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CONTENTS

1. Nike ......................................................................................................................................... 3

2. Supply chain ............................................................................................................................ 4

3. Global Coordination of Activities at Nike ............................................................................... 5

4. Nike Supply Chain................................................................................................................... 6

5. Backward Supply Chain .......................................................................................................... 7

6. Manufacturing Map of Nike .................................................................................................... 8

7. Nike’s manufacturers ............................................................................................................... 9

8. Sourcing ................................................................................................................................... 9

9. Product Design ...................................................................................................................... 16

10. Raw Materials .................................................................................................................... 16

11. Manufacturing Process....................................................................................................... 17

12. Sustainable practices followed by Nike ............................................................................. 18

13. CHALLENGES ................................................................................................................. 26

14. Suggestions for improvement in backward supply chain .................................................. 27

15. Forward Supply chain ........................................................................................................ 27

16. Nike Logistics .................................................................................................................... 28

17. Supply chain management through e retailer..................................................................... 33

18. Delivery: ............................................................................................................................ 37

19. Consumer and its Value in Supply chain of Nike .............................................................. 37

20. Improvement in Forward Supply Chain of Nike ............................................................... 40

21. Conclusion ......................................................................................................................... 46

22. REFERENCES- ................................................................................................................. 48


List of Figures

Figure 1: NIKE Matrix.................................................................................................................... 5

Figure 2: Supply chain of Nike ....................................................................................................... 7

Figure 3: Manufacturing Map of Nike ............................................................................................ 8

Figure 4: Manufacturing Process by Nike's suppliers .................................................................. 10

Figure 5: Sourcing and Manufacturing ......................................................................................... 13

Figure 6: Manufacturing Process .................................................................................................. 18

Figure 7: Nike Shoe ...................................................................................................................... 19

Figure 8: Recycle of shoe ............................................................................................................. 21

Figure 9: Recycle with waste ........................................................................................................ 23

Figure 10: Nike Packaging............................................................................................................ 26

Figure 11: Forward Supply Chain................................................................................................. 28

Figure 12: Inbound logistics mode of Nike .................................................................................. 30

Figure 13:Outbound Logistics (Distribution channels of Nike) ................................................... 31

Figure 14: E-commerce workflow diagram( (Pekonen, 2013) ..................................................... 33

Figure 15: Supply chain management of E-commerce ................................................................ 34

Figure 16: Nike distribution channels ........................................................................................... 34

Figure 17: Evolution of E-tailer in Market ................................................................................... 36

Figure 18: Supply chain Management of Sports Footwear of Nike ............................................. 36

Figure 19: Nike cross over with Flex ............................................................................................ 39

Figure 20: Direct-to-store operation ............................................................................................. 42

Figure 21: Nike+ Application ....................................................................................................... 44

Figure 22: Foot Scanning Application .......................................................................................... 46


1. Nike

Nike, originally known as Blue Ribbon Sports (BRS), was founded by University of Oregon track
athlete Phil Knight and his coach Bill Bowerman in January 1964. It is one of the world's largest
designers, marketers and distributors of athletic footwear, apparel, equipment and accessories for
a wide variety of sports and fitness activities. The company operates in the Americas, Europe, the
Middle East, Africa and Asia. Nike is a worldwide famous sports company, who had proven
themselves among its competitors. It takes its name from the Greek goddess of triumph, and is
marked by the profoundly prestigious swoosh logo and "Just do it " company slogan. Nike global
operations spread over United States; Europe, Middle East and Africa; Asia Pacific. Since the mid-
1970s, (Doorey 2011) Nike has outsourced its manufacturing activities to various countries
especially in Asia and Africa where labor is cost effective. NIKE offers its products across four
categories which are footwear, apparel, equipment and other. The company sells its products
through NIKE owned retail stores, as well as through various independent distributors and
licensees, in virtually all countries across the world. The company also offers its products through
its Nikebsite: Nike.com. NIKE's footwear products are also designed for kids, as Well as other
athletic and recreational uses such as cricket, lacrosse, tennis, volleyball, wrestling, walking, and
outdoor activities. The company also manufactures and sells various products for casual and
leisure use. The company also markets apparel with licensed college and professional team and
league logos. NIKE sells a wide range of performance equipment and accessories under the NIKE
brand name, designed for sports activities. These include bags, socks, sport balls, eyeNikear,
timepieces, digital devices, bats, gloves, protective equipment, golf clubs, and another sports
equipment. Wholly owned subsidiaries of NIKE include Converse and Hurley International.
Converse designs, distributes and licenses casual sneakers, apparel and accessories under the
Converse, Chuck Taylor, All Star, One Star, Star Chevron and Jack Purcell trademarks. Hurley
International designs and distributes a line of action sports and youth lifestyle apparel and
accessories under the Hurley trademark.

Nike owns no factories for manufacturing its footwear and apparel, which make up ~88% of its
revenues. Instead, manufacturing is outsourced to third parties because of the cost advantages of
doing so. Most raw materials in Nike’s supply chain are sourced in the manufacturing host country
by independent contractors.
2. Supply chain

A supply chain is the network of all the individuals, organizations, resources, activities and
technology involved in the creation and sale of a product, from the delivery of source materials
from the supplier to the manufacturer, through to its eventual delivery to the end user. The supply
chain segment involved with getting the finished product from the manufacturer to the consumer
is known as the distribution channel.

Entire network of entities, directly or indirectly interlinked and interdependent in serving the same
consumer or customer. It comprises of vendors that supply raw material, producers who convert
the material into products, warehouses that store, distribution centers that deliver to the retailers,
and retailers who bring the product to the ultimate user. Supply chains underlie value-chains
because, without them, no producer has the ability to give customers what they want, when and
where they want, at the price they want. Producers compete with each other only through their
supply chains, and no degree of improvement at the producer's end can make up for the deficiencies
in a supply chain which reduce the producer's ability to compete (Supply chain, 2019)

Supply chain management (SCM) is the active management of supply chain activities to maximize
customer value and achieve a sustainable competitive advantage. It represents a conscious effort
by the supply chain firms to develop and run supply chains in the most effective & efficient ways
possible. Supply chain activities cover everything from product development, sourcing,
production, and logistics, as Well as the information systems needed to coordinate these activities.

The organizations that make up the supply chain are “linked” together through physical flows and
information flows.

Physical Flows

Physical flows involve the transformation, movement, and storage of goods and materials. They
are the most visible piece of the supply chain. But just as important are information flows.

Information Flows

Information flows allow the various supply chain partners to coordinate their long-term plans, and
to control the day-to-day flow of goods and materials up and down the supply chain.
3. Global Coordination of Activities at Nike

Nike has established its presence in six continents, with an estimated 800,000 workforces in
subsidiaries and contract factories. With 56% of the annual income from Non-US retail stores, it
very obvious of the diversification and international presence of the organization (Nike News,
2012).

To maintain a coordination with all the different subsidiaries globally, Nike has about 67 factories
in Vietnam with about 330,000 workers producing a wide range of sportswear, shoes and apparels.
The choice of Vietnam as allocation is primarily for the labor cost is deemed very cheap compared
with European communities and USA. The average wage to Vietnamese factory worker is 69 cents
for an hour. The average customs values for sneakers destined for the US market is 5.27USD while
the retail cost in the market ranges between 60usd to 120usd (Kernaghan, 2015). The hourly wage
of an average factory worker in the USA is about 30usd inclusive of insurance and other benefits
(Assess cost everywhere) as against 69 cents in Vietnam.

For a more sustained growth and coordination, Nike introduced a regional headquarters to the
existing organizational matrix for EMEA and this structure is cascaded down to the regional level,
also functions and responsibilities were introduced for each hierarchy.

Figure 1: NIKE Matrix

Global Headquarter:

Without cooperate identity all structure will be faulty, at Nike the global headquarter creates a
common identity and culture. The consumer need is paramount and its satisfaction through several
laid down processes are the culture everyone one is indoctrinated irrespective of your position in
the supply chain.

As the cooperate headquarter is is not only saddled with the responsibility of making decisions but
also oversees and manages the three key markets and operations of US, Americas and Asia Pacific
branches of Nike. Instead of the usual regional headquarters, all the units and departments that are
required for the management and operations of these markets are located at the global
headquarters. The EMEA region is managed by the European regional headquarters.

