Individual Assignment Nike Supply Chain Management.pdf

Understanding this, Nike has identified, built and developed their supply chain into a competitive advantage.. By investing in the supply chain as a competitive advantage, Nike hopes to

INDIVIDUAL ASSIGNMENT

*****

NIKE SUPPLY CHAIN MANAGEMENT

COURSE: SCM201

Table of Contents

OVERVIEW 3

DESCRIPTION 4

Philosophy 5

Core value 6

Strategy & Tactic 6

Cost reduction 6 Customer experience 8 Stable manufacturing cycle 8 Longer-term supplier relationship 9 EVALUATION 10

Advantage 10

Disadvantage 10

SUGGESTION 11

CONCLUSION 11

Nike, Inc is an American multinational corporation that designs, develops, manufactures, markets, and sells footwear, apparel, equipment, accessories, and services worldwide The company was founded in 1964 by William Jay Bowerman and Philip H Knight and headquartered in the Portland metropolitan area, near Beaverton, Oregon Nike currently has subsidiaries in over 200 countries Along with the famous brand Nike, Nike Group also owns a system of subsidiaries with other famous brands in the world such as Cole Haan, Converse, Inc, Hurley, LLC, Nike Goft, etc

According to Nike Financial Summary 2022 on Forbes, their financial ratio included revenue of

$46.9 billion, assets of $38.6 billion and profits of $6.1 billion, it became the world's largest supplier of athletic shoes - apparel and a major manufacturer of sports equipment

Every corporation has always understood that owning a strong supply chain is a competitive advantage over other competitors in the business In other words, supply chain management is no longer an operational function of leading companies but becomes a strategic part of the company Understanding this, Nike has identified, built and developed their supply chain into a competitive advantage

Since 2005 until now, Nike's supply chain has achieved many great successes Along with Apple, Nike's supply chain is considered one of the most efficient supply chains today According to The Gartner Supply Chain Top 25 for 2022, Nike ranked 13th best supply chain worldwide based on scores on key attributes such as ESG, three-year weight return on physical assets (ROPA), revenue growth and inventory turns[ CITATION Mik22 \l 1033 ]

By investing in the supply chain as a competitive advantage, Nike hopes to reduce the time from order receipt to final product delivery to the retailer Moreover, this investment will help the supply chain become leaner (lean supply chain) and better able to quickly respond to customer needs

Nike's manufacturing process is as follows: Nike researches and designs the product then delivers the model to factories for mass production After that, the product will be transferred to the Nike company, from where Nike will carry out the process of distributing and selling products Nike sells their products through their own retail stores and digital platforms, to retail accounts and through a mix of independent distributors, licensees and sales representatives in virtually all countries around the world Virtually all of the products are manufactured by

independent contract manufacturers [ CITATION Nik22 \l 1033 ].

‘To bring inspiration and innovation to every athlete* in the world.

*If you have a body, you are an athlete.’ [ CITATION Nik \l 1033 ]

This philosophy drives Nike to do everything possible to expand human potential They do that

by creating groundbreaking sport innovations, by making their products more sustainable, by building a creative and diverse global team and by making a positive impact in communities where they live and work

Core value

Cost optimization: Nike's top priority has successfully earned them $5.3 per pair of shoes which means $2.8 more than Adidas' profit - $2.50[ CITATION LêT17 \l 1033 ]

Customer orientation: Nike has spent half a century shifting big ideas into scaled, sustainable platforms that have changed their products and manufacturing process, fueled their design ethos, and championed the athlete community[ CITATION Nik1 \l 1033 ]

Supply chain relationship management: tracking the work results of hundreds of manufacturers and thousands of retailers is not easy Therefore, Nike determines that the cooperation between the company and related units needs to be planned transparently and clearly

Non-stop innovation: John Donahoe, President and CEO of Nike once mentioned that ‘NIKE is, and always will be, a brand of action We don’t just say we want to create positive change in the world—we set out to do it And so long as we can help shape a brighter future, we will never stop working to do better.’[ CITATION Nik221 \l 1033 ]

