ANANALYSISOFTHESUPPLYCHAINOF“NIKE” Chitra2015B3PS0967P Kavya Gupta2016A5PS0749P Paresh. G. Deshmukh2016A4PS0412P Akshit Ahuja2016A1PS0319P Kuppa Sai Sashank2016A3PS0167P Dibya Raman Patra2016A2PS0838P Sayan Kumar Das2016A1PS0617P Aishit Jain2016A1PS0768P Ashutosh Sahoo2016A1PS0573P Sachin Yadav2016B4TS0961P Diksha Kumari2016B3TS0955P Project pursued under the guidance of Prof. Srikanta Routroy in partial fulfillment of the course “Supply Chain Management” (MF F421) Case Study of NIKE Supply Chain
Birla Institute of Technology andScience Pilani,Rajasthan SUPPLYCHAINMANAGEMENTMFF421 NIKE SUPPLY CHAIN MANAGEMENT By Sachin Yadav - 2016B4TS0961P Sayan kumar Das - 2016A1PS0617P Diksha Kumari - 2016B3TS0955P Akshit Ahuja - 2016A1PS0319P Sachin Yadav - 2016B4TS0961P Aishit Jain - 2016A1PS0768P Chitra - 2015B3PS0967P Ashutosh Sahoo - 2016A1PS0573P K. S. Sashank - 2016A3PS0167P Paresh Deshmukh -2016A4PS0412P Kavya Gupta - 2016A5PS0749P Dibya Raman Patra - 2016A2PS0838P 29th April, 2019 Instructor-In-Charge SRIKANTA ROUTROY A project report submitted for the partial fulfillment of the course Supply Chain Management (MF F421)
Introduction Nike, Inc, is an american multinational corporation that is engaged in the design, development, manufacturing, and worldwide marketing and sales of footwear, apparel, equipment, accessories, and services.The company's headquarters are located near Beaverton, Oregon.Nike is the world's largest supplier of athletic shoes and apparel and also a major manufacturer of sports equipment. Product offerings are primarily focused at nine key categories that include Running, NIKE Basketball, the Jordan Brand, Football (Soccer), Men’s Training, Women’s Training, action Sports, Sportswear (sports-inspired lifestyle products) and Golf. The company also operates retail stores under the Niketown name. Nike sponsors many high-profile athletes and sports teams around the world, with the highly recognized trademarks of "Just Do It" and the Swoosh logo. In 2018, it employs more than 73,100 people worldwide. Net income in year 2018 is 1,933 million USD$. The company has majorly focused on two important things – product innovation and product quality.It ranked No. 89 in the 2018 Fortune 500 list of the largest United States corporations by total revenue, having revenue around 36,397 million US dollars. It has offices situated in 45 countries outside the United States. Most of its factories are located in Southeast asia including China, Taiwan,Indonesia, India, Vietnam, Thailand, Philippines, Pakistan, and Malaysia. Supply Chain Framework and Design As of 2006, Nike products were manufactured by nearly 800,000 workers in 700 contract factories located in 52 different countries.
The cogs in NIKE’s supply chain Delivery precision in a multi-product and multi-jurisdictional company like NIKE, Inc.is critical. It improves profit margins, reduces inventories, minimizes price markdowns, and ensures that the customer receives the right product assortment on time. NIKE moved ~900 million units through its supply chain last year. Its manufacturing network consists of over 700 factories in 42 countries. Each product moves from 57 distribution centers across a networkof 18,500 accounts and 140,000 retail doors.
