Nike supply chain management (scm). case study

1. Description

WHAT IS THE IMPORTANCE OF SCM?

Nike is one of the most important companies in the sports industry. It has well-managed distribution processes and a very compelling product offering. Currently, the market is very competitive, which is why companies constantly seek to improve in order to provide greater satisfaction to their customers. In the case of Nike, with the new competitive operators with better service and delivery time and even fashion brands in motion in its market, it has caused Nike to increase the excellence of its supply chain which has risen in recent years and is seen as a competitive weapon.

Nike is clear that it is crucial that the consumer has accurate and complete information about the delivery of products. Likewise, the company works so that its supply chain is good and meets the needs of its customers. Here's some information on Nike's supply chain and its importance.

California's supply chain transparency legislation requires Nike to disclose its activities to eradicate slavery and human trafficking from its direct supply chains.

Nike takes federal and international efforts to eradicate all forms of forced labor very seriously (prison work, forced labor, bonded labor, human trafficking, or other similar cases)., by means of the standards of the Code of Conduct, initially established by Nike and subsequently adopted by its subsidiaries, included in the section “The work is voluntary”. In addition, employees and management directly responsible for managing the supply chain receive training on forced labor, including human trafficking and slavery.

On the other hand, it is of utmost importance that Nike verifies that the environments where its products are going to be manufactured meet the necessary conditions to provide a product that meets the needs of its customers, for which reason, it is Nike's policy to inspect the factories of possible recruitment before they are integrated into the supply chain to assess compliance with standards, including country-related risks such as forced labor, human trafficking, and slavery. Nike uses both internal and external audit services. However, if a contracted factory violates laws or Nike standards, it will have a responsibility to improve its operation according to a master plan of action. If the factory does not show progress on the action plan,will be subject to evaluation and penalties, including termination of the contract. Additionally, the factory's performance is evaluated through a sustainability contract, including labor and environmental practices along with cost, quality, and on-time delivery. This assessment encourages improvement in factory performance and further drives business for those top performing factories.

On the other hand, an important factor to analyze by Nike is the suppliers. These must be duly certified to be sure that the materials used are in accordance with the characteristics desired by the company, for which Nike will develop standards that are applied to the suppliers of the contracted manufacturers.

SCM PRINCIPLES

Nike renewed its code of conduct where it specified its business principles and ratified its serious improvement purposes. In addition, the code would constitute a tool to guarantee the continuity of its social commitment and also required that all its contractors adhere to the same conditions.

Several general Nike principles include:

Simplify end-to-end: Drive waste and complexity out of Nike processes to enable them and operate normally Standardize solutions to improve processes Copy and paste across the company: Replicate best practices across all business units, regions and brands Leading change: Investing in project and transition management Accelerating the pace: Responding quickly to new business needs Delivering business results: Finish what was started by achieving business benefits Respect the rights of all employees, including the right to free association and collective bargaining, Seek the minimum impact on the environment, Ensure a safe and secure workplace. healthy Contribute to the health and well-being of all employees.

In order to comply with these principles, Nike has supervisors who are in charge of controlling the work in each of its factories.

OBJECTIVES OF THE SCM

The objective of Nike's supply chain management is to satisfy the customer through the delivery of the product and the accuracy of the information provided to the customer. Methods are used to measure the accuracy of delivery on time (DIFOT) and the time to provide solutions to customer inquiries to meet the main objective of improving customer satisfaction. This change in Nike's supply chain is focused on customers, their needs and requirements, improving customer relationships and improving the delivery requested.

Nike seeks to improve basic working conditions by eliminating excessive overtime at its factories by 2018. This problem is one of the most serious compliance issues facing the company. As a result, Nike seeks to improve working conditions for nearly 800,000 factory employees.

