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?