Regional Headquarters:

This additional hierarchy to the existing structure was to reduce complexity and promote
transparency within the Nike organization. With the European headquarter situated in the
Netherlands and have 27 countries under the EMEA region and this is subdivided in three countries
and four sub-regions. Italy and France report directly to the regional headquarter while other
countries are subdivided into groups. These grouping by regions are able to synergize and
streamline the operations, reduce the time required for decision making and facilitate coordination.
Smaller markets are able to show their significance without being over shadowed by the larger
markets.

AGSS - Austria, Germany, Switzerland and Slovenia.

CEMEA- Central Europe, the Middle East and Africa)

Iberia- Portugal and Spain.

Northern Europe- Belgium, Denmark, Finland, Norway, the Netherlands and SNikeden.

Subsidiaries:

Subsidiaries enjoy a certain level of autonomy; operational decisions are taken by these
subsidiaries in their own locality in so far as it does not exceed the project limits granted to them
by the cooperate. Subsidiaries are setup within regions to ensure a consistent brand positioning.

4. Nike Supply Chain

The supply chain of Nike is interesting in terms of it outsources all of its activity to the
subcontarctors. This helps Nike in focusing on design development and also making new
marketing strategies and implementing them by means of the retail outlets and other channels. The
supply chain of Nike is divided into backward and forward supply chain which will be discussed
in detail in later sections. The key intermediaries of Nike’s supply chain are listed below.

Raw material Contract Distribution


Logistics Retailers Consumers
suppliers manufacturers centers (DC)

Figure 2: Supply chain of Nike

5. Backward Supply Chain

Backward supply chain is a network between a company and its suppliers to produce and distribute
a specific product to the buyer. This network includes different activities, people, entities,
information, and resources. Backward supply chain also represents the steps it takes to get the
product from its raw material state to the finished product.

The steps in backward supply chain include moving and transforming raw materials into finished
products. The entities involved in this include product design, raw material sourcing and
manufacturing of finished goods. It also involves transportation of raw material from vendor to
manufacturing site but it is not a major factor of backward supply chain.
6. Manufacturing Map of Nike

In 2005, NIKE was the first company in such industry to publicly disclose its factory base, in the
interests of transparency and collaboration. Nike's Manufacturing Map is a tool to learn about the
independent factories contracted to make Nike, Hurley, and Converse products—including the
names and location of each factory, the types of product made, the factories that supply their
collegiate product and demographic statistics about the workers at each factory. The interactive
map is updated on a quarterly basis to reflect changes in its source base.

Figure 3: Manufacturing Map of Nike

This resource provides extensive details about the factories Nike contracts with around the world.
From the detail provided by its manufacturing map, they can easily learn more about the types of
products made, the factories that supply its collegiate product, demographic statistics about
workers at each factory and the factory address and contact information.
7. Nike’s manufacturers

NIKE owns no factories for manufacturing its footwear and apparel. Instead, manufacturing is
outsourced to third parties because of the cost advantages of doing so. Most raw materials in
NIKE’s supply chain are sourced in the manufacturing host country by independent contractors.

NIKE is one of the pioneers of the industry-defining manufacturing outsourcing strategy. It’s now
exploring innovative ways of manufacturing so it can customize products on an unprecedented
scale.

Nike works with contract factories and set standards for factories to ensure that its products are
made responsibly and sustainably.

Footwear manufacturers: NIKE’s footwear is manufactured outside the US by independent


contract manufacturers that often operate multiple factories.

Apparel manufacturers: Like footwear, all of NIKE’s apparel is manufactured outside the US by
independent contract manufacturers.

Third-party licenses

Nike also has license agreements that permit unaffiliated parties to manufacture and sell using
NIKE-owned trademarks, certain apparel, digital devices and applications, and other equipment
designed for sports activities.

8. Sourcing

Teamwork is at the foundation of our approach to business. NIKE builds long-term relationships
with suppliers who share their commitment to make its products responsibly and sustainably.

Partners in Action

Nike work with a wide range of partners, including its suppliers, other businesses, governments,
multi-stakeholder organizations, unions, civil society organizations and others to address risks and
to strengthen the resiliency and capability of its supply chain.

It continues to invest in its relationships with partners such as the Sustainable Apparel Coalition,
the Fair Labour Association (FLA), the Better Work Programme and the Social Labour
Convergence Project. Additionally, Nike works with these organizations on joint standards, tools,
programs and advocacy.

Figure 4: Manufacturing Process by Nike's suppliers

Global Partnerships

Some affiliations take place at a country level. For example, in Indonesia, Nike was an original
signatory of the 2011 Freedom of Association Protocol in Indonesia, which was signed by unions,
suppliers, and leading brands manufacturing in the country. The brand meets regularly with the
National Committee to review progress and discuss further opportunities for improvement.

NIKE is also working on addressing risks deeper in the supply chain, with a focus on advancing
industry approaches and collaborative tools through existing associations. The project (FLA)
focuses on preventing and addressing child labor and improving labor recruitment practices for
migrant workers at the farm level.

Strengthening Laws

Beyond the brand's (NIKE) own standards and programs, it advocates publicly for strengthening
local laws and protecting the rights of workers. It also advocates for the inclusion of labor and
environmental provisions when free trade agreements are negotiated.
NIKE continues to look for opportunities to help support its suppliers. For instance, NIKE's
partnership with the International Finance Corporation, established in 2016, offers factories that
comply with its Code of Conduct for better financing terms. So far, 23 factories are currently taking
advantage of this program due to their continued sustainable performance.

NIKE understands the fact that no one organization can solve all the societal and environmental
challenges a brand faces. Solutions require input and collaboration from a diverse range of
stakeholders including governments, businesses, trade unions, civil society and consumers. It
continues to work with other stakeholders to identify creative tools and approaches to advance
human rights and sustainable business.

Sourcing and Manufacturing Standards

When it comes to Nike, standards at sourcing and manufacturing are very necessary. The standards
are set by Nike and are mandatory to be followed by the contractors strictly.

Setting Standards

When it comes to business and sport, NIKE value fair play. It believes world-class manufacturing
is grounded in standards that respect the environment, the people who work in factories and the
principles of a healthy and safe workplace.

NIKE understands and follows the responsibility to run its business in an ethical way, and that
responsibility extends to the contract manufacturers who make their products.

NIKE’s Code of Conduct and Code Leadership Standards set its expectations for suppliers. They
respect the rights of the people who work in factories, including requiring at least minimum wage
or prevailing wage (whichever is higher), equal pay for equal work and a commitment to safe and
healthy work environments.

Code of Conduct

Nike has a longstanding commitment of working with suppliers on improving manufacturing


conditions and minimizing negative impacts on workers, local communities and the environment.
Since the brand first launched its Code of Conduct in 1992, it continued to evolve its standards
and programs to drive improved outcomes for the workers in the supply chain and communities
where its suppliers operate.

According to NIKE, every supplier factory that makes products for Nike must meet a rigorous set
of compliance requirements, because Nike's Code of Conduct lays out the minimum required
standard the brand expects each supplier factory or facility to meet.

NIKE expects all its suppliers to share its commitment to the Nikelfare of workers and using
resources responsibly and efficiently. It works with suppliers who show leadership in sustainability
and who have achieved a foundation of compliance and want to move into new and innovative
labor practices.

The brand regularly reviews supplier factories to assess the ability to meet its high standards.

1) Employment is voluntary: The supplier does not use forced labor, including prison labor,
indentured labor, bonded labor or other forms of forced labor. The supplier is responsible
for the employment eligibility fees of all workers, including recruitment fees.

2) Employees are age 16 or older: Supplier’s employees must be at least age 16 or over the
age for completion of compulsory education or country legal working age, whichever is
higher. Employees under 18 are not employed in hazardous conditions.

3) Supplier does not discriminate: The men and women employed by the supplier are not
subject to discrimination in employment, including hiring, compensation, promotion or
discipline, on the basis of gender, race, religion, age, disability, sexual orientation,
pregnancy, marital status, nationality, political opinion, trade union affiliation, social or
ethnic origin or any other status protected by country law. Women and men shall receive
equal pay for work of equal value.

4) Freedom of association and collective bargaining are respected: Supplier shall


recognize and respect the right of employees to freedom of association and collective
bargaining. Where the right to freedom of association and collective bargaining is restricted
under law, the supplier allows the development of parallel means for independent and free
association and bargaining.
5) Harassment and abuse are not tolerated: Supplier’s employees shall be treated with
respect and dignity. Employees are not subjected to physical, sexual, psychological or
verbal harassment or abuse.