Make all Nike brand, retail and business travel companies respectful of the environment and achieve recognition. Nike has been successful in reducing its CO2 emissions in the past two years through the World Wildlife Fund's Climate Savers program. The company also eliminated fluorinated gases (F gases) in all Nike brand products after 14 years of research and development on the Nike Air cushioning system. In addition, the company designs its products in a special way to reduce waste in product design and packaging, eliminate volatile organic compounds and make use of preferential materials for the environment, through the design of sustainable innovative solutions, which will bring many benefits.

Nike continues its commitment to supply chain transparency by updating the public disclosure of more than 700 factories around the world that produce Nike items. In 2005, Nike was the first company in its industry to unveil its factory base to foster industry transparency and collaboration. For the first time, Nike has also released the company's factory audit tools. The tools help provide more transparency and insight into how the company evaluates and monitors its factories for compliance with company standards.

Nike seeks to be a company recognized for its transparency in its supply chain, which is why it keeps updated the public information of more than 700 factories around the world that produce Nike articles. In 2005, Nike was the first company in its industry to unveil its factory base to foster industry transparency and collaboration. Also, for the first time, Nike has also released the company's factory audit tools. The tools help provide more transparency and insight into how the company evaluates and monitors its factories for compliance with company standards.

CHAPTER II

2. Application in the case study:

HOW THE SCM CAN BE APPLIED TO AN ORGANIZATION

First decoupling the logistics issue with respect to Supply Chain Management, for later its application in the “Nike” case; We understand that to apply a strategy such as supplying and having a respective control of it, it depends on certain principles:

- Segment: customers in need and adapt the chain according to it.

- Adjust: the logistics network to the service requirements and profitability of the segments.

- Stay: attentive to market signals, evolve consumer behavior.

- Develop: a technological strategy for the entire chain.

- Create: performance measurements, supply chain with reality criteria, analysis and adjustment.

- Update: permanently all tools (technical, production, administrative and marketing).

Taken to our case, Nike applies its SCM in accordance with California's legislation on transparency in supply chains, which requires Nike to make public the activities it carries out to eradicate slavery and human trafficking from its supply chains. direct supply. Nike is serious about federal and international efforts to eradicate all forms of forced labor (be it prison work, contract work, bonded labor, human trafficking or other cases). similar), using the standards of our Code of Conduct, originally established by Nike and subsequently adopted by our affiliates, including the "Work is voluntary" section.It is part of Nike's policy to inspect potential hiring factories before they enter the supply chain to assess compliance with standards, including risks, related to any country, such as forced labor, human trafficking and slavery. Nike uses both internal and external audit services. Nike is working on locating and understanding impacts higher up the supply chain in order to develop standards that apply to contracted manufacturers' suppliers. If a Nike-contracted factory violates laws or standards, it is your responsibility to improve its operation according to a master action plan. If the factory does not show progress regarding the action plan, it will be subject to evaluation and penalties,including termination of the contract.

Another measurable tool that can be applied at Nike is Stewart's PDCA cycle, Plan, Do, Check, Act.

CONDITIONS FOR IMPLEMENTATION

To resolve the situation of a company, the characterizing elements must be taken into account in the implementation of SCM in it. For this, it must be considered that the definition of SCM does not specify the question of what are the “signals” that one would expect to find in a company that has SCM implanted. The characterizing dimensions of an SCM strategy:

a) The design, mostly, of products specifically for each client

Designing specifically the products that the organization sells for each client implies a strategic orientation towards differentiation, a shift towards the last link in the chain to be managed and a determining factor in the entire production process.

b) The use in the production process of a flexible production system

The use of flexible production systems is linked to the previous characteristic, since a specific product design requires a great need for changes in molds and dies on a regular basis.

c) The existence of technological collaboration agreements with clients

The peculiarities of the supply needs make it necessary to enter into long-term contracts in which the trust and reputation of the parties play a very relevant role.

d) The existence of technological collaboration agreements with suppliers

Finally, the existence of collaboration agreements of a technological nature for the development of new products and / or processes with suppliers and customers represents another step in the comprehensive management of the supply chain.

