Supply Chain of

Nike
By Group-9
Devang Mehta-2018079
Abhishek Nigam-2018064
Aishwarya Kamat-2018065
Priya Patil-2018098
Durgesh Jain-2018146
Mansi Gupta-2018158
INTRODUCTION

• Operations: 41 countries, 525

factories, 1,086,098 workers
• World largest seller of
footwear, sportswear, clothing
and sports equipment supplier
• Headquarters – Oregon, USA
• Sponsors many high-profile
athletes and sports teams
around the world.
• Nike employs over 74,000
people worldwide.
Framework for Network Design

3
Phase-I: Supply Chain Strategy
o Focus on superior quality products and keeping
costs under control through its supply chain
o Supply chain emphasises on use of multiple
sourcing partners to take advantage of
economic atmospheres across the world
o Most raw materials are sourced by independent
contractors in the manufacturing host country
o Company operates on a business model where
"consumer demand is a signal to anticipate and
demand." Hence, Nike has digitized its end-to-
end supply chain and created a model with
shorter lead times to deliver what consumers
want, when they want it, where they want it.
o Adidas is one of the topmost Nike’s
Competitors. One of the key advantages of
Adidas is that it operates via both – the Adidas
brand and also has a strong subsidiary in
Reebok
 Phase-II: Regional Facility Configuration

o Nike does not own or operate its own companies, it outsources

the services to 14 countries around the world. This production
makes up for ~88% of its revenues
o NIKE moved ~900 million units through its supply chain last
year. Its operating facilities consists of over 700 factories in 42
countries.
o Most of its manufacturing units are located in countries that are
emerging markets where customer demand is high
o Vietnam, Indonesia, China, Bangladesh are the countries where
96% were of its footwear is produced
 Phase-II: Location Choices
Nike partners with factory groups that are skilled, responsive and innovative. This is possible in Asia where materials
innovation supports the manufacturing base and vice versa, and lower labour costs reinforce both.

Reasons for Location Choices (mainly emerging markets):

o Low workers’ rights protection and low minimum wages
o Low Labour cost: 0.2$ per hour in Vietnam as compared to 5$ per hour in USA
o Lower cost of production in Asia than in USA
o Free Trade agreement (FTA) for tax benefits , reduced shipping costs, lower export duties
o Easy availability of raw materials

Constraints:
o In China, some provinces have raised minimum wages to more than $200 a month
o In Bangladesh the government has set the minimum wage for entry level garment workers at less than $37 a month
o Trade war between China and USA leading to increase in overall import cost
Hence the sourcing model is shifting from ‘China Plus Many’ to ‘China Plus Vietnam Plus Many’ Model
Phase-II: Logistics
o Nike reduced the lead times for its orders
from 60 days to 10 days by redesigning its
logistics network, nearshoring more facilities
and investing in automation.
o Through successful partnerships with state
and local government, Nike have built a
premier logistics centre(distribution hub)
that meets the increasing demands of our
consumers and our wholesale
customers, while also ensuring that the
facility meets our high standards for
sustainability
o Nike has opened its largest distribution
centre in Memphis-Tennessee.
o Benefits: offer greater cost efficiencies,
reduce shipping times and increase
service capabilities for our consumers
and retail partners
Phase-III: Production Methods
o Lean manufacturing – By the end of fiscal
year 2013, between 70% and 76% of its
apparel and 85% of its footwear products
were manufactured on lean lines
o This delivered additional savings of $0.15
per unit through better labor productivity
and lower waste. The company moves over
900 million units per year, so these savings
end up giving the company a serious
competitive edge.
o Introduced a new supply chain that used JIT
approach to facilitate faster shipment of
products in Europe and America
o Roughly half of the products in Nike's
Chinese New Year Collection in 2018 were
produced using shorter lead times, under a
program deemed the Express Lane
initiative, i.e. closer to market consumer
insights to update key styles.
 Sustainability Initiatives
o Nike’s main components of production are polyester, rubber, eva foam, cotton, synthetic leather, and
leather.
o 19% of the polyester Nike uses is recycled. Nike helped recycle 82 million water bottles to make
polyester out of. China and India are the main polyester producers worldwide.
o Rubber- 70% of Nike shoes use environmentally preferred rubber. Thailand, Indonesia, and Malaysia
are the top producers of rubber around the world.
o Eva foam( Ethylene Vinyl Acetate) is a very environmentally friendly material used in many shoes.
Main producers of eva foam are located in china.
o Cotton- There cotton is mainly organic cotton, meaning its harvested without pesticides, no fertilizer,
and defoliants. Most of cotton is from China, India, turkey, and the USA.
o Eg. Nike’s Flyknit which features a one-piece upper in the shoe and doesn’t require multiple cuts that
are typically used to build a sports shoe. Since this innovation eliminates waste, the use of this
technology has reduced Nike’s environmental footprint by 3.5 million pounds of waste.
o Its sourcing strategy focuses on those suppliers and makes them a priority who have shown leadership
in CSR and sustainability and who offer more than the minimum quality standards.
o Nike has set a code of conduct and Code Leadership standards for suppliers, which lays down the
minimum standards that each of its suppliers factories and facilities are required to meet.