Supply Chain in Nike

Presented by Group C6 Ashish Patodia(11127) Chirag Gupta(11133) Haniya Eram(11139) Kaustubh Sinha(11145) Naba Kumar Barman(11151) Paul Joseph Fernandez(11157)

OVERVIEW OF THE CASE

Introduction: NIKE The Journey NIKES supply chain Introduction of new supply chain system Benefits Reasons for i2s software failure Impact of failure in new system Conclusion

Introduction: NIKE
Founded in 1957 by Philip Knight. Manufactures:
Sports equipment Sports wear Apparels Accessory products

Products sold in over 140 countries.

The Journey
1960s-Phillip Knight(CEO) & William Bowerman partnered to sell running shoes to athletes named BRS Ltd. The Glorious 1970s Sales Grew from $10million to $270million. Creation of new designs Sales increased in Europe, Asia &Australia In 1971 designed Swoosh Symbol In 1972 BRS Ltd became Nike Inc.

Journey Contd..
The Successful 1980s Public Issue of 2 million shares of common stock Sports Research & Development Lab was set up Manufactured shoes in 11 countries and employed more than 3000 people Good hold on the overseas market New Punch Line adopted JUST DO IT

Journey Contd
The success story continues in 1990s
Total revenue surpasses $3 billions Opened a NIKETOWN in Chicago Nike Asia was formed Company implemented a SCM & CRM software

The turbulent beginning of 20th century Company profits fall in third quarter of 2001 by almost 24%
Failure of NIKE SCM software that it implemented in June 2000

Demand Management System

Nike were the first to introduce Futures booking program. In this orders were placed by retailers six months ahead of the delivery dates. These orders had to be forwarded to the factories in Asia. And the final product had to be shipped back. Started encountering problems with the orders due to increasing demand , number of factories and retailers.

New SCM and CRM System

Nike contracted i2, to install main system and SAP AG and Siebel Systems Inc. for CRM. Cost of i2 software is $40 million Total cost of project is $400 million and going to complete in 5 years

i2 Trade Matrix Plan Solution

Solution Objective Challenge Benefit

Strategic Planning

Maximize profitability by optimally allocating resources

Unclear parameters

Long term profitability

Demand management

Anticipate and influence demand

Accurate demand estimation is difficult

Improved customer service

Supply planning

Determine what to make and when and how to profitably distribute supply Determine what to produce and when

Size and complexity of problem

Global visibility and coordination , fast reaction to changes

Production

Managing material & capacity trade offs is complex

Reduced inventory, Improved due date performance

What benefits did the company expect to achieve by implementing a new supply chain system?
The IT overhaul was designed to streamline communications with buyers and suppliers. Lower operating costs. Reduce order to delivery time by 50 percent.

POSSIBLE REASONS FOR i2S SOFTWARE FAILURE?

Customization. Trying to forecast too far out ahead. Third party integrator. Early implementation Inexperience of i2. Pilot test. Nike implemented two projects simultaneously.

NIKEs Profit falls

Nikes profit falls by 24% in 3rd quarter of 2001
Trends are what make this industry so unpredictable. Not having the right shoes in the stores in that short window of opportunity is disastrous -John Shanley, an analyst at Wells Fargo Securities

How did the breakdown harm Nike?

Nikes share dropped from 48% to 39%. A large number of unpopular models were produced and had to sold at high discounted rates. Not enough quantity of popular models were produced. Additional shipping costs incurred. Liquidation of the excess inventory took Nike six to eight months. Soured relations between Nike and major retailers.

Important elements while implementing a new system in organization?

Use of third party integrators. Taking up one project at a time. Using the system after it has developed completely. Testing the system before implementing.

Mistakes made by Nike and i2

Both took hasty decisions without any cautionary measures. Before testing the system, it was already implemented in all the Nike outlets. Third party integrators were not there.

Comments on the future of Nikes supply chain system

In 2003 the company could closely monitor the movement of goods from raw materials through factories to retailers. Reduced its inventory levels. Gross margins and profits increased form 41% to 43%. Before almost 30% of Nikes orders were based on guesswork, in 2003 it reduced to 3% of guesswork. Future orders increased by 10% over the previous years.

Measures to overcome demand forecasting problem

Well equipped and competent system Continuous interaction with the customer

Proper analysis of data

Supplier and retailer feedback

BENEFITS

CONCLUSION
Implementation is a complex process.
Evaluating pros and cons. Continuous assessment. Adaptability Importance of pilot test.

Thank you
Just do it