CHAPTER III

3. Implementation procedure in the case study:

STEPS OR PHASES FOR IMPLEMENTATION:

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

Nike's support policies provide for efficient and cost-effective delivery of NIKE Inc. products in a responsible manner. Our efforts are focused on ensuring the efficient transportation, safety and security of NIKE, Inc. products throughout the supply chain. Additionally, we advocate for policies that help ensure that NIKE, Inc.'s supply chain - from factory to consumer - functions in a way that considers both people and the environment every step of the way. We work with various agencies to advocate for these policies. These include national governments, industry associations, and NGOs.

Nike sees two big changes in its 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 many more strategic partnerships than they did in the past. Not all clothing items will necessarily be made in China. But going forward, they see a lot more apparel companies focused on partnerships, and that should help inject more speed and agility into Nike's supply chain management.

1) The second big change depends on the need to be more demand driven. Point of sale technology has progressed significantly in recent years, and point of sale information is more readily available - and also much cleaner - than it was in the past. At this point, it is the company to figure out how to use that information to make itself much more responsive to the needs of our customers and deliver the products in a better appropriate procedure and creates value over time.

2) RFID will certainly help Nike in a number of ways for continuous improvement of supply chain management. RFID is used to identify incoming and outgoing product. RFID is being used in the warehouse to locate the product. It is being used in the manufacturing and processing industries to track and locate WIP (Work in Progress) and finished products. RFID is used to monitor and track product in transit, and RFID is used to ensure that store shelves are replenished. GAO RFID understands that the supply chain requires more than one type of RFID technology to meet all these different requirements and has developed different solutions for tracking as well as locating.But they believe it has the potential to help us build more demand responsiveness in our supply chain.

COMPETITIVE APPROACH TO STORAGE AND DISTRIBUTION:

The international production of clothing and home textiles involves complex and multifaceted challenges in the supply chain. Nike sportswear are from Thailand. Clothes sold in western countries are made elsewhere, usually in Asia. And it is a huge and complex logistical challenge to track and control international shipments and inland shipments of products. Imagine the international production and supply chain scenario between a European retailer (here called "buyer") and its production partner, called "producer") in Bangladesh. The buyer places an order for one million t-shirts to the producer. The producer makes the shirts on time, and then washes them, irons them and packs them in individual packages. And then the logistical nightmare begins.

It is a Chaos in the country of origin:

As soon as the production is complete, the individually packed T-shirts must be packed in cardboard boxes. A carton can hold 20 t-shirts, so for 1 million t-shirts (which is considered a standard purchase), we are talking about 50,000 boxes. Now, all these 50,000 cartons must be sent to the freight forwarder's warehouse 300 kilometers away. But hey, wait! Before dispatching them from the factory, there are a few more things to do. T-shirts of the same size are placed in the same cardboard and there are seven different sizes. In addition to that, the shirts come in six different colors, and the colors should not be mixed. Therefore, the 50,000 cartons must be accurately classified into 42 different groups, before they are loaded onto trucks and left the factory gate.

The cartons then arrive at the transitory warehouse. Bangladesh is one of the top three exporters of garment products in the world, so a standard warehouse can already hold 5 million other similar cartons for different buyers. And the cartons should not be mixed. Once again, a complex logistical procedure begins. Sort the cartons, load them into the containers in a special sequence, and place the containers on the ship. And after a 17-day long journey, the containers finally arrive in Europe.

The situation in the country of destination is not better:

Problems solved? Not yet. The buyer takes the containers to his own warehouse / distribution center. They opened the containers and found 50,000 cartons with 1 million T-shirts in them. The next task is to distribute the cartons to the 300 stores that the buyer owns throughout the country. But simply dividing 50,000 cartons into 300 batches and shipping a batch to each store is not the solution. It is much more complex than that. The buyer needs to check that each lot contains the correct number of shirts of each size and color. That means solving a puzzle of 50,000 cards, which contain shirts in six different colors and seven different sizes and need to be divided into 300 correct batches. The size of the lots is not equal and is determined according to the demand of each individual store. AND,In most cases, all of these logistics procedures are done manually, reading the individual barcode labels printed on each box. A real nightmare, huh?