6) Working hours shall not excessive: Suppliers shall not require workers to work for more
than the regular and overtime hours allowed by the law of the country where the workers
are employed. The regular work week shall not exceed 48 hours. Suppliers shall allow
workers at least 24 consecutive hours of rest in every seven-day period. All overtime work
shall be consensual. Suppliers shall not request overtime on a regular basis and shall
compensate all overtime work at a premium rate. Other than in extraordinary
circumstances, the sum of regular and overtime hours in a Week shall not exceed 60 hours.

Figure 5: Sourcing and Manufacturing

7) Compensation must be timely paid: Supplier acknowledges that every employee, male
or female, has a right to compensation for a regular work Week that is sufficient to meet
employees’ basic needs and provide some discretionary income. Supplier's employees shall
be timely paid at least the minimum wage required by country law, or prevailing wage,
whichever is higher and provided legally mandated benefits, including holidays and leaves,
and statutory severance when employment ends. There shall be no disciplinary deductions
from pay. When compensation does not meet the employee’s basic needs and provide some
discretionary income, the supplier shall develop, communicate and implement strategies to
progressively realize compensation that does.

8) The workplace must be safe: The supplier shall provide a safe workplace setting and shall
take necessary steps to prevent accidents and injury arising out of, linked with or occurring
in the course of work or as a result of the operation of supplier’s facilities. The supplier
must have systems to detect, avoid and respond to potential risks to the safety of all
employees.

9) Dorms, canteens and childcare facilities are healthy and safe: All facilities operated by
the supplier, including residential, dining and childcare, must be safe, hygienic, and
healthy. Facilities, including childcare, must adhere to applicable country laws or the
appropriate Nike standards that cover building construction and health and safety.
Suppliers must have robust safety management systems in place to reduce or eliminate the
safety and health risks of operating these non-manufacturing facilities.

10) Building is fit for purpose: The supplier’s building and load bearing structures must be
constructed according to the laws of the manufacturing country, certified civil or structural
engineering construction approvals or international standards. Multi-use occupancies are
not allowed.

11) Fire and emergency action plans are in place: Suppliers have fire prevention and
emergency action plans to protect workers during normal working operations and
emergency situations. The supplier provides alarm systems to notify workers of
emergencies, safe exit routes when workers need to leave the building and safe shelter
locations when workers are required to remain in the building during emergencies.

12) Occupational health and hygiene hazards are controlled: Suppliers anticipate,
recognize, evaluate and control occupational health and hygiene hazards in the workplace.
Suppliers must use routine monitoring and analytical methods to determine the potential
health effects of hazards that are present in the workplace. Workers shall not be exposed
to physical, chemical or biological hazards above occupational exposure limits.

SUSTAINABLE FACTORS:

Water is valued: Supplier shall minimize freshwater withdrawals and discharge wastewater in
compliance with relevant local laws, regulations and Nike standards. Supplier shall strive to be a
good water steward by understanding and managing its water risk, and promoting the continuous
reduction and efficient use in its operations.

Waste is minimized and handled properly: Supplier shall properly segregate, manage, transport,
and dispose of all solid/ hazardous waste in compliance with local regulations and Nike standards.
It must obtain all required permits and verify solid /hazardous waste vendors are properly qualified
and licensed. The supplier shall measure and continuously improve material efficiency and value-
added recycling.

Energy and carbon shall be minimized: Energy and electricity purchasing records shall be
maintained and best practices shall be implemented on key energy systems. Supplier must strive
to find cost-effective methods to improve energy efficiency, tracks and reduce greenhouse gas
emissions, and use renewable energy wherever feasible.

Air emissions impact is minimized: Air emissions of volatile organic chemicals, aerosols,
corrosives, particulates, ozone depleting chemicals and combustion by-products generated from
operations shall be characterized, routinely monitored, controlled and treated according to the laws
of the manufacturing country prior to discharge. The supplier shall conduct routine monitoring of
the performance of its air emission control systems.

Chemicals are properly managed: Supplier demonstrates a consistent and competent approach
to restricted substance management, supported by an effective and legally compliant chemical
management program. The program clearly identifies and mitigates chemical risks to workers, the
environment, and consumers by facilitating safe handling, storage, use, procurement and disposal
of chemicals.

The code is fully implemented: As a condition of doing business with Nike, the supplier shall
implement and integrate this Code and accompanying Code Leadership Standards and applicable
laws into its business, including the development of effective management systems, and submit to
verification and monitoring. The supplier shall post this Code, in the language(s) of its employees
in all major workspaces, train employees on their rights and obligations as defined by this Code
and applicable country law and, ensure the compliance of any sub-suppliers producing Nike
branded or affiliate products.

Nike shoes:

Nike is a big Brand commodity chain that links many parts of the world together. Places like China,
Indonesia, Vietnam, India, the United States, Turkey, and many other places are connected through
Nike. These different countries Ship raw materials, finished product, and have workers for the
many different jobs so that Nike can continue to make quality shoes.
9. Product Design

Nike has been designing all of their products in-house since it launched its own name branded
shoes in 1971. Nike employs 400 people for the design and development of footwear, apparel, and
sports equipment located at headquarters in Beaverton, Oregon. Globalization has led Nike to
understand that different countries have other performance desires. Such as in Japan where runners
prefer shoes lighter and with a Lower profile to the traditional designs made by Nike. As a result,
Nike plans on opening a research and design department in Japan. Developing foreign

Markets may require more than American based designs to satisfy public expectations resulting in
Nike having to consider designing internationally.

Concept to Prototype:

In order to proceed to a final prototype, the design must undergo numerous interrogations. The
"Concept Review" is a group of managers from various departments who comment on the qualities
of the shoe in the design phase. Critical points often revieNiked are: meeting marketing
expectations, competitive pricing, profitability, performance, applied technology and does it
compete with products at the same price? After approval, the design goes from illustration to a
three-dimensional sample. Creating the sample will be done either at headquarters or one of the
Asian manufacturing sites depending on the design’s complexity. Developing the upper part of the
shoe includes a designer working with the engineering group to produce what typically totals over
forty pieces. Whereas the bottom of the shoe might be made of clay or wood but when put together
with the upper, it will be a three-dimensional representation of the drawing. Some samples can go
through up to fifteen design changes with the end result of a sample in every color that has been
planned.

10.Raw Materials

Nike uses many materials to make all its products but there are only six main materials that make
up the majority of all their products mass. First, the polyester, 19 percent of the polyester Nike
uses is recycled. Nike helped recycle 82 million plastic water bottles to make polyester out of. The
world cup jerseys Nike made in 2010 Were 100% recycled polyester each using eight plastic
bottles. The solid plastic bottles are broken down into pieces and then melted to a liquid when they
are then made into polyester strands. China and India are the main polyester producers worldwide.
The next main material Nike uses is rubber and they have used more and more environmentally
preferred rubber. Well over 70% of Nikes shoes now use environmentally preferred rubber. Nike
released their environmentally preferred rubber in 2002, this altered rubber is made by
incorporating more benign accelerators and vegetable oils, they also modify the processing.
Thailand, Indonesia, Malaysia are the top producers of rubber around the world. Eva foam is a
very environmentally friendly material used in many shoes. The main producers of Eva Foam are
located in China. EVA stands for Ethylene Vinyl Acetate. Eva Foam is one of the most efficient
and cheap materials that Nike uses in their shoes. The next material Nike widely uses is cotton.
Nike is proud to say that they are using more and more organic cotton every year and plan to keep
this trend going. Organic cotton means that it is harvested without chemical pesticides, no
fertilizer, and defoliants. Nike gets most of its cotton from suppliers in China, India, Turkey, and
the United States of America. Nikes plan is to have at least 10% of organic cotton in all of their
appeal that contains cotton by 2015. Synthetic leather is also used often in Nike products. Synthetic
leather is a man-made fabric and is made to look and feel like real leather but function better than
real leather. Nike uses synthetic leather in many of their products because it is cheaper than real
leather, tends to be more breathable, and easier to clean. China and Taiwan are the leading supplier
of synthetic leather worldwide. Nike also uses real leather that is LWG certified. Nike is one of
the world’s largest users of white leather and teams up with tanners, suppliers, and other
distributers to be most efficient. Nike does not believe in harvesting leather from animals in the
amazon because they believe that it is contributing to the deforestation but before 2011 they Were
using leather taken from the Amazon. Nike gets their leather from tanners and suppliers in China
and Vietnam.