Yet NIKEowns no factories for manufacturingits footwear and apparel, which make up ~88% of its revenues. Instead, manufacturing is outsourced to third parties because of thecost advantages of doing so. Most raw materials in NIKE’s supply chain are sourced inthe manufacturing host country by independent contractor NIKE’s manufacturers NIKE is one of the pioneers of the industry-defining manufacturing outsourcing strategy.It’s nowexploringinnovativewaysofmanufacturingsoitcancustomizeproductsonan unprecedented scale. Key manufacturing thrusts ●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.This delivered additional savings of $0.15 per unit through better labor productivityand lower waste ●Material consolidation– Reducing the number of vendors through whichNIKE sources materials and also reducing the materials used in manufacturing products ●Manufacturing innovation andmodernization Footwear manufacturers NIKE’s footwear is manufactured outside the US by independent contract manufacturers that often operate multiple factories. In fiscal year 2014, the company was supplied by ~150 footwear factories in 14 countries. Contract factories in Vietnam, China, and Indonesia respectively manufactured approximately 43%, 28%, and 25% of total NIKE’s footwear. The largest single footwear factory accounted for ~5% of total NIKE brand footwear production. Apparel manufacturers
Like footwear, all of NIKE’s apparel is manufactured outside the US by independent contract manufacturers. In fiscal year 2014, NIKE was supplied by ~430 apparel factories operating in 41 countries. China, Vietnam, Thailand, Indonesia, Sri Lanka, Pakistan, and Malaysia accounted for most of the apparel production. The top five apparel contract manufacturers together accounted for ~34% of NIKE’s apparel production. One apparel contract manufacturer accounted forover 10% of production. 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. NIKE’s distribution centers NIKE has five primary distribution centers in the US located in Memphis, Tennessee, three of which operate on a leased basis. The company had 16 distribution centers outside the US at the end of fiscal year 2014. NIKE brand apparel and equipment products are also shipped from its distribution center in Foothill Ranch, California. Converse and Hurley products are shipped primarily from Ontario, California. Analyzing NIKE’s distribution channels and retail model NIKE distributes its products through three major channels: ●By selling products to wholesalers in the US and international markets ●Bydirect-to-consumer (or DTC)sales, which include in line and factory retailoutlets (see graph below) and e-commerce sales through www.nike.com ●Sales to global brand divisions
Retail partnerships NIKE, Inc. (NKE) has also tried to create category-specific retail destinations by partnering with footwear retailers such as Foot Locker, Inc. (FL), JD Sports, and Intersport. NIKE’s sales mix and retail slant Sales to wholesalers are the largest revenue category. However, this category’s contribution in the sales mix contracted from 83.3% in fiscal year 2012 to 79.2% of revenues in fiscal year2014. DTC sales, on the other hand, increased from 16.2% to 20.3% over the same period. Comparing NIKE’s distribution channels, direct sales to the consumer provide higher margins than do sales to wholesalers. Nike has been investing heavily in its direct-to-consumer sales – they’re now worth 29.6% of overall revenue or just over $9 billion in 2017, per Nike’s FY17 financials. That percentage has grown from just 16% in 2011. That’s an annual growth rate of 14.7%, compounded. What is Direct-to-Consumer (DTC)? DTC involves a brand connecting and selling directly to its customers, whether online or offline, through branded stores, in-store concessions, or pop-ups. Instead of wholesaling products to retailers for them to do the job of selling on to the customer, the brand takes responsibility for the whole chain from production to the customer having the goods. What does it mean for Nike? For Nike, the rationale behind their investment and business focus on direct-to-consumer is multifaceted, but there are several key outcomes they’re able to achieve through direct sales that their existing wholesale business was unable to do. Firstly, their connection and relevance to millennial customers was limited and mediated by their retail partners. For the brand to grow and retain its dominance, Nike needed to find ways to connect with customers more directly. The cornerstone of modern retail and brand best practices is customer data – without it, the brand cannot personalise, adapt locally, develop the best products, test pricing strategies, etc. In short, customer data is the lifeblood of a consumer brand. When a shopper picks up a pair of trainers or a running top in Dick’s Sporting Goods, Nike gets less information less quickly about that transaction than if the same customer purchases in one of Nike’s branded stores, where the information is available to Nike immediately and is more likely to be relevant from a strategic perspective.
The same principle applies to online shopping, perhaps more so because of the nature of e-commerce where data about page visits, items added to the bag, and items purchased can reveal all kinds of useful patterns of consumer behaviour. Secondly, a major reason for the deal with Amazon specifically was the fear that Nike’s brand image was endangered by third-party retailers selling through the marketplace platform, and additionally by the ever-present challenge of counterfeit items making their way into the supply chain. By signing up to a pilot with Amazon’s Vendor service and wholesaling a limited selection of inventory to Amazon, Nike was able to negotiate stricter controls on who is permitted to list Nike brand items. The third reason for Nike’s DTC emphasis is the bottom line. Margins in their direct-to-consumer business were estimated by Merriman analysts to be 62%, compared to 38% in the wholesale business. Also included in this line of thinking is the shakiness of specific forms of offline retailers. Undifferentiated experiences and offerings no longer appeal to consumers, and as department stores and other retailers are becoming less valuable as sales drivers, major brands are rethinking their reliance on wholesaling to such businesses. How is Nike approaching DTC? 1.Amazon As mentioned, Nike established a pilot deal with Amazon to offer a limited selection of the Nike product range through Vendor. This gives consumers the option to buy Nike goods straight from Amazon and benefit from Prime’s free 2-day shipping, Amazon’s customer service and accessibility. 2.Website The Nike.com site offers a fluid ecommerce experience with free shipping for NikePlus members (more on that soon) and 30 day free returns. At the same time, it’s a place where the brand is able to tell its story and emphasise its creative collaborations and releases. 3.Branded Stores
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