Effective Supply Chain Management Strategies: A Case Study Of Nike

Product Flow in Nike’s Supply Chain

Question:

Discuss about the Supply Chain Management at Nike.

Supply chains can be relatively challenging to get manage, varying in the complexity, relying on the size and type of business and various products manufactured. Effective supply chain management is quite essential for organizations, as the network of the interlinked companies should be smoothly liaised (Christopher, 2004). The aim is to offer the products and services to the customers in the professional, and cost-effective manner. The critical element of the supply chain management includes planning, developing, product manufacturing as well as delivering the products and services (Christopher, 2004). This report will discuss Nike, which is the multinational company involved in the production of footwear and apparel.

Effectiveness of products flow

Nike product flow includes the Nike design of their products. Later design provides factory, which is involved in the production of the press and sews, cut, package and sole. Nike also makes use of Hyper-fuse technology that consists of the heat and pressure involved while manufacturing footwear, and concern towards a reduction in cost and reduction of lead-time (Christopher, 2004). The factory also follows the Nike standard, along with local supply as well as China Importing supply. Product flow also involves manufacturing countries and importing countries, along with distribution centre.

Next is a port, which includes unloading of material from the ship, checking of goods and loading back in the truck (Christopher, 2004). Next is a warehouse, which consists of the process of unloading of goods, checking of goods, inbound that involve scanning and labelling of goods, put away the products, and finally outbound. From the warehouse, goods are sent to whole sellers and at retail stores (Christopher, 2004).

Nike information flow includes the self-research, new design of the products, factory settings that produce new design items. Suppliers are also connected with factory through material sustainability index system. Factory and port of the company are connected with distribution centre (Peter, 2010). The distribution centre is connected with ACFC that look after demand and trends. Port is connected with Geodis Wilson ISC Client 2000 for informing about the product arrival. Geodis Wilson is combined with stores for truck brooking and calculating the delivery timeline (Liu & Jiang, 2011). Geodis Wilson ensures unloading of discrepancy report, store request, outbound, delivery timeline. Stores connect with ACFC for store request, and for selling reports. Customers also require to access ACFC, and they provide feedback to stores, where else stores offer them public announcements (Liu & Jiang, 2011).  

Information Flow in Nike’s Supply Chain

The aim of the foreign currency hedging activities of the company is mainly to protect an organization from the risk, which gradual cash flows outcomes through the transaction of the overseas currencies, covering the cost of the product, revenues, administrative and selling expenses, along with investment made in American dollar-denominated for the securities of sale debt as well as payment linked with the interconnected company transactions, that might get adversely impacted through exchange rate change (Liu & Jiang, 2011). It’s the Nike policy to make use of the derivatives for minimizing the overseas exchange risks, where strategies of internal netting cannot be employed in an efficient way (Liu & Jiang, 2011). The organization assesses the options effectiveness based over the complete cash flows methods as well as total record changes in the fair value of the option with the various other comprehensive assets income towards the degree of its effectiveness (Liu & Jiang, 2011).

Return flow

Nike has attained the average invested assets that comes to around 22.3%, which is referred as the average return on investment of the company (Liu & Jiang, 2011).

Advancement in the information technology, growing intensified competition in the present international markets, the introduction of the new items for the short life cycles, as well as increasing the customer expectations has profoundly contributed towards the new approach development of the supply chain management (Najdawi, Chung & Salaheldin, 2008). Previously, raw materials were used to get procured, and the products were manufactured at single or more than one factories, then those products were shipped to warehouses to have an immediate shortage, and finally, it was shipped to customers or retailers (Najdawi, Chung & Salaheldin, 2008). Therefore, it is recommended to minimize the cost and enhanced the service levels, and for that effective supply chain strategies should be considered at different supply chain levels of the company.

It is recommended that Nike should follow system dynamics that mainly link with the problem solving within the living systems that bring people, businesses,, and machine together (Najdawi, Chung & Salaheldin, 2008). It also connect the control and system theory to generate the insight in the behaviour of system dynamics and especially the casual relationships about international system performance and internal control (Najdawi, Chung & Salaheldin, 2008).

The critical purpose of the product control and plans, along with the various other manufacturing controls is to optimize the company’s profit. Similar to the inventory control and management, this can be attained through making customers satisfied through promptly offering the products (Schrunder, Galletly & Bicheno, 1994). The critical objectives related with the production planning and control is to establish the schedules and routes of the work that offer guarantee about the optimum use of materials, machines, and workers and to provide them with ways for making sure about the plant operations as per the plans. Conducting outsourcing for the different countries such as Japan, China, Indonesia, and Thailand is the Nikes planning as well as control strategy plan (Schrunder, Galletly & Bicheno, 1994). Therefore, a right production planning and control supports the company in controlling the cost of production and the same also reduces the profits.

Return Flow in Nike’s Supply Chain

The different tasks included in the scheduling, sequencing as well as loading of the supply chain management system of the Nike minimizes the engineering time of production cycle, and the same enhances the market share (Schrunder, Galletly & Bicheno, 1994). The system of supply chain management, along with the right forecasting facilities, support the firm in shifting the focus towards the make to stock policy. It is analysed that inventories are appropriately managed with the help of proper control and planning all around the system that enables to have fast turnover entirely around the production chain, the carrying cost of inventory along with complete price of product is importantly reduced, and the same increases the entire profit (Schrunder, Galletly & Bicheno, 1994).