Cost reduction

Outsourcing: sneakers are one of the most labor-intensive products, and with the sky-high labor costs in the US and Europe, making shoes in these two biggest markets is almost suicide Because of that, nearly 99% of sports shoes in the US are manufactured abroad A supply chain that completely outsources production helps Nike reduce direct labor costs, infrastructure construction costs, and administrative costs According to Nike’s manufacturing map, most of their factories are concentrated in Asian countries such as China, Indonesia, Vietnam, Philippines, Taiwan, Korea Furthermore, thanks to the expansion of the manufacturing market

by outsourcing, Nike has the flexibility to switch suppliers at a lower cost

Moreover, Nike forced more than 85% of their manufacturing partners to adopt the lean manufacturing method and achieve their #1 priority - cutting costs All of the above efforts have helped them save 0.15 USD (about 3,500 VND) for each of their shoes The seemingly insignificant number will be multiplied with more than 900 million products released each year, providing a unique competitive advantage in the market[ CITATION LêT19 \l 1033 ]

Inventory control: Nike only proceeds with production when there is certain confirmation of purchases from retailers As a result, they have reduced the percentage of goods needed to be produced, helping to reduce inventory from 30% to 3%[ CITATION MIS22 \l 1033 ] Moreover, Nike Factory Outlet Store and Clearance Store, which were founded to deal with large inventory, obsolete and defective products will sell these products with a price that is lower than the setting one

Customer experience

Delivery time: shorten the time from 9 months to 6 months from the time the order is received until it is delivered to the consumer

Customer understanding: Nike follows the D2C business model by selling products directly to consumers through their own stores, websites or apps, which means Nike completely controls the purchase journey, the brand experience, and the most important advantage: data This has given Nike the ability to accurately convey their messages and effectively approach the needs and

desires of consumers, thereby chasing after market trends and continuously improving product quality

Management and handling returned items: returns are not conducted by many businesses due to the relatively high two-way shipping costs However, nowadays, many companies see it as a long-term competitive strategy Customers tend to give more trust to businesses that provide exchange and return services In the long run, the brand reputation and customer loyalty will be enhanced

Stable manufacturing cycle

Nike invests heavily in technology and information systems to avoid the risk of interruption at each link in the chain Besides, they also choose a risk manager for each link to ensure manufacturing continuity

Investing in technology Nike rarely employs direct workers Instead, there are modern "Robot":

machines called Grabit with 20 times more productivity than humans with an error rate of approximately 0[ CITATION VũM21 \l 1033 ] In Nike's factory, humans only supervise, manage and control devices Everything is almost completely automated to save time and huge labor costs

Investing information system for the supply chain backbone, Nike invested $500 million to: build a new information system to replace the old one As a result, design and production were accelerated and profits increased 42.9% in 2003, compared with an average of 39.9% over the previous five years [ CITATION AMI22 \l 1033 ]

Longer-term supplier relationship

Nike, Inc Statement on Force Labor, Human Trafficking and Modern Slavery for Fiscal Year

2022 has shown that the corporate wish to grow the business through long-term relationship with

suppliers To implement this wish, Nike selects suppliers based on certain criteria such as business sustainability, environmental impact, human rights, cost and quality of raw materials, etc In addition, Nike will keep the list of material suppliers to manage quality and price Nike’s

5 major suppliers include Pou Chen, PT Pan Brothers, Fulgent Sun International, Delta Galil and Eagle Nice[ CITATION JWI22 \l 1033 ]

EVALUATION

Advantage

Outsourcing: dramatically cutting production costs helps Nike get more profit per product and has more time to invest in the company's strengths: customer research and product design Besides, thanks to outsourcing, Nike could flexibly switch suppliers at a favorable price, access different technologies and expand the market by reaching many potential customers

Lean manufacturing: reducing waste, improving efficiency in production and cutting inventory D2C: directly selling helps Nike to access more customers’ data to analyze and understand consumer purchasing patterns, timely innovate, and capture opportunities

Digitalization: Nike's heavy investment in technology helps the supply cycle continue smoothly Besides, Nike also takes advantage of technology to predict future demand and create a backup plan for the worst scenarios