11.Manufacturing Process

Almost all Nike shoes are manufactured outside of the United States. The leading manufacturer of
Nike shoes is China and Vietnam each accounting for 36% of the total manufactured worldwide.
Indonesia accounts for 22% and Thailand for 6% of the Nike shoes that are being produced
worldwide. There are 785 contract factories with more than 1 million workers.
Figure 6: Manufacturing Process

Manufacturing more than 500000 different products. To make the shoe the worker first cut all the
material in the shapes and forms they need to be in, they then sew the pieces together on the upper
section above the sole. The workers then prepare the sole also called stock fitting, followed by
preparing the attachment of upper to the sole also known as lasting. Then the worker attaches and
shapes the bottom heel to its final form this process is called heeling. The finishing touches are
made and any necessary accessories are then attached in the process called treeing.

12.Sustainable practices followed by Nike

NIKE’s purpose is to use the poNiker of sport to move the world forward. They believe in a fair,
sustainable future – one where everyone thrives on a healthy planet and a level playing field.
They’re advocating and investing in bringing sport back into kids’ lives. They’re innovating a new
business model for the 21st century, in which supply chains are lean, green, and equitable, and
their materials and products are sustainable. And now, with more determination than ever, they’re
creating a culture where everyone has an opportunity to play an important role and be successful.
PRODUCT

Sustainability at NIKE is more than a single-product philosophy. It’s a principle embedded in their
product creation teams that they are scaling across their company to include every brand, every
category, and every product.

Figure 7: Nike Shoe

In FY16, Nike developed a Sustainability Performance Dashboard to give its product team’s timely
sustainability metrics. Combining the ASI, FSI, and MSI with additional product and material data,
the dashboard has helped its product category teams focus on the sustainability of their highest
volume styles. These additions have already produced improvements in apparel and footwear
sustainability scores. For example, footwear has improved by using more water-based solvents
(resulting in approximately 96 percent less petroleum-derived solvents since 1995) and better
pattern efficiency, while apparel has improved by sourcing from better performing material
suppliers and increased efficiency. The improvement in materials supplier performance can be
attributed to, in part, engagement with their suppliers to improve sustainable practices at their
facilities.

By the end of FY17, footwear and apparel teams had improved their internal index scores (FSI and
ASI) resulting in a 2.5 percent decrease in average carbon footprint per unit compared to the
baseline.
MATERIALS

The materials used by Nike – from the crops grown to the finished fabrics and trims – have the
greatest environmental impact in the entire product lifecycle. Reducing this impact is the strongest
way they can improve overall environmental performance.

Nike materials teams incorporated the MSI into their standard tools. This allows them to make
better decisions around which materials to use and which suppliers to work with to drive their use
of sustainable materials.

In FY16 and FY17, apparel and footwear used more sustainable materials in the following ways:

1. Sustainable cotton: Apparel moved from conventional cotton to more sustainable cotton.

2. Recycled rubber: They are closing the loop on the rubber by using their own scraps as inputs
into new shoes. NIKE has a long history of reducing the impact of rubber, including developing
two environmentally preferred rubber base formulations suitable for performance footwear in the
1990s. In 2004, just 3 percent of Nike brand footwear designs used environmentally. By FY17, 98
percent of their products used environmentally preferred rubber. The increase is due to NIKE’s
continued proliferation of environmentally preferred compounds while slowly phasing out/retiring
the less preferred compounds.

3. Recycled polyester: All core Flyknit yarns used by Nike are 100% recycled polyester. They
use recycled polyester in some of their most advanced apparel, such as global football team kits
and elite track & field uniforms, classic items like Tempo running shorts, as Well as other key
components used in the construction of a shoe. As of FY17, NIKE has transformed more than 4.6
billion plastic bottles into recycled polyester footwear and apparel. As a result, NIKE has been
recognized as using the most recycled polyester in the industry for the fourth straight year by
Textile Exchange’s “2017 Preferred Fibre & Materials Market Report.”

In FY17, some recycled materials Were used in 75 percent of Nike brand footwear and apparel
products. These materials include recycled PET bottles in their apparel textiles and Flyknit shoe
uppers, apparel trims made from recycled Nike Airbag waste, and rubber outsole scraps recycled
back into footwear outsoles.
Figure 8: Recycle of shoe

NIKE is a leader in advancing better approaches to cotton. Since 1998, they’ve been blending
organic into their cotton products and in 2002 they co-founded Organic Exchange (now Textile
Exchange).

They are working with their supply chain to move toward 100 percent sustainable cotton – certified
organic, Better Cotton (BCI), or recycled cotton.

In FY16, they sourced one-third of their cotton more sustainably, which reduced their
environmental footprint by more than 17 billion liters of water and more than 51,000 kilograms of
pesticides. In FY17, they increased this to 54 percent, which reduced their impact by more than 24
billion liters of water and 85,000 kilograms of pesticides. In FY17, Nike-branded apparel
continued to lead the company by sustainably sourcing 73 percent of its cotton.

Nike blend a minimum of 10 percent organic cotton into nearly every Nike-branded apparel cotton
fabric, a strategy that has made Nike one of the top four buyers of certified organic cotton globally
according to Textile Exchange’s (TE) 2017 Preferred Fibers and Materials Report.
ENERGY AND EMISSIONS

In the U.S., Nike executed two projects which will produce roughly 4, 60,000 mWh/year of wind
energy. In Oregon, their off-site power purchase agreement (PPA) went live in January 2017.
Today, it supplies their World Headquarters and other NIKE-owned or operated facilities in
Oregon with 100 percent renewable energy. Nike also has a broader U.S. PPA which will support
the development of a wind farm that will start operating commercially in mid-2019. Together,
these contracts will cover their owned and operated consumption in the U.S. and Canada, and
deliver on more than one-half of their global commitment for RE100.

Additionally, NIKE has reached 100 percent renewable energy at their European Logistics Campus
in Laakdal, Belgium through five sources of energy (onsite wind, solar, geothermal, and locally
produced biomass and hydro). They have also reached more than 35 percent renewable energy at
their China Logistics Centre in Taicang, China through a rooftop solar array.

 PROCUREMENT: Procuring renewable energy for a diverse global operation is


complex. So, like any team looking to win, they began by creating a game plan. First, they
outlined their preferred sources of renewable energy, and then they developed principles
to guide their procurement strategy.
Nike prefers to source electricity from wind, solar, geothermal, run-of-river hydro sources,
and biomass, as Nike believe they pose the least harm for the environment.
Guided by the needs of Nike business, Nike developed these principles to assess
opportunities. Nike look to optimize across these guiding principles when evaluating
projects.
 FINANCIAL IMPACT: Nike seek cost-effective solutions because they believe that in
the long term, renewable energy is more cost effective than fossil fuel generation.
 RISK DIVERSIFICATION: Energy procurement and markets are dynamic and complex.
Therefore, they look for solutions that won’t result in unacceptable risk to their company.
 ADDITIONALITY: Nike strives for solutions that increase the amount and availability
of renewable energy and benefit both the environment and the local communities where
projects are located.
 PROXIMITY: Where feasible, Nike aim to procure renewable electricity close to their
facilities so that the communities they are a part of share in the environmental, health, and
economic benefits of renewable energy.

Nike looks at different sourcing options in each geographic area they operate in and choose a
solution that best optimizes these considerations.

WASTE

Nike’s priority is zero waste. They aim to eliminate waste wherever they can, beginning by
designing waste out of their products and optimizing manufacturing processes. Eliminating waste
reduces material consumption and cost, and the upstream environmental impacts associated with
making materials.

They’re focused particularly on footwear, which accounts for nearly two-thirds of NIKE
manufacturing waste. For them, manufacturing scraps and manufacturing by-products are valuable
resources. Every gram of materials sourced to make NIKE products should be put to good use,
maximizing economic value and minimizing environmental impact.

Nike strengthening its recycling capabilities and making it easier to responsibly convert
unrecyclable waste into energy. In FY17, more than one-half of NIKE footwear finished goods
manufacturing waste was recycled. They do this by segregating waste for recycling and using
waste management centers that consolidate, process, and market this material. The program
increases the recycling demand for some materials through carefully targeted initiatives.

