Global Logistics & Supply Chain of Nike: SCOR Model, Lean Manufacturing & Sustainability

This article explains the fundamentals of global logistics and supply chain management of Nike along with describing the integration between its inbound and outbound logistics systems. It also enlightens the readers about the various activity theories of SCM of the company along with sustainability throughout the supply chains of the company.

Running head: GLOBAL LOGISTICS & SUPPLY CHAIN
Global Logistics & Supply Chain

GLOBAL LOGISTICS & SUPPLY CHAIN 1
Contents
Introduction to Supply Chain Management.................................................................................................2
Overview of Nike........................................................................................................................................2
Global Logistics and Supply Chain Management from source to the consumer..........................................3
Linkage between the activities theories of Nike..........................................................................................6
Porter’s Value Chain Analysis of Nike....................................................................................................6
Application of SCOR model on Nike..........................................................................................................8
Application of Lean Manufacturing Practices in Nike............................................................................9
Sustainability throughout the supply chain of Nike.....................................................................................9
Conclusion.................................................................................................................................................11
References.................................................................................................................................................12

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Introduction to Supply Chain Management
Supply Chain Management (SCM) pertains to the management of the flow of products
and services along with dealing with all the procedures which transform the raw materials into
finished products.It consists of aligning the supply chain activities of the business for
maximizing the consumer value.
It also helps the business in gaining a competitive advantage in the marketplace.
Summarizing the above points, SCM comprises every aspect from production to the strategic
assets to the information systems required to direct the undertakings( Mena, Van Hoek &
Christopher,2018).
So this article explains the fundamentals of global logistics and SCM of Nike along with
describing the integration between its inbound and outbound logistics systems. It shall also
enlighten the readers about the various activity theories of SCM of the company along with
sustainability throughout the supply chains of the company. Lastly, it shall also explain the
strategic tangible assets of the company and the ways in which the value chain has been
harmonized for achieving the strategic outcomes.
Overview of Nike
Nike Inc. is an American based multinational corporation which is involved in
developing, designing, manufacturing, marketing and selling apparels, footwear, equipment,
accessories and services. It is headquartered in Beaverton, Oregon which is situated in the
Portland metropolitan region. It was founded on September 8th, 1969, by Bill Bowerman and Phil
Knight.

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It is amongst the world’s largest suppliers of sports shoes and apparels. It is also a major
manufacturer of sports equipment. As of the year 2017, its brand value was $19 billion, thereby
making it the most valued brand in the sports business (Reuters, 2019).
Global Logistics and Supply Chain Management from source to the consumer

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Nike has managed an effective, smart and agile supply chain systems. It relies completely
on external resources ranging for raw materials to manufacturing its products. All its products
are produced by independent contracts.
There is a global procurement team of the company to obtain raw materials. Its strategic
sourcing initiatives have assisted in building the brand value of the company. It is committed
towards procurement of sustainable raw materials (Hemphill & WHITE 2016).
The supply chain of Nike ranges to many countries. Its products are manufactured in 42
countries at 567 factories which employ more than 1 million workers. Nearly all the products
which are sold and marketed at Nike are manufactured by these factories.
It has reduced the number of vendors for sourcing its materials along with the raw
material utilized for producing its goods. It has also permitted the third party licenses which
allow the parties to produce and sell its products using its trademarks, apparels, digital devices
and applications.
It distributes its products through selling them to wholesalers in US and international
markets. Additionally, it is also involved in direct to consumer sales through its retail and online
stores.It also sells its products to international brand divisions( Quarshie, Salmi &
Leuschner,2016).
It has also created a category specific retail destinations by partnering with footwear
retailers like Foot Locker, Inc. and Intersport.
The strategy of supply chain management is focused on quality and long term
agreements.It has an effective logistic system which helps in catering to the needs of its

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consumer quickly. It has formulated a smarter logistics and distribution network which assists in
faster shipments and instant response to the demands of the consumers.
The distribution and logistics centers of Nike serve as crucial touch points fulfilling the
requirements of many of its retail as well as stores along with its individual consumers.They
enhance the value of the supply chain by adding speed to it( Waters & Rinsler, 2014).
Nike has opened up its largest logistic store in Memphis, Tennesee in North America. It
has been opened to cater to not less than 2000 stores in the region. It is spread over 2.8 million
square foot and has a variety of apparels, footwear and equipment owned by the company.
It has improved the capability of the company to deliver premium products to its
consumers quickly and efficiently. The logistic center helps in minimizing the cost by decreasing
the shipping time and enhancing the services of the company.
Simultaneously, the European logistic centers of Nike are situated across four locations in
Belgium.The brand experience stores of Nike provide their consumers with retail propositions of
brick and mortar. The premium stores like NIKETOWN offer their consumers with the best
brand experiences (Boström et al.,2015).
It has also established its factory outlets which provide premium products to its
consumers by adding value to their shopping. Its increasing focus on retail has contributed to its
growth strategy to a larger extent.
The company has attempted to increase its sales in its direct to consumer segment due to
its higher profit margins. Adding on to this, its digital initiative Nike+ has millions of users.It is
utilizing its digital power to build personalized relations with its customers.

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The company has invested a huge amount in the research and development for new
technologies and implementing their applications on the existing product lines. Its product
portfolio includes premium services and customized solutions for its consumers (Qrunfleh &
Tarafdar, 2014).
It helps the company to differentiate its goods from its competitors and at the same time
charge more prices from its consumers.Its core competencies and strategic assets are its unique
business model. It has left the manufacturing component of the value chain to its independent
contractors.
It has primarily focused on expanding its global network which involves extensive design
and market research. It has enhanced its competitive advantage over its competitors as it is able
to focus more on enhancing the value of its products by introducing a constant improvement in
them. Through its marketing and designing elements, it is able to harmonize the components of
its value chain in order to achieve strategic outcomes( Marshall et al.,2016).
Linkage between the activities theories of Nike
Porter’s Value Chain Analysis of Nike

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Primary Activities :
Inbound logistics of Nike: Nike has an international procurement team which manages
the procurement section of its supply chain management. It comprises choosing and selecting the
appropriate suppliers for the products and services.
The focus throughout the entire process remains on transparency, sustainability and
quality. The products which are obtained from these suppliers are sent to the markets through the
local offices and distribution centers of Nike.
Operations: It is headquartered in North America. It also has its offices in the Middle
East, Africa, Greater China, Latin America and the Asia Pacific.
Outbound Logistics: They form a crucial part of the value chain of Nike. The
manufactured products are sent to the distribution centers of Nike which in return are sent to the
retail stores for sales (Hines, 2014).
Marketing and Sales: Nike is also known for its marketing strategy. It has invested a
huge amount in its marketing and promotion of its products. Its video marketing strategy is
appreciated by its fans.

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Support Activities :
Technology: The quality of products of Nike and technology adopted by it are a crucial
strategy of its production. It is reusing its waste by implementing best class technologies to
create materials which are both sustainable as well as user-friendly.
HRM: Managing a global company is impossible without a large and skilled workforce.
So, Nike has employed more than 70,000 workforces and created a culture and environment
which inculcates diversity and inclusion.
Procurement: Quality forms an essential element in the procurement process of Nike. It
has hired only those contractors who can guarantee more than the minimum requirements of
quality (Khurana & Ricchetti,2016).
Firm Infrastructure: Nike is an international firm with large infrastructure comprised of
distribution and logistics centers, retail stores and offices. Its large infrastructure assists it in
managing its international presence as well.
Application of SCOR model on Nike
The supply chain operation reference model (SCOR) is a managerial tool used to address,
communicate and improve the decisions related to supply chain management within the company
along with its suppliers and consumers (Christopher,2016).
The SCOR model of Nike is based on three principles namely process modeling or
reengineering, measuring the performance and best practices. Following are the five building
blocks of the SCOR model:

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1. Plan: These are processes relating to supply and demand planning. The standards
of Nike are formulated for improving and measuring the efficiency of the supply chain.
2. Source: It pertains to the procurement of raw materials for meeting the demands
of the consumers. The acquisitions of materials are analyzed in Nike to determine the ways to
manage the network of suppliers, inventory, the performance of suppliers and agreements.
3. Make: For meeting the planned and actual the demand, Nike implements the
technology answering the questions: make-to-order, make-to-stock and engineer-to-order.
4. Deliver: It involves rendering services to the consumers as well as managing the
lifecycle of the products, assets and inventories of Nike.
5. Return: It focuses on the goods which are returned. Nike prepares itself for
handling the return of defected goods (Fox,2013).
Application of Lean Manufacturing Practices in Nike
Nike trains it, suppliers, to comprehend the approach of lean management. The training is
focused mainly on managing the human resources in order to train them regarding the effective
implementation and management of their capabilities in health, environment and safety (Nike,
Inc.,2019).
Sustainability throughout the supply chain of Nike
Nike has been able to implement lean management principles with creativity which is in
the cultural norm of the company. It works on the accomplishment of two goals and pillars. First
one is ‘Make Today Better ‘and the second is ‘Design The Future'.

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Make Today Better is the lean philosophy of Nike. It has been an integral part of its
approach within its factories and how they advance sustainable management practices. Lean
Management is considered a consistent opportunity for improvement which is aimed at the
production of best quality products along eliminating the waste (U Future Investment
Group,2017).
It is also considered as a business system through which employees are trained to perform
as a team. It is viewed as a key to improve the operations. The employees who are closest to the
problem are motivated to resolve it.
Its ‘Design the Future ‘ campaign forms a crucial part in achieving success and market
leadership. Its key commitments which are linked to accomplishing its goals are :
1. Building sustainable innovative capabilities across the business for driving
disruptive innovation agenda.
2. Development of tools, techniques and procedures for establishing metrics for
measuring the performance of impact which can be shared as a part of an index without
compromising the competitive nature of innovative techniques.
3. Developing an index for driving and measuring the way in which sustainability
can be integrated into the innovation portfolios (Nike, Inc.,2019).
Additionally, its value chain comprises of nine tiers and it makes it a challenge to address
all of them especially those over which it has les control. It is also concerned with the less
wastage of water used for washing and drying the apparels.

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It has influenced over the washing and drying practices of its consumers by putting care
labels on the apparels. Another aspect of sustainability practices in the procurement of materials
varying from manufacturing to their finishing (Nike, Inc.,2019).
Conclusion
Hence to conclude it can be said that Nike should manage its business processes which
are based upon its objectives like improving the quality, variety of products and decreasing the
cost throughout its value chain.
Due to the changing patterns of demands of consumers, it should focus more on
managing the demands so that a sustainable competitive position can be gained in the market. It
can also use the point of sale systems and the data of its consumers to manage the systems of
demand and supply throughout the value chain.

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References
Boström, M., Jönsson, A. M., Lockie, S., Mol, A. P. & Oosterveer, P. (2015). Sustainable and
responsible supply chain governance: challenges and opportunities. Journal of Cleaner
Production, 107(2015), 1-7.
Christopher, M. (2016). Logistics & supply chain management. UK: Pearson . 1-20.
Fox, N.(2013). Nike: how supply chain measures up. The Guardian .Retrieved January 26th ,
2019 from https://www.theguardian.com/sustainable-business/nike-supply-chain-
measures-up
Hemphill, T. A. & WHITE III, G. O. (2016). The World Economic Forum and Nike: Emerging
‘Shared Responsibility’ and Institutional Control Models for Achieving a Socially
Responsible Global Supply Chain?. Business and Human Rights Journal, 1(2), 307-313.
Hines, T. (2014). Supply chain strategies: Demand driven and customer focused. UK:
Routledge.1-20.
Khurana, K. & Ricchetti, M. (2016). Two decades of sustainable supply chain management in
the fashion business, an appraisal. Journal of Fashion Marketing and
Management, 20(1), 89-104.
Marshall, D., McCarthy, L., McGrath, P. & Harrigan, F. (2016). What's your strategy for supply
chain disclosure?. MIT Sloan Management Review, 57(2), 37-45.
Mena, C., Van Hoek, R. & Christopher, M. (2018). Leading procurement strategy: driving value
through the supply chain.UK: Kogan Page Publishers. 1-50.

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Nike, Inc.(2019). Nike’s Lean Management Framework. Retrieved January 26th , 2019 from
https://sustainability.nike.com/lean-management-framework
Nike, Inc.(2019). Stages of Our Value Chain. Retrieved January 26th , 2019 from
https://sustainability.nike.com/value-chain-stages
Nike, Inc.(2019). We Aim To Use the Best Possible Version of Every Material . Retrieved
January 26th , 2019 from https://sustainability.nike.com/sustainable-materials
Qrunfleh, S. & Tarafdar, M. (2014). Supply chain information systems strategy: Impacts on
supply chain performance and firm performance. International Journal of Production
Economics, 147(2014), 340-350.
Quarshie, A. M., Salmi, A. & Leuschner, R. (2016). Sustainability and corporate social
responsibility in supply chains: The state of research in supply chain management and
business ethics journals. Journal of Purchasing and Supply Management, 22(2), 82-97.
Reuters (2019). Nike Inc (NKE.N).Retrieved January 25th , 2019 from
https://www.reuters.com/finance/stocks/company-profile/NKE.N
U Future Investment Group(2017). Lean manufacturing and innovation: how does Nike do it?
Retrieved January 26th , 2019 from https://ufuture.com/lean-manufacturing-innovation-
nike/
Waters, D. & Rinsler, S. (2014). Global logistics: New directions in supply chain management.
UK: Kogan Page Publishers.1-20.