The scheduling approach of Nike is concerned with the corporate operations as well as supply chain coordination with both the retail and distribution operations. In the decision strategies are related to operations management, the purpose is to increase the use of resources (Verdaasdonk, 1999). Managers at Nike satisfy the aim through automation. The schedules of corporate office are also referred as standardized, where else schedules of supply chains are adjusted as per the market condition. Nike also applies the changes within the supply chain, relying on the demand of the market for the equipment, athletic footwear and apparel (Verdaasdonk & Wouters, 2001).

Nike also makes use of information systems, which supports in creating plans for production resources like material resource planning efficiently. The software makes use of managing the orders, supply and production, and the same leads towards the minimization of inventory all-around the supply chain and enhances the efficiency of production (Verdaasdonk & Wouters, 2001). It is crucial in these cases to refer the information related to events happening within the supply chain. Like knowledge enables the manufacturers and suppliers as well as sellers to coordinate their actions to fulfil the foreseeable demand and that too at the low expected rate (Verdaasdonk & Wouters, 2001).

Managing the interconnected business network includes the packaging supply of both products and services through the raw material to the consumers as per the end user requirement. The management and planning of every activity cover up sourcing, production, and purchasing and logistics management (Hoyt, 2000). It also covers up collaboration and coordination with the partners with the help of channel that includes dealers, suppliers, and customers. The supply chain involves two crucial functions such as physical functions is visible as well as evident, in this materials are converted in the details and the same is later on transformed into the finished items (Lee & Amaral, 2002).

Effective Supply Chain Strategies for Optimizing Profits

The primary purpose of the production control and plans, along with manufacturing controls is to optimize the company’s profit. Similar to the inventory control and management, it can be attained through keeping the customers more satisfied through delivering the item.it is recommended that production planning and control should be established through schedules and routes of the work that provides grantee for optimum material use, workers and offer them with the assurance of operations of plant as per the plan (Reddy & Reddy, 2001).

The supply chain forecasting

Forecasting demand, as well as coordinating activities, are required for fulfilling the requirement of jobs. Organizations working within the international operations usually make use of sophisticated systems and software for forecasting demand, but it is analysed that small businesses can easily forecast the requirement of the supply chain by applying different techniques. The method involved in moving the averages as well as exponential smoothing often seek to move out the demand for permitting the seasonality in the outcome (Simchi-Levi, Kaminsky & Simchi-Levi, 2003).

Through the support of moving averages, one can quickly try to drop the previous sales figure as well as add the new figure, by making out the standard. For instance, for measuring the sales in four weeks, it is essential to add the weeks, then drop the sales and then finally divide the same by four. It is analysed that exponential smoothing is quite same as average, except the old information attaining the progressive less weight and attain new information for more weight (Simchi-Levi, Kaminsky & Simchi-Levi, 2003). In the definitive trend, it is noted that the exponential smoothing and moving averages forecast can go behind the ongoing trend.

A decision tree involved in the forecast methods is formed to depict the forecast method selection, and it profoundly assumed to propose to choose the best method of forecasting, as per the various information pattern. Decision tree forecast method supports in pre-selecting the alternative methods to forecast the future demand (Al-Mashari & Zairi, 2000). At last, for choosing the right and adequate optional proposed through the decision tree, the retrospective analysis of information through the pre-selected method should be undertaken. It importantly determines the error measures for everyone, and the best one from it that fit with the information holds the low forecast error.

It is essential that Nike should make use of RMSE, MSE as well as MAPE for undertaking the error analysis (Al-Mashari & Zairi, 2000). Along with this, if the resources, as well as time, is available, it is highly recommended to same use of combined forecast holding various models as per the information pattern, and then analysing the right method for attaining the low error (Forrester, 1961). In this way, companies can go with the method evaluation by measuring the respective error, and then monitor the forecast by applying tracking signal (Forrester, 1958).

Conclusion

It is analysed that the revenue of Nike has turned out to around $49.4 million that is low as compared to 2001 forecast. It is also noted that overestimating the demand of shoes as well as underestimating the demand of shoes has pushed Nike towards the reducing customer’s satisfaction, market share as well as damage to the reputation of the company in the market (Soni, 2014). As per the perspective of the supply chain, it is recommended that the software should be applied that can deliver the right forecasting, a right picture of the organization complete supply chain system and efficient inventory management tools for minimizing the surplus inventory, enhancing the satisfaction of customers and reducing overproduction cost (Ferguson, 2017).

Conclusion

Supply chain is the integral part of the company, therefore, it’s important to ensure about its process and try to effectively undertake every step of it.

References

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Christopher, K. (2004). “Nike Rebounds: How (and Why) Nike Recovered from Its Supply Chain    Disaster.” CIO Magazine

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Peter, S. (2010). “The World’s Top Sports Brands”. Forbes. 

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Soni, P. (2014). An Overview of NIKE’s Supply Chain and Manufacturing Strategies. Retrieved on 17^th November 2017, from https://marketrealist.com/2014/12/overview-nikes-supply-chain-manufacturing-strategies/

Verdaasdonk, P. (1999). Defining an information structure to analyse resource spending changes of operations management decisions. Production Planning & Control, 10(2), 162-174.

Verdaasdonk, P., & Wouters, M. (2001). A generic accounting model to support operations management decisions. Production Planning & Control, 12(6), 605-620.