Figure 9: Recycle with waste


Footwear factories are implementing NIKE’s Waste Minimum Program, which sets expectations
for:

1. Management commitment

2. A hierarchy of waste where the disposal is a last resort

3. Separation and handling waste for recycling, and

4. Data collection and reporting for accountability.

Distribution Centres: Corrugated cardboard cartons are the biggest source of waste at Nike's
distribution centers, and there was an increase in cardboard waste generation over FY16/17
because of changing customer order profiles. Today, Nike customers want more variety of product
and/or smaller orders at any given time. This, in turn, means that their distribution centers must
debox cartons delivered from their factories and repackage products into more customized orders,
a process that inherently creates more waste. As a result, they have turned their focus to a long-
standing initiative: Re-Use-A-Box program, which reuses the corrugated cardboard carton waste
on outbound shipments. They are analyzing the potential of increasing the reuse rate to get the
most out of the program, and they are also piloting and evaluating alternative packaging such as
reusable shipping totes.

WATER

NIKE recognize the increased risk of water availability to their business, and they've been working
to reduce their water footprint for years. They are focused on reducing their water use through
innovation and improving wastewater quality to enable cost-effective water recycling.

In FY16, their team of water consultants sets up the NIKE Water Minimum Program, Designed to
spot opportunities for better efficiency, the program sets expectations for water stewardship,
wastewater treatment data collection, and managers’ understanding the risks of water scarcity and
flooding. It also helps factories develop structured approaches to maintaining their water and
wastewater treatment equipment. The intent of the Water Minimum Program is to prepare their
suppliers for closed loop water recycling.
CHEMISTRY

Chemistry plays an essential role in product innovation and manufacturing at NIKE. It can deeply
influence and elevate product performance and design, yet the choice of chemistry can also affect
the sustainability of their overall product creation process.

With every chemistry choice Nike innovation teams make, they can unlock potential for the athlete.
NIKE’s Chemistry Centre of Excellence works with teams across the business and supply chain
to ensure they are simultaneously increasing the performance of their products while reducing their
chemical footprint.

Beyond their chemical compliance programs, further work is being advanced across three core
areas to move them closer to their goal:

1. Elevating Chemicals Management Capability: They baselined performance at 121 strategic


suppliers to help prioritize improvements and guide the development of shared assessment tools.

2. Assessing New Chemicals: Going beyond compliance by strengthening their review of new
chemicals through a robust toxicological screening process.

3. Prioritizing Chemicals: Ahead of compliance, identifying priority chemicals for phase-out


based on an intensive review of the chemicals used throughout their supply chain’s manufacturing
processes.

Demonstrating their leadership and commitment to driving industry change through collective
action, NIKE co-created and formally adopted the ZDHC Wastewater Guideline in FY17. The
new guideline allows global suppliers and brands to align wastewater testing and reporting
expectations to a testing schedule, laboratory methods and reporting limits for hazardous
chemicals. NIKE is deploying this robust tool across its supply chain to track progress toward their
ZDHC target by measuring the performance of suppliers' ZDHC MRSL compliance and adherence
to wastewater quality standards.

By strengthening foundational programs, promoting the responsible use of better chemistry, and
advancing global alignment of chemical requirements, NIKE continues to make strong progress
toward achieving the aspirational goal of the ZDHC.

By the end of FY17, 72.6 percent of suppliers met NIKE's wastewater quality requirements.
They're working with the remaining 27.4 percent to understand the opportunities that exist to allow
them to discharge wastewater at quality better than legal compliance. In many cases, the suppliers
Were challenged with conventional wastewater parameters such as chemical oxygen demand,
biological oxygen demand, color, coliform, antimony, and total nitrogen.

PACKAGING

Nike has developed new sustainable packaging for its shoes, working in collaboration with Arthur
Huang, the CEO and founder of Taiwanese firm Miniwiz, which recycles consumer and industrial
waste into new products.
The lightweight packaging is made entirely of post-consumer materials such as milk and orange
juice containers, and morning coffee lids. The box is produced from a single process
Polypropylene with no added chemicals. The modular design allows it to be used as a stackable,
interlocking component of a product display or storage system.

Figure 10: Nike Packaging

Sustainable packaging can help companies save money on material and transportation costs, while
also reducing their environmental impacts. Plus, it is becoming increasingly popular among
consumers.Invalid source specified.

13.CHALLENGES

Nike already made significant progress, but the complexity of its operations and the nature of
global renewable energy markets continue to present challenges for them.
Outside the U.S., Nike does not have sufficient owned or operated demand at any facility or in any
individual country to enable utility-scale procurement. Utility-scale procurement options optimize
their guiding principles, and without them, they are limited to the less-preferred option of
purchasing unbundled renewable energy credits from market exchange.

Nike’s approach to accelerating renewable energy has three components:

1. Supporting factories in installing solar photovoltaic (solar PV) systems on factory rooftops to
provide up to 45 percent of the electricity use of factory operations.

2. Engaging with governments and policymakers to advocate for policy that lets their
manufacturing factories directly source renewable electricity from local poNiker utilities. 3.
Expanding their responsibly sourced biomass renewable energy program with a focus on their
materials manufacturers.

At scale, this approach will eventually allow their manufacturing factories to use renewable energy
to poNiker their operations.

In FY17, their energy and carbon intensity in key operations was flat compared to baseline, as the
reductions achieved in footwear manufacturing Were offset by increased inbound air freight.

14.Suggestions for improvement in backward supply chain

Nike can add robots to supply chain to deliver products to its customers faster, it will help brands
and retailers establish stronger relationships with their customers.

Country Level Risk Assessment: Country profiles are developed based on in-depth due diligence
processes. Countries are categorized as high or low risk.

15.Forward Supply chain

System whose constituent parts includes material suppliers, production facilities, distribution
services and customers linked together by the feed forward flow of materials and feedback flow
of information. Traditional or forward logistics deals with the flow of products from the factory to
the consumer. The different types of forward supply chain management include direct order
fulfillment, hub services, pick-and-pack services, and shipping. With forward logistics shipping, a
sales forecast is used to project the requirement. When a certain amount of product is required,
that quantity will be shipped to the distribution center and then to the retail stores from there. At
every level of this method of supply chain management, advanced shipping notices will assist the
information as the products flow. The flow of product is in forward direction and that of
information is in reverse direction. Each stage adds a value to the product. The demand from the
customer drives the flow speed and utmost care is taken while material handling and transportation.
The main objective of this chain is to quantify the demand and then meet it. It provides value while
enhancing the image at same time. The forward supply chain supports any new product
development and it is the backbone of marketing. The flow of Nike products is from factories to
distribution centers and then from DC located across the world and then to the regional stores of
either the company or independently owned one. The process can be understood as shown in
Figure 11.

Figure 11: Forward Supply Chain

16.Nike Logistics

NIKE has been highly effective in shipping its products from the factories to the distribution
centers and then from distribution center to retail stores, wholesalers, Nike Only stores and online
customers. Nike's product cycle began with a “futures order” month in advance. This would then
prompt more than 1 million workers at 566 factories to produce an estimated 1.3 billion units and
ship them through 75 distribution centers to more than 30,000 retailers in 190 countries.

The logistics of products from factory to distribution centers is termed as inbound logistics and
from distribution centers to customers is called outbound logistics. The logistics of Nike is
overseen by United Parcel Services (UPS). Nike has outsourced its logistics entirely to UPS.
Instead of going to a Nike warehouse, Nike products are delivered directly from Asian factories to
UPS Kentucky facilities. UPS employees then check these orders, package them and deliver them
to their intended destinations.

Nike uses the Enterprise Resource Planning (ERP) software, SAP to manage all their inventories,
deliveries, logistics and supply chain activities. This gives the supplier, the receiver and the
distribution channel a real-time information on the status of the products. To further improve on
the supply chain process, Nike entered into a partnership with a software developing company
LLamasoft Inc to get a solution for logistics and environmental benefit as Well. The partnership
yielded a more sustainable logistics solution that was environmentally friendly (Nike News, 2012).
These information systems improve the efficiency of sharing information between partners.
However, they also result in some new challenges to supply chain management, such as reduced
information accessibility due to tightened security and reduced data relevancy (Lu, October 2016).
This lack of information may sometimes lead to errors in demand forecasting.