That Wonderful Little Thing Called RFID:

Basically all of these problems can be largely solved by using RFID (radio frequency identification) tags. RFID tags are small electronic devices that use electromagnetic fields to transfer data to RFID readers.

Advantages and benefits:

Combination of different RFID and Internet technologies Provider of identification and location of items in the most immediate, automatic and precise supply chain of any company, in any sector and anywhere in the world Faster and more accurate readings (eliminating the need for direct line of sight) Lower inventory levels Improved cash flow and potential reduction in overhead costs Reduced stock out-of-stock Ability to inform staff or managers when to replenish the shelves or when an item has been placed in the wrong place Reduction of unknown loss Helps to know exactly which items have been stolen and, if necessary, where to locate them Integrating it with multiple technologies - video, location systems, etc..- with RFID readers on shelves help prevent theft in store Better utilization of assets Track your reusable assets (packaging, packaging, trolleys) in a more precise way Fight against counterfeiting (this is essential for the administration and pharmaceutical industries) Withdrawal from the market of specific products Reduction of costs and damage to the brand (breakdowns or loss of sales).Reduction of costs and damage to the brand (breakdowns or loss of sales).Reduction of costs and damage to the brand (breakdowns or loss of sales).

TECHNIQUES OR INSTRUMENTS FOR IMPLEMENTATION:

RFID can make significant contributions to ease production and supply chain problems in the textile and textile industry. RFID tags are attached to garments during production; They are traced throughout the entire supply chain. There is no need to remove product labels afterwards, but if desired by the customer, they can be disabled / killed on departure. Let's consider the situation we talked about earlier. If the producer had put RFID tags on the 1 million T-shirts during production, it would have been much easier to track and count the products, order them appropriately and ship them from the factory efficiently and saving time. When the cartons are delivered to the carrier's warehouse,the risk of mixing them with products from other buyers would have been close to zero and no cartons would have disappeared during the loading of the cartons into the container or into the container. Loading the containers on the ship. Each RFID tag has its own identity, which means that it helps to control all elements on an individual level. In the future, the buyer is likely to only use RFID tags in their barcode replacement products entirely. With an RFID system more data can be stored and analyzed.the buyer is likely to only use RFID tags on their barcode replacement products entirely. With an RFID system more data can be stored and analyzed.the buyer is likely to only use RFID tags on their barcode replacement products entirely. With an RFID system more data can be stored and analyzed.

SOFTWARE USED:

RFID (acronym R adio Frequency IDentification in Spanish RFID) is a storage system and remote data recovery using devices called tags, cards, transponders or RFID tags. The fundamental purpose of RFID technology is to transmit the identity of an object (similar to a unique serial number) using radio waves. RFID technologies are grouped within the so-called Auto ID (automatic identification, or automatic identification).

RFID tags (RFID Tags, in English) are small devices, similar to a sticker, that can be attached or incorporated to a product, an animal or a person. They contain antennas to allow them to receive and respond to requests by radio frequency from an RFID transmitter-receiver. Passive tags do not need internal power, while active tags do. One of the advantages of using radio frequency (instead of, for example, infrared) is that no direct vision is required between emitter and receiver.

The use of this technology would allow any product to be located within the supply chain. Regarding traceability, labels could have great application since they can be engraved, with which it could be known how long the product was stored, in which places, etc. In this way, important optimizations can be achieved in the management of products in supply chains based on the same product, and practically independent of the information system.

CHAPTER IV

4. Problems in the SCM:

PROBLEMS IN THE SUPPLY CHAIN OF THE CASE STUDY AND HOW THEY SOLVED IT:

In 2001, Nike implemented software to manage its supply chain, without having adequately tested its correct operation, a serious mistake for a company with such complex and global operations.

The result of this was a stock deficit in products that were in high demand and an excess in those that had little, according to press reports, this error cost Nike a loss in sales of 100 million dollars, in addition to reducing by a 20% the price of your shares.