Disadvantage

Supply chain complexity: including many components such as multiple suppliers, factories, and distribution centers that make it difficult to manage the entire chain

Outsourcing risk: local laws, regional exchange rate differences, product quality issues, lack of potential employees, etc Moreover, geographical barriers sometimes prevent Nike from getting the necessary information in time when encountering problems

Ethical concerns: criticism for using sweatshops and illegal labor to deal with mass production Environment impact: though Nike has made efforts to reduce the impact, their supply chain still has a significant carbon footprint due to transportation, energy consumption and industrial waste

SUGGESTION

Improving transparency: Nike should publicize more information about their supply chain such

as suppliers’ information and working conditions to improve their reputation

Invest more in technology: the more modern the technology, the more optimal the supply chain management For example, investing in the information system will help Nike access accurate information faster in order to control the situation better and guarantee the continuity of the supply circulation

Concerning employees: opening training courses, upgrading the working environment, setting out incentive policies to improve the staff qualifications

CONCLUSION

The supply chain occupies an irreplaceable position for trading and manufacturing enterprises

An effective supply model will make the process of providing goods to consumers more convenient and faster Nike's supply chain possesses most of the advantages that almost every company wants, especially effective cost optimization without affecting quality or chain operation Besides, the cumbersome supply chain model and the risk of outsourcing are two

major disadvantages that Nike needs to overcome By implementing the above recommendations, Nike can somewhat improve their supply engine and maintain their competitive position in the market

REFERENCES

AMICA, 2022 Chuỗi quản trị cung ứng: Những bài học từ Nike [Online]

Available at: https://amica.vn/blogs/phan-phoi/chuoi-quan-tri-cung-ung-nhung-bai-hoc-tu-nike AMIS, M., 2022 Chuỗi cung ứng của Nike – Mô hình cung ứng hiệu quả hàng đầu [Online] Available at: https://amis.misa.vn/67048/chuoi-cung-ung-cua-nike/

CARPENTER, J W., 2022 Nike Stock: Analyzing 5 Key Suppliers (NKE) [Online]

Available at: https://www.investopedia.com/articles/markets/051416/nike-stock-analyzing-5-key-suppliers-nke.asp#citation-16

Griswold, M., 2022 The Gartner Supply Chain Top 25 for 2022 [Online]

Available at: https://www.gartner.com/en/articles/the-gartner-supply-chain-top-25-for-2022 Hiền, V M., 2021 Khám phá quy trình sản xuất giày thể thao Nike với quy tắc vàng ấn tượng! [Online]

Available at: https://lakbay.vn/tin-tuc/quy-trinh-san-xuat-giay-the-thao-nike-voi-quy-tac-an-tuong-1856.html

Nike, 2022 A Letter from Our President and CEO [Online]

Available at: A Letter from Our President and CEO

Nike, 2022 NIKE, INC STATEMENT ON FORCED LABOR, HUMAN TRAFFICKING AND MODERN SLAVERY FOR FISCAL YEAR 2022 [Online]

Available at:

file:///C:/Users/admin/Downloads/NIKE_Inc_Statement_Forced_Labor_Human_Trafficking_Mo dern_Slavery_FY22_11.30.2022.pdf

Nike, n.d A CULTURE OF INNOVATION [Online]

Available at: https://about.nike.com/en/volumes/a-culture-of-innovation

Nike, n.d WHAT IS NIKE'S MISSION? [Online]

Available at: https://www.nike.com/vn/help/a/nikeinc-mission

Sang, L T., 2017 Bài toán chi phí và giá thành trên mỗi đôi giày Nike & Adidas [Online] Available at: https://www.brandsvietnam.com/12953-Bai-toan-chi-phi-va-gia-thanh-tren-moi-doi-giay-Nike-Adidas

Sang, L T., 2019 Cắt giảm chi phí chuỗi cung ứng, Nike tạo ra tỷ suất lợi nhuận vượt trội [Online]

Available at: https://www.brandsvietnam.com/16292-Cat-giam-chi-phi-chuoi-cung-ung-Nike-tao-ra-ty-suat-loi-nhuan-vuot-troi