Inbound Logistics:

The most significant driver of carbon emissions for logistics continues to be shipping product from
origin to destination by air. On the inbound leg (origin to destination geography), air freight is 25
times more carbon intensive than ocean freight. As part of their efforts to optimize air freight and
help ensure decisions are demand-driven, in FY18 cross-functional teams completed a robust
review of the current processes and tools. Through this work, teams identified key metrics, tools,
operating models, and communications needed to support demand driven decision-making. With
the new process, they are now using signals from the marketplace as they near the start of a season
to gain clarity on when product is needed. This helps to ensure that Nike uses air freight only when
necessary. In parallel, Nike implemented or expanded alternative modes of transportation,
including international trucking, international rail, and sea-air (freight transport that is part-ocean,
part-air, which is faster than all-ocean and less carbon intensive than all-air transport). FY18 was
the second year Nike used Supply Chain Sustainability Index (SCSI) with inbound ocean freight
and air freight providers. Nike saw positive improvement from logistics service providers from
FY17 to FY18. Driving logistics service providers to meet and surpass minimum sustainability
requirements has led them to fully integrate sustainability into how they deliver and operate. The
SCSI has also helped elevate discussions with providers on innovative offerings currently available
and on the roadmap for the future.

Outbound Logistics:

Outbound logistics (transportation from a NIKE distribution center to point of sale or consumer)
continues to be challenging for sustainability due to continued strong e-commerce growth and
evolving consumer trends.

Nike adopts either Business to business (B2B) or Business to Consumer (B2C) strategy to
distribute its products from distribution center to the final end users. It is shown in Figure 13.

Air Freight Sea Sea-Air

International International
Trucking Rail

Figure 12: Inbound logistics mode of Nike


Figure 13:Outbound Logistics (Distribution channels of Nike)

B2B Distribution

In B2B channel, the products from Nike distribution centers are bought by wholesalers which is
then sold to retailers in a wholesale-retail distribution channel. Once the retailer receives the
product, it is sold to consumer by means of independent stores, chain stores or online stores like
Myntra, Flipkart, Jabong, Amazon, etc.

Distribution center (DC) to Wholesaler:

The wholesaler places an order by means of buying form to the DC which in case of India are
located in Delhi, Mumbai, Chennai, Bangalore and Chandigarh as per the information shared by
store manager of the Nike Only Store of Fraser Road, Patna. The buying form is approved by the
DC sales manager and the order is processed. Once the order is processed it is shipped to
wholesaler. The shipment tracking ID is shared with the wholesaler for a better track of the goods
being transported. The wholesaler receives the goods in less than 7 days from the date of ordering.

Wholesaler to Independent stores and chain stores:


Once the Nike products are received at Wholesalers stores, the goods are forwarded to the retailers
which includes independent stores and chain stores. This is done in batches as per the retailer’s
demand. It may involve cross-docking process. Sometimes, the products are not stored, rather the
shipment is directly done to the retaile stores in order to save the time and storage cost.

Wholesaler to Online retailers:

Online retailers don’t take the ownership of the Nike products. The products are delivered to the
customers by means of shipping agencies as per the order placed by the customers on the online
retailer’s Nikebsite or portal. It may include famous retailers like Flipkart, Myntra, Jabong,
Amazon, etc.

B2C Distribution

In B2C mode of distribution, Nike transfer ownership of goods directly from Nike to consumer
without involvement of any intermediary (Refer Figure 13). This is done either by Nike owned
retails stores or Nike official shopping Nikebsite that is customized differently or each country
where they have business. The retail stores which are called Nike Only Stores (NOS) are fully
equipped with appropriate technology that is helpful in generating order, tracking order and also
forecasting the next order size. Some of the software used are NikeLookUp, Pie Board and LMS.
They also use Systems Applications and Products (SAP) which is an Enterprise Resource Planning
(ERP) tool to manage the inventory level, book order, and update order status so that all the data
is accessible to the warehouse. This helps them in generating forecast of the demand near to
accuracy. LMS is used to track the status of shipment or order that is dispatched by the
warehouse/DC at Bangalore and is about to be received at stores in different cities. It gives a detail
about the delivered, in-transit, or ready to ship status of the order that is important to plan the store
storage accordingly.

Both the retail store mode of distribution and online mode of distribution is discussed in later
sections of the report.

In a marketplace demanding speed, Nike looks for creative alternatives to deliver in ways that are
not at the expense of our sustainability goals. For example, Nike are working to understand the
value of sustainable fulfillment services to our consumer. Nike can then begin to curate
experiences our consumers want that include their values on sustainability. One initiative
implemented in North America, and expanding across regions, is the switch to shipping e-
commerce apparel orders in envelopes, which are significantly lighter and take up less space in
transportation than boxes. For apparel shipments that are switched to envelopes, the estimated
carbon savings per unit is at least 50%. Nike are also working with our logistics service providers
to elevate their sustainable service offerings. One way Nike have done this is by deploying our
SCSI for outbound logistics services. As with inbound transportation, the SCSI establishes clear
minimum sustainability requirements and drives innovation discussions. Through partnering with
our providers, Nike have begun taking advantage of available alternative fuels for transportation
in Europe and China.

17.Supply chain management through e retailer

An order-to-delivery process has five components, the customer, the order, the producer, the
payment and the delivery. This might work in theory with the producer selling a product or service
that is always available and the customer collecting it from the producer. Most of the time shipping,
warehousing for the products and a way to process the payments, are required.

Figure 14: E-commerce workflow diagram( (Pekonen, 2013)

Once an order is placed with an online marketplace, its system checks the customer's delivery
pin code and the order is directed to a warehouse that has the product in stock and is closest to
that location.

The pick-to-dispatch cycle involves humans picking the correct product in order, packaging it
and dispatching it to a delivery person. Picking the right product involves the warehouse staff
going around the facility with tote bags and a list of items on their handheld devices. These
devices optimize the route within the warehouse for them, so they know where exactly a product
is stored and in what order to fill their bags. The products are placed in such a way that the
picker can easily get the product. (The Economic Times, 2019)

Figure 15: Supply chain management of E-commerce

Distribution Process of Nike

Nike distributes its products through three major channels:

 By selling products to wholesalers in the US and international markets


 By direct-to-consumer (or DTC) sales, which include in line and factory retail outlets and
e-commerce sales through www.Nike.com
 Sales to global brand divisions

Figure 16: Nike distribution channels


NIKE is focusing on direct selling to the consumer with its DTC initiative as NIKE’s distribution
channels, direct sales to the consumer provide higher margins. In fiscal year 2014, DTC revenues
accounted for ~20% of total NIKE Brand revenues as compared to 18% in fiscal year 2013. On a
currency neutral basis, DTC revenues grew 22% in fiscal year 2014 and 30% in 1Q15, year-over-
year. The company is attempting to grow the DTC category to $8 billion in sales by fiscal year
2017, up from $5.3 billion in fiscal year 2014. That’s an annual growth rate of 14.7%,
compounded. (Vanguard Software Corporation, 2018)

The direct-to-consumer e-commerce business model has been gaining popularity across industries
in recent years. In large part, this is a result of technological gains, as brands now have the ability
to reach consumers more directly than they have at any time in the past. The decision among major
manufacturers to pursue this business model is also partly built on the new data-driven marketing
techniques that currently dominate the advertising world. By gathering data on their own,
companies can now build direct relationships with customers and personalize their shopping
experiences. From a brand’s perspective, these unique facets of the direct-to-consumer model are
massively beneficial. Companies can now sell their products more cheaply and at higher profits
because of the elimination of retail middlemen. The direct-to-consumer model also gives
manufacturers total control of everything from production to distribution, leaving them less
vulnerable to the effects of external business decisions made by their retail partners.

Nike products are sold through different channels either in retail store or through online Nikebsites
like myntra, Flipkart, Amazon and also through its online Nikebsite. They have some integrated
retailers who maintain both store and direct to customer channels and some distributors are directly
linked with the E-retailer. Nike prefers direct consumer service as it reduces the mediator charges
and add profit to their company and also give consumer product at cheaper rate which satisfy the
consumer.
Figure 17: Evolution of E-tailer in Market

Figure 18: Supply chain Management of Sports Footwear of Nike


18.Delivery:

Each Country or region of the world has its own Nike distribution center so that shipments can be
sent out in reasonable time periods. In Europe Standard shipping from Nike is 5 euros and takes
3-4 business days to arrive, express shipping is 15 euros and take only 2 business days. There are
also different times for remote locations and special orders. In the United States, it is $8.00 for
standard shipping and it can take 2-3 business days to arrive, you can also pay $ 15.00 for 2-3 day
shipping, or $25.00 for 1-2 day shipping. Every country has different shipping prices, regulations,
and standards because in many of the countries Nike is not nearly as popular and in some of the
countries the mail systems are not as advanced making it more difficult for consumers to buy these
products.

