR SUPPLY CHAIN MANAGEMENT

Distribution network
configuration

Distribution strategy

Information

Inventory management
 Making
Moving
Buying

Ware
housing
Selling
 NIKE SUPPLY CHAIN

In 1975, Nike introduced Future Program.

Supply Chain Management was inadequate.

1998, Nikes global operations were broadly divided into 5 geographic regions.

Nikes profit dropped by 50% from US$ 798 million to US$ 399 million.
Launched NSC Project.

Initiative of Shelley Dewey,Vice President of Supply Chain and Steele.

Implement its ERP, Supply Chain, & CRM Software onto a single SAP Platform.
NIKES SUPPLY CHAIN MANAGEMENT
PROGRAMME

Greater flexibility
Aims & objectives Real time of constraints
Other expectations

Enhancing companys ability

Reducing inventory and capital
Goals investment risk
Improving services
Efficient global supply chain
I2S SOFTWARE IMPLEMENTATION

First part of supply chain strategy.

Cost of this project was US $40 million.

To match supply with demand.

To reduce the amount of raw material.

Used it as a legacy system rather than as a part of SAP ERP project.

Solution Objective Challenge Capability

Strategic Maximize profitability by Unclear Optimization

optimally allocating resources parameters
Planning

Demand Anticipate and influence Accurate demand Demand planning,

management demand estimation is channel collaboration
difficult

Supply planning Determine what to make and Size and Collaboration,

when and how to profitably complexity of optimization,
distribute supply problem
Speed

Production Determine what to produce Managing material Fast finite material &
and when & capacity capacity planning &
tradeoffs is scheduling
complex
 SUPPLY CHAIN MANAGEMENT PROBLEMS AT
NIKE

In February 2001, Nike, the athletic shoe and clothing giant had warned that its
third-quarter footwear sales were not up to the mark and as a result, its year-over-
year sales for the third quarter would be flat.

Nikes stock price fell almost 20% the day this announcement came while i2s stock
plunged nearly 22% (Nikes footwear division was powered by i2 Technologies.)

The problem Nikes new supply-and-demand software planning systems from i2

Technologies had hiccups in June 2000. The software incorrectly output orders for
thousands more Air Garnett sneakers than the market had appetite for and called
for thousands fewer Air Jordans than were needed.As a result, there were huge
inventory problems and overdue deliveries.
REASONS FOR FAILURE

Third party integrator.

Inexperience of i2.
Customization.
Trying to forecast too far out ahead.
Pilot test.
Problems in smooth integration.
Inadequate information.
Changing market conditions.
Complication of NSC project.
Review meetings.
 NIKE LEARNS PATIENCE

Nike learned from its mistakes.

The NSC project ultimately will consolidate a wide variety of legacy application
subsystems into approximately five core systems.

SAP AFS provides Nike with a complete enterprise management system, including
capabilities for financials, order fulfillment, and logistics.

The solutions data structure, designed specifically to meet the unique requirements
of the apparel and footwear industry, will allow Nike to more effectively manage its
inventory.
 By 1998, NIKE had 27 order management systems around the globe, all highly
customized and poorly linked to Beaverton.

To gain control over its nine-month manufacturing cycle, NIKE decided that it
needed systems as centralized as its planning processes.

ERP software, specifically SAPs R/3 software, would be the bedrock of

NIKEs strategy, with i2 supply, demand and collaboration planner
software applications and Siebels CRM software also knitted into the overall
system using middleware from STC.

So what has $500 million done for NIKEs business? Wolfram claims that better
collaboration with Far East factories has reduced the amount of pre-building of
shoes from 30 percent of NIKEs total manufacturing units to around 3 percent. The
lead-time for shoes, he asserts, has gone from nine months to six (in some
periods of high demand, seven).
 Better financial management
Improved revenue forecasting
Direct Decreased inventory level
Benefits Quicker manufacturing & design
process

Better integration between various

Non- departments
Improved level of decision making
quantifiable Better visibility into customer
Benefits order transactions
MEASURES TO OVERCOME DEMAND
FORECASTING PROBLEM

Well equipped and competent

system

Continuous interaction with the

customer

Proper analysis of data

Supplier and retailer feedback

WAYS TO AVOID SUPPLY CHAIN PROBLEMS

Monitor delivery performance

Coordinator for troubled

situations

Report obligations

Assessment of Supplier financial

situation

Press and other reports

LESSONS LEARNED

Be Patient

Define a business Goal

Re-engineering Process

Just Do It Over

Keep your eye on the price