The I2 demand planning system showed in 2000 that there would be more thousands of orders for Air Granett sports shoes than required by the market, as well as detailed that fewer Air Jordan shoes would be requested than necessary.

Although they state that they fixed the problem in the fall of the same year (2000) they stopped using the I2 software in the spring of 2001. And they declared in mid-2004 that the last quarters of 2003 had the highest profit margin in their history.

Causes:

Planning software was too slow It was constantly failing Failed to integrate well It was not compatible with other Nike SCM software Those responsible for planning were not sufficiently trained False sense of security in the application of the software

Development of the Problem:

Nike installed the i2 demand supply and planning software in 1999, while using old institutional systems. The i2 and its supply chain planner (which plans the manufacture of specific products) used different business rules and stored data in different formats, thus making it difficult to integrate the two applications.

The i2 needed so many adaptations to operate with Nike's old corporate systems; so much was the difficulty that it took up to 1 minute to register a single data. In addition to this, the system frequently failed overwhelmed by the tens of millions of numerous products the company used.

These problems spread to factory orders. The system ignored some requests and duplicated others. The demand planning system data for orders 6 to 8 weeks after they were recorded, which prevented the planning manager from remembering what he had asked the factory to produce. Before long, many orders for Air Garnett athletic shoes were traveling to factories located in Asia, while many orders for Air Jordan shoes were lost or removed.

Solution:

When they discovered the problems, Nike developed alternative solutions.

Data from the i2 demand prediction system had to be downloaded for manual reloading into the supply chain planning system, using programmers, quality control personnel, and business personnel whenever applications were required to share data, which which happened weekly.

In addition, consultants were hired to create databases in order to avoid parts of the i2 applications, and adapted bridges were built that would allow the i2 supply and demand planning applications to coexist.

Nike claims that the difficulties were resolved in November 2000, however the damage was done, seriously affecting Nike's sales and inventory for the following quarter. When the SAP system arrived at the company, the short and medium term planning was completely transferred from i2 to SAP.

Wolfram (Nike VP of Global Operations and Technology) believes that a false sense of security was relied upon when installing the i2, because compared to the SAP plan, it was a much smaller project (Nike has around 200 managers planning using supply and demand planning systems). He says it seemed like something they could do simply because they believed it didn't change everything else about the company, but instead it turned out to be a lot more complicated.

CONCLUSIONS

The main problems of the software failures were in themselves the incompatibility they had in terms of the old systems that Nike used in its SCM, which should be directly related to this new supply and demand forecasting software. This incompatibility generated the failures, the delay in the data analysis process, the omissions of orders and duplications of others, resulting in surpluses and shortages in the stock; This resulted in the 100 million dollars in losses that Nike had. Nike appropriately designed plans to solve the damage and they achieved it by replacing the I2 software, previously solving the problems through help from internal and external personnel hired specifically to solve the problems presented.To guarantee that our SCM is heading on a course according to our objectives, we must take into account the following: Segment customers in needs and adapt the chain accordingly, after that, adjust the logistics network to the requirements service and segment profitability, while we remain attentive to market signals, evolve consumer behavior. After that we develop a technological strategy for the entire chain, creating performance measurements, supply chain with reality criteria, analysis and adjustment. Finally, permanently update all the tools (technical, production, administrative and marketing). Finally, we must take into account the conditions to implement this SCM; design, mostly,of products specifically for each client, as well as seeing the use in the production process of a flexible production system, that is, using flexible production systems is linked to the previous characteristic. Also the existence of technological collaboration agreements with clients and the existence of technological collaboration agreements with suppliers. With these points we will implement a consolidated SCM.With these points we will implement a consolidated SCM.With these points we will implement a consolidated SCM.

ELECTRONIC SOURCES

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Cf. Portal Rueda, Carlos Antonio (2011). "Supply Chain Management: Introduction". Visited: February 16, 2017.