“Nike Ships shoes via truck for orders that are close to a distraction center.”

19.Consumer and its Value in Supply chain of Nike

The ability to respond to the customer requirements is one of the very valuable function of supply
chain management. Supply Chain management plays a pivotal role in fulfillment of customer
needs and ensuring value for them. This customer value guides the brand to undertake
modifications and improvements in its supply chain. Another significant application of identifying
customer value lies in its importance in determining the type of supply chain required for ensuring
retention of the customers. This signifies a profound relation between supply chain management
and the perceived customer value of the brand.

The concept of Customer Value subsumes within itself a lot of dimensions of the customer
perception. The customer perception can be segregated into the following dimensions-

1.Conformance to Requirements- It refers to the ability of the brand to offer products to the
customers as per their needs. The role of supply chain management lies in ensuring the easy
availability of products along with the considerable amount of selection. The efficiency of supply
chain management can be enhanced in case of high variability items like fashion products by
becoming all the more flexible in its nature and working towards further reduction in the lead time.

The brand has made certain significant modifications in its supply chain for fulfilling the needs of
its customers more effectively. The most prominent example of such modification is the usage of
RFID technology to improve product visibility and attain integration of physical and digital
experiences, distribution centers and contract factories. It will lead to a significant improvement
in providing easy accessibility of products to the customers. It will also enable the brand to achieve
higher growth rate by matching the supply and demand of the products.

The major hinderance in the business operations of Nike is the long manufacturing lead time due
to technical complexity associated with fabrics and products that require complex innovations.
Nike has undertaken a lot of efforts for reducing the total amount of time taken for all the processes
involved in the business operation i.e. transformation of input into the desired output. This concept
is referred to as Time Compression. For fulfilling this objective, it has attempted to identify those
activities in the entire process which do not add value to the process.

2.Product Selection- The contemporary target segment of the brand demands wide range of
variety in the product range offered by the brand. The brand fulfills the expectations of its
customers by manufacturing wide range of products. In order to accommodate the diverse product
range, the brand maintains a minimal stock inside the store.

3.Price – The Price of products and cost of services are the important elements of Customer Value.
The price of the product may not be the sole influential factor in the buying decisions of the
customers. Despite this, there is a certain acceptable price range of any commodity. In case of little
flexibility in the prices of the products, the demand for the product may get negatively affected. In
order to achieve price competitiveness, there is a need to attain cost advantages through
innovations in the supply chain.

Nike has utilized certain forms of technological advancements in its sneaker manufacturing
process. In 2015, Nike collaborated with Flex to introduce greater automation into the labor-
intensive shoe-making process. Flex’s facility in Mexico has led to extensive amount of
innovations that allow for laser- cutting and automated gluing. The end result of this innovation is
the acceleration in the production process. This would lead to substantial reduction in the total cost
of production.
Figure 19: Nike cross over with Flex

4.Value Added Services- The value-added services offered by the Nike to its customers pertains
to increased access of information for the customers. It is one of the very essential condition for
an effective supply chain management by any brand.

In case of Nike, the Nike Plus members can scan barcodes inside each shoe on display using the
Nike app. It helps the customers in learning about any product and enables them to explore all
available sizes and colors. It also helps them in monitoring the real time inventory online and in
store without depending on store employees.

5. Relationships and Experiences-The final level of Customer Value is an increased connection


between the firm and its customers through development of a relationship. It is an example of
adoption of one to one enterprise concept by Nike.

Nike has enhanced its focus on providing a personalized shopping experience to its customers. It
has translated its objective into reality by providing personalized content for mobile devices.

The brand offers unique experiences to its customers with its Nike Plus Nikebsite. It enables the
runners to upload about their recent participations and allows the vieNikers to see the history of
their runs as Well. It also provides the customers the opportunity to share the updates with their
friends, get tips and disseminate information about upcoming events. It has led to significant
improvement in the customer engagement. (BCG, 2019)

The Customer Relationship Management refers to a client centered approach wherein the brand
focusses on establishing a long-term relationship with its customers rather than exclusively
focusing on increasing its profitability. In 2010, Nike launched a new business division called Nike
Digital Sport (NDS). The primary function of NDS is to develop such technologies and devices
to allow the users to monitor their personal performance and to enable the brand to collect data
about the customer trends and their needs. It has helped the brand in communicating openly and
effectively with customers about their respective requirements.

Nike Fuel is one of the CRM programs of the brand to maintain customer relationships. It
capacitates the customers to record their progress by using the Nike Plus devices. Nike Plus devices
are especially designed to update customers regarding the latest trends. The users of this device
are permitted to communicate with the brand directly.

Nike Plus Connect Apps are another element of the CRM Strategy of the brand. The customers
are not charged any amount to download these apps. It uploads the customers Nike Plus data from
Plus devices to their Nikeplus.com accounts.

The Nike Plus Running App enables the customers to share their experiences on the various social
media platforms.

These CRM strategies are quite helpful for the brand in terms of maximization of its return on
investment and creation of brand loyalty.

In the Nike Store at Fraser Road, Patna, the customer feedback is obtained by the Nike Direct App.
It enables the brand to increase customer engagement with the brand.

The brand also attempts to enrich the shopping experience of its customers by offering certain
distinct experiences to them . Nike By You allows the visitors to finalize appointments with style
experts to design their own pair of custom Nike ID Sneakers with the assistance of the store
employees for smooth execution of the entire process. After undertaking the entire process, the
customers are shown the digital display of their customized shoe.

Nike has introduced the Nike Live Concept in Los Angeles. The store combines an in-store,
physical experience with an approach that functions on data and draws on mobile to create a more
convenient shopping experience. It offers certain exclusive product range at this store in order to
attract higher footfall.

20.Improvement in Forward Supply Chain of Nike

The forward supply chain of Nike is robust enough as it has evolved over the years with lots of up
and down. But still there are points where supply chain of Nike can be improved to make it quicker
and more accountable in terms of acting to customer’s demand. Some of the improvement
strategies in forward supply chain are discussed below

Direct-to-Store Operations

The key impact of consumer demand fluctuation is on the inventory held at different points in the
supply chain. But, in order to become most efficient and slack free, the inventory buffer should be
zero. This can be achieved by equating supply and demand in real time. The global sourcing of
Nike has forced its supply chain to stretch fathers across borders. This has changed the logistic
equation by means of consideration of fulfillment speed and inventory costs becoming more and
more complicated. In addition to this, retailers are demanding ready to floor merchandise that will
add costs and responsibilities to the supply chain. Nike can overcome this barrier by adopting a
more direct approach to global fulfillment which is called DC bypass or Direct distribution. It helps
in keeping inventory moving from factories at China, Vietnam and Indonesia to end customers
across the globe by eliminating stops at warehouses along the way. It helps in eliminating inventory
costs thus giving a good balance between fulfillment speed and logistics costs. The major factor
making it possible is internet-enabled electronic links between supply chain partners allowing
better coordination and collaboration. Also, sophisticated point-of-sale systems at front of the
supply chain helps in capturing product-demand patterns. This approach will let Nike keep
inventory in motion- across borders and around the world. The key pre-requisite foe this approach
is more accurate demand forecasts and precise delivery allocation planning along with
sophisticated tracking and tracing tools for detailed supply chain visibility, even as shipments
change hands and hop from one mode of transport to another. Nike products being seasonal needs
to remove the inventory time as once the season is over its worth is zero. Moreover, Nike is
experiencing high growth needs to reduce strain on existing infrastructure. DTS can help them
save time and enormous capital outlay.
Figure 20: Direct-to-store operation

The demerits of DTS strategy in case of Nike can be that there will always be a danger of running
out of stock. Also, inaccurate orders- the wrong products, the wrong varieties, the wrong sizes-
can create bigger problems if not monitored precisely. DTS can However save costs in number of
areas listed below:

 Capital investment savings


 Improved network efficiency
 Reduced inventory-carrying costs
 Reduced material-handling costs
 Lower administrative costs
 Lower damage costs

Reducing Order Lead Time by means of automation

Lead time for delivery is sum of order lead time and production lead time. If the production and
logistics delay are reduced then the product can be made available to consumers at a faster rate.
Nike can reduce lead times for its orders from 60 days to a mere ten days by redesigning its logistics
network, nearshoring more facilities, improving contract manufacturer relationships and investing
in automation. Installing new automated machines at its Asian suppliers' factories, can lead to
speed cutting, cementing, shoe assembly, and sole creation. Nearshoring will reduce shipping
expenses, import duties, and over-production risks. However, since Nike does not independently
manufacture many of its products, such a business model shift requires closer relationships with
its contract manufacturers. Thus, by reducing lead time, Nike will be able to control the bullwhip
effect that is caused by current longer lead times of supply.

Demand Information Centralization at Raw material level

Another improvement Nike can incorporate into its supply chain is centralizing the demand
information where the demand forecast data is shared with the vendors those provide the raw
material for the production factories. Centralizing this information sharing can help in reducing
the production errors at the very first stage of the supply chain. It will help in minimizing the
bullwhip effect to the extreme left of the supply chain. The information sharing can be done by
granting access to key personnel of the raw material vendors and production factories or can make
use of software where the data is shared on real time basis with every level of intermediary of the
supply chain. This will lead to reduction in dead inventory at backend of the supply chain discussed
in initial sections.

Direct-to-Consumer as An Improvement Strategy

The efficient usage of technological up gradation by the brand has led to an immensely favorable
impact on the supply chain management of the brand. One of the most positive consequence of
effective usage of the information obtained by the information technology is the resultant
improvement in the production and distribution mechanism of the brand. Nike has positioned itself
as a technologically advanced brand in sportswear industry.

The brand introduced its growth plan as its Triple Double Strategy in 2017. In this plan, the brand
mentioned about increasing the use of innovation and establishing stronger relationships with its
customers for increasing its growth. This strategy is based upon the creation of Nike Consumer
Experience (NCX). The Direct to Consumer approach is one of the core elements of NCX.
(Brumley, 2018)

Nike adopted the DTC approach in its marketing strategy by primarily focusing in providing the
products to its customers on a personalized basis by using the mobile technology. The Nike+ App
has enabled the brand to undertake the application of DTC concept in its marketing strategy.
However, the usage of the app is not restricted to the provision of the products directly to the
consumers, it is also very helpful for the brand to intensify its relationship with its customers.

Figure 21: Nike+ Application

The brand has been able to offer such unique customer experiences by recognizing the various
aspects of the consumer behavior. Such valuable insights have been obtained as a result of the
acquisition of Zodiac by Nike. Zodiac is a consumer data and analytics company. In this manner,
Nike has used Data Analytics in its functioning.

The brand has embraced Direct- to- Consumer (DTC) channel to enhance the total revenue earned
by the brand. The most probable reasons for adoption of DTC channel may include the the ever-
growing expectations of the customers about provision of a better experience, increased
possibilities of establishment of a firm relationship between the brand and the customers and
collecting large amount of data about the customers. The incorporation of DTC channel in the
marketing strategy of the brand will also help the brand in building brand loyalty and at the same
time reduce the costs incurred by the brand.

The DTC approach of Nike is visible in three forms-

1.Nike brand and Category experience stores

2.Online Presence through its online portal www.Nike.com

3.Nike Factory Stores

The brand has been able to enlarge its existing customer base through the increased visibility of
its products on all these channels. The benefits accrued to the brand as a result of this renwed
marketing strategy can be quantitatively measured through the growing revenue of the brand.
(Hopwood, 2019)

Sensory Elements in NOS (Nike Only Store)

The retail environment of the Nike Only Store (NOS) includes certain sensory elements. The
sensory elements required in the NOS consists of certain standards of lighting, Air quality, and
temperature control.

The store environment required to be adequately illuminated. The lighting is evenly distributed
throughout the retail store. The fitting rooms have a slightly softer lighting. The air quality of the
retail store should be monitored by the allotted personnel. The retailers are directed to ensure
proper ventilation and air conditioning system for proper temperature regulation inside the store.

Latest Technology Adopted by Nike

Nike has initiated the usage of a new technology in its retail store to enrich the shopping experience
of its customers. The brand will help the customers to select the perfectly fitting footwear for
themselves. It would be accomplished by the utilizing the foot scanning feature on the app, which
would be accessed by their smartphone camera. The scanner would function by taking into account
13 different measurements. Thereafter, the results would be obtained after analyzing the
measurements through the machine algorithm. It enables them to select the exactly fit of their
footwear. (Danziger, 2018)
Figure 22: Foot Scanning Application

This facility can be availed by the customers in few seconds. This feature reveals the effectiveness
of this technology in terms of reduced time consumption.

The usage of this new technology would not amount to doing away with the sizes by the brand.
This facility would redirect the customers towards the size which would be a perfect option for
them.

The rationale of the brand behind the usage of this technology is the anticipation of significant
reduction in the return rates and would be really effective in the inventory planning of the brand.

The commencement of this attractive facility in the retail stores of the brand has been possible due
to the acquisition of an Israeli 3D- Scanning company- Invertex by the brand. This firm specializes
in making custom orthotics.

This technology has been used by the brand in the European nations since July 2019.

21.Conclusion

Nike is an established brand in the market. It is successfully positioned in the mind of consumers
and is preferred by them over other footwear brands because of it quality and design. The
outsourcing of production activities is the beginning of Nike’s supply chain. The raw materials
criteria being defined by Nike makes an affirmation that the product finally produced will be of
superior quality. The production factories are contractors for Nike who produce the finished goods
as per the standards set by Nike. Any deviation from the set standards results in lowering the grade
of the contractor and successive performance gaps leads to cancellation of contract. Once the goods
are ready, they are shipped to DC located in various countries, majorly where Nike operates in
retail format. The key market for Nike is United States. The products once received at DC are
forwarded to retail stores and NOS as per the demand of respective stores. In terms of Nike owned
stores demand and supply is synced by means of upgraded software like SAP, web look, pie board.
E-retail demand are fulfilled by independent retailers if the mode of selling is online retailers like
myntra, flipkart, amazon, etc. But in case of Nike online website demand is met by means of
forwarding product by Nike’s DC.

There are still markets which their presence is still not so imposing. Within these emerging markets
like, Russia, turkey, Brazil and China will need to be explored to maintain their already existing
competitive advantage within the industry (Josh, 2012). In spite of such an extensive network and
established supply chain, Nike faces bullwhip effect at various occasions due to its big lead time
and numerous production partners In order to reduce this, Nike needs to adopt certain improvement
strategies like Direct-to-store operation can be implemented by Nike where once the consignment
reaches the destination port, it is broken into smaller shipments that directly goes to the specified
retail outlets. Another strategy is to reduce the lead time from factory to consumer from 60 to 10
days by automating the production process and nearshoring the production as much as possible.
Demand information centralization may also help Nike’s supply chain intermediaries to forecast
the demand and thus plan their resources respectively. Moreover, it will help backward supply
chain intermediaries to help Nike in decision making process with regards to the demand
forecasting. Direct to consumer is another modification that can be adopted by Nike aong with
addition of sensory elements in to retail outlets. An an holistic level adoption of technology by
Nike will help it in building in a more integrated supply chain where each intermediary will work
in coordination with another and where the contractors, distributors, wholesalers and retailers will
align thewir goals for better profits and satisfying end consumer in a better way.

Athletics which is the core business of Nike, is very competitive sport these days and all athletes
want to usurp all the advantage they can garner from all their equipment and tools. Nike should as
usual keep filling up the gap through research and development, innovations and technological
advancement to still remain the pace-setter in the industry.
22.REFERENCES-

Book Referred: Managing the Supply Chain (David Simchi-Levi, Philip Kaminsky, & Edith
Simchi-Levi)

Other References:

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BCG. (2019). Is Nike's Highly Customised Shopping Experience the New Normal?

Brumley, J. (2018). Nike's Triple Double Strategy Could be big for their Stock.

Chopra, K. (n.d.). E-Commerce Supply Chain Management. Retrieved 05 23, 2019, from
semanticscholar.org:
https://pdfs.semanticscholar.org/d8b0/9c386dd3180067d7f62cbec74ebdf47db2fb.pdf

Danziger, P. N. (2018). Nike's New Consumer Experience Distribution Strategy Hits the Ground Running.

Hopwood, C. (2019). Why Direct to Consumer is becoming an Important Retail Channel.

Josh, B. (2012, April 26). Nike’s International Strategy. Retrieved December 23, 2015, from Josh